Is a Semi-Custom Business Model the Right Fit For You?

A man in a well-tailored suit will always shine brighter than a guy in an off-the-rack suit. ~Michael Kors

Mr. Kors may be right, there is nothing quite like a real custom-tailored suit.  But it has also been one of life’s luxuries reserved for the fortunate few – a bespoke suit from one of London’s Saville Row tailors will set the owner back at least $2,000 and it could be several times that amount.  So, most of us usually settled for an off-the-rack suit, it didn’t fit perfectly, but it was a fraction of the cost.

That is until now… in the last several years a new business model allows you to get a made to order suit for about the price of an off-the-rack special.  Among the leaders in this space is Indochino – they offer made-to-measure suits, usually for less than $500.

The trick is there is no tailor.  You watch a series of on-line videos and have a friend take the measurements (about 20 in all).  You then answer a handful of questions about how you like your suit to fit and from there, a model calculates the cutting patterns and sends them off to be produced in Asia.  Your new suit arrives about two weeks later (about the time you would wait for the pants to be hemmed on an off-the-rack suit) with exactly the fabric and fit you selected, down to being able to customize the lining or add other detailed touches.

Indochino was started in Vancouver in 2007 by Kyle Vucko and Heikal Gani, former University of Victoria students who disliked their existing clothes-shopping options.  Vucko and Gani knew nothing about the clothing business but they took inspiration from the culture of their tech entrepreneur peers, embracing technology and pivoting quickly to meet customer needs. For example, In 2008, Men’s Flair posted a less than flattering review of an experience with Indochino. Rather than fight the criticism, Indochino updated their website to address the identified issues and Vucko himself oversaw the adjustments to the reviewer’s suit to correct the fit.  In a follow up piece, the reviewer credited Indochino with making a ‘smart recovery.’

In fact, realizing that when based on self-reported measurements, suits may not be perfect, Indochino started to provide a credit for a local tailor to make it right.  In addition, recognizing that some people may not want to take their own measurements, Indochino has opened showrooms where you can not only have a professional take and record your measurements, you can touch and feel the fabrics before placing your order.

In truth, even with these improvements, an Indochino suit is not the equal of a bespoke suit – there is no substitute for that second fitting, where the tailor brings a partially constructed suit and checks the drape off your shoulders.  On the other hand, for most men an Indochino suit looks way better than off the rack, at a cost that is not much more.  And, as they have continued to grow, traditional menswear retailers are feeling the heat.  Clearly Covid played a role in the timing, but both Tailored Brands (the parent company of Men’s Wearhouse and Joseph A. Bank) and Brooks Brothers (the iconic 200-year-old clothier of the gentry) filed for bankruptcy and announced significant store closings in 2020.

Indochino’s success is a great example of what we have come to call the ‘semi-custom’ business model, where a company figures out how to invest upfront to make their product more configurable, thereby providing near custom value at a price that is usually not much more than a standard generic product.

Pulte homes is another example that we have referenced elsewhere. Pulte figured out years ago how to offer a bounded set of choices for the things that home buyers really want to personalize (e.g., cabinets, counter-tops, light fixtures, etc.) about their homes, while maintaining the scale economies of building largely standard floorplans.  Again, the result approximates the value of custom at a price that is little more than standard, and it has allowed Pulte to go from a small regional company building a handful of houses per year in the early 1950’s, to a $10 billion+ company in 2020.

So, is a semi-custom business model right for you?  Some questions to ask are:

  • Is there a repetitive part of your offering that could be automated and/or made more modular? – for example, a design or installation procedure that you do manually, but where most of the process is similar for every job
  • Can you approximate the value of custom with a bounded number of customer choices? – think about the ‘turbo tax’ interface, where you can answer a limited set of questions phrased in plain English, and the algorithm prepares a draft of your tax return
  • Can you leverage the concept of ‘make to order’ to drive change in your supply chain? – Dell Computer is a good example of a company that competed on this dimension, revolutionizing the supply chain to turn its inventory nearly twenty times per year (most manufacturing businesses would consider 5-6 turns to be outstanding performance)
  • Can you use technology to create a learning engine? – Remember, you don’t have to be as good as custom on the first try, there might even be a need for some manual adjustments, but if you are collecting the right feedback data, over time your output will get closer to custom and the manual intervention (and therefore the cost) will go down.

Whether you are building houses, suits, or automobiles, there will always be a market for true custom solutions.  This can be a profitable business for the experts who meet these needs, but even the most sought after tailor still gets paid by the number of  hours worked (or by the number of suits).  To create a scalable business that can result in a flywheel, you might consider a semi-custom business model.  Often this allows you to access a market that is many times bigger than the portion of the market that can afford true custom. You can potentially do this profitably as long as you provide the upfront investment to turn personal expertise into repeatable process.  This requires different thinking, but like a well-fitting suit, the result may be worth it.

Leave a Reply