Trend: Ultra-Cheap Custom Clothing – How Ziami uses multi level marketing schemes to sell custom goods (UPDATE)

(This is an updated version of the original post.)

I always have argued that mass customization has large potentials for huge cost savings along the entire supply chain. Established companies like Dolzer in Germany have shown since 25 years that custom made clothing can have the same price tag as conventional standard apparel (in the 200-300 Euro range for a custom suit, 50-70 Euro for a custom shirt). Most mass customization clothing offerings, however, come in a price range of 800-1000 Euro (far beyond the price of bespoke tailoring, but with a premium to your average Boss suit).

Ziami_1But as everywhere in retail, there seems to be also a trend of discountization in mass customization: New players like Ziami or Aston offer CUSTOM made shirts for 29 Euro, and a custom suit for 99 Euro. Especially Düsseldorf, Germany based Ziami seems to enter the market aggressively with its range of custom apparel items. Manufacturing is done in China and Thailand, measurements are taken by sales associates by hand, fabrics are cheap and limited, but the customization options quite large. Ziami’s approach is based on a multi-level marketing (or: pyramid) approach. This means, all products are sold by independent sales associates who purchase a 50 Euro starter package that enables them to become a custom shirt seller. This package includes everything to sell Ziami shirts, like a „How to measure“-DVD, one sample shirt, fabric samples, measuring tape, needles, 50 ordering flyers, 50 promotion flyers, a brochure containing all the necessary information and the official license to sell Ziami clothes. Distribution partners purchase a custom shirt for 22 Euro, and resell it for the suggested 29 Euro. In addition, they are motivated to recruit further sales associates, as they will participate also on the margins generated by those 2nd tier partners.

Ziami German AdverstisingOne of the more active Ziami partners, Stangl in Vienna, Austria, has described this system very neatly in an English presentation on their web site. And another motivated promoter of the company has even created a nice YouTube Video that describes the system and provides some insight in the rather easy measurement process.

Can you make a custom shirt for 29 Euro? Yes, of course, given that consumers are willing to wait (as for this price, you cannot use single item air-fright from Asia to Europe) and compromise for the quality of the fabric. Reviews and feedbacks by customers on the internet are mixed. Some really love the system, others are rather annoyed and complain about unstable quality, bad customer service and poor fabrics (just Google Ziami and you find numerous forums and newsgroups discussing Ziami’s shirts).

According to their own claim, Ziami, founded in 2003 by Designer Ersin Canga and Philip Kamp, have risen to become Europe’s #1 Producer of Custom Tailored Shirting (however I could get no proof for this, interview requests with the founders were not answered). Ziami most recently expanded its offerings to include Custom Designer Jeans and Cashmere Sweaters available for $29.95 each. Also belts and other accessories are offered in „custom designs“. But what really astonished me was the price for their custom shoes which will be offered soon: „The shoe is made from the highest quality leathers to your exact foot measurements for just $79.95 ($600 retail value)“. From everything I know from footwear customization, this price is not possible, neither with manufacturing in China or elsewhere, given that this is a real custom shoe.

Is this good or bad mass customization? Well, I am not quite sure. I think the danger of such a system is that it cannibalizes the efforts of higher-quality vendors of mass customized apparel. It also is a low-tech version that depends strongly on the personal skills of each sales associate (this I reagrd as the largest challenge of this model). It may also discourage customers to try more custom goods once they purchased a Ziami shirt, waited for 4-8 weeks to get it delivered, and then were disappointed by the cut and quality.

On the other hand, this system shows what you can do if you really rethink the value chain in the apparel industry. Extreme cases, as this ultra-discount mass customization offering, are always great examples to study and to test the boundaries of a system. As such a case, I really appreciate this experiment and will observe curiously where this will lead us.

Update:
Just by chance I had the opportunity to order a custom shit from Ziami recently. I will report here how this works out and how it fits. And I learned that the 29 Euro retail price for the custom shirt is just marketing: You always have to pay a 5 Euro handling & shipping fee per shirt, also if you order several at one time. And then there is a 10 Euro „measuring“ fee for you firs shirt. So in total, you pay 44 Euro — which sounds not as spectacular as the 29 Euros before (and there are many players in this price range — with local manufacturing and professional tailors taking your measurements — and MUCH faster delivery).

Also, Ziami’s headquarters seem to make most profit not from selling the custom products but from selling marketing materials, order forms, web hosting, etc. to their resellers. These standard items are much more expensive than the shirts (in comparison).

The distributor selling me the shirt told me that the start phase for custom suits (99 Euros plus hidden costs), custom jeans (29) and shoes (79) has just started — meaning that in the moment only the independent distributors can order.

UPDATE TWO: Eight weeks later, the shirt was delivered. As I ordered it in Europe and was in the US when it came, I only today (Feb 2007) can evaluate the fit: To make it short, this shirt does NOT fit. The arms are at least an inch too short, and the shoulder area too tight on the bottom and too long on the top. The quality of the fabric, the finishing of the shirt, the buttons etc. are, however, good. It also came in a nice package, and I liked the feature that I got an extra piece of the fabric for my pocket.

This experience reveals one of the largest challenges of mass customization: get the configuration process correctly. Ziami relies on independent sales agents, and the quality of your products will depend on their personal skills. I always preach that the basic principle of mass customization is process stability, and this is what Ziami lacks totally in the order taking process.

In my case, the sales agent was a very nice, but apparently „fresh in the business“ management student from Vienna who probably lacked the correct skills to get the measurements correctly. Established, vertical integrated mass customization providers often report from the difficulty to get qualified sales persons with adequate skills for the measurement job (or they just invest in 3D scanners to avoid this problem), and so I do not not see how an independent part-time Ziami reseller shall learn this without much „trial-and-error“ learning using his or her first customers.

Also, prices are calculated in a way that for 99% of all Ziami agents this business will only be a small side business. With about 35% margin (based on very cheap goods) and a personal sales process, you can not become rich or make this your full business — and thus only few Ziami agents will develop strong learning effects to get an expert in the order taking.

So my conclusion: This is an interesting concept, prices are very good. The product I got was nice, but did not fit. The main problem: The Ziami system lacks the most important aspect of a mass customization business: stability in the configuration process (and I do not see how you can add this with their pricing model in a multi-level marketing scheme). Thus, if you order, do so only with an experienced agent, probably someone who is from the clothing business and not just your next-door neighbor.

About the Author:

Frank T. Piller is a Co-Director of the MIT Smart Customization Group at the MIT Media Lab, Massachusetts Institute of Technology, USA, and a chair professor of management at the Technology & Innovation Management Group of RWTH Aachen University, Germany, one of Europe’s leading institutes of technology. Before entering his recent position in Aachen, he worked at the MIT Sloan School of Management (2004-2007) and has been an associate professor of management at TUM Business School, Technische Universitaet Muenchen. Frequently quoted in The New York Times, The Economist, and Business Week, amongst others, Frank is regarded as one of the leading experts on strategies for customer-centric value creation, like mass customization, personalization, and innovation co-creation. His recent analysis of the crowdsourcing business model “Threadless” (co-authored with Susumu Ogawa), an innovative crowdsourcing business model in the fashion industry, has been elected as one of the Top-20 articles in MIT Sloan Management Review.