Generation Y consumers, a group that includes teenagers and 20-somethings, are particularly drawn to products that help define and broadcast who they are, says Lisa Feigen Dugal, a retail expert at PricewaterhouseCoopers. They grew up with Facebook, on-demand television programming, and blogs, all of which make them expect a certain level of customization from products, she explains. Their parents are often drawn to customization for an entirely different reason—frugality. Dan Butler, vice president at the National Retail Federation, says consumers are more price-conscious now because of the economic slowdown, so they are applying a higher standard to the products they buy. They want to make sure a purchase "really meets their needs," which a product designed specifically for them is more likely to do.
As consumers expect more personalization, it's the big-box stores that sell rows of products created on faraway assembly lines that will suffer, says Liz Crawford, consumer strategist for the consultancy Iconoculture. Many big stores, she says, "are still in the warehouse mentality, and the business model has shifted.... If you have to spend an hour wandering around looking for what you want, forget it." In a study of localization, or how retailers customize stores to reflect regional preferences, Bain found that in 1995, most national chains were focused on centralizing and standardizing their operations to reduce costs. But by 2006, Bain had identified 50 retailers and consumer product companies that were carrying out localization strategies, and now that number exceeds 100, says Rigby. Even the biggest box, Wal-Mart, has started customizing each store to fit regional demands, such as focusing on clothes that reflect local styles. Analysts say that has helped the mammoth chain stay relevant.
The bank of you? Research by IBM suggests that other sectors, too, including financial services, have much to gain by customizing their offerings. IBM found that two thirds of bank customers don't feel valued by their banks and only one third thought bank employees listened to their needs. Consumers also told Big Blue that they wanted more personalized service from their insurance providers. Some 57 percent said policies were not tailored to their needs. "You used to be able to make broad categorizations about customers," says Guy Blissett of the IBM Business Value Institute. "Now, each customer is an island of one who brings their own set of issues, priorities, perspective, and information."
The shift to custom-made may also signal a dialing back on globalization, since customized products are typically made closer to home, where they can be shipped directly to consumers at low cost. Ralph Lauren, for example, makes almost all of its products outside the United States, mainly in Asia, Europe, and South America. But the polos ordered through the "Create Your Own" collection are embroidered and otherwise customized at a new Ralphlauren.com fulfillment center in North Carolina.
Eventually, says Reinier Evers, founder of the research firm trendwatching.com, consumers may return to buying mass-produced goods. Once every lifestyle brand offers some kind of customization or personalization, it will make trendsetters "uncomfortable with the masses having access to all of this, too, so the next thing will be either very expensive bespoke or a backlash trend that's all about generic."
Until then, consumers will be reluctant to settle for anything less than products designed just for them.