Many consumer goods companies, including breakfast cereal maker General Mills, are hoping that giving people more choices via the Web will cement more personal relationships with customers.
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With some 1 million possible combinations, the experiment is supposed to be able to produce customers' ideal cereals for about $7 a box, shipped to their doors within two to four days.
Some analysts are skeptical that such services are economical.
"Is it worth it to the manufacturer to put in the infrastructure to ship single pieces as opposed to shipping in bulk?" asked Pamela Rucker, an executive at the National Retail Federation.
Still, General Mills' ambitious experiment underscores the continuing belief among manufacturers that the Web has the power to completely redefine their businesses, despite scaled-back expectations after the recent collapse of investor confidence in the struggling dot-com sector.
Direct, custom sales of products have already been credited with revolutionizing a handful of industries, including PC manufacturing, where Micron Electronics and Dell Computer used the Web to power past slower rivals in the late 1990s.
Now a growing number of consumer goods companies are experimenting with similar strategies, with varying success. General Mills joins other consumer giants testing direct, custom sales, including Nike and Procter & Gamble.
"The idea of customization and personalization hits a chord with the American people, the American spirit," said Jack Staff, chief Internet economist with Zona Research.
Nevertheless, he added a note of caution: "Sometimes the message is more dramatic than the reality--and the message is: 'We're listening to you and we're giving you choice'...Whether the economics creates a payoff for the site is still questionable."
Back to the future
That consumers can buy a product tailored to their desires through the Web is relatively new--but ultimately a throwback to times when shoemakers would make shoes designed for each customer's foot. Although the Web may revive that kind of one-to-one relationship in some industries, such as PCs, others may not be well-suited to niche scales, analysts said.
Struggling clothing maker Levi Strauss, for example, quickly pulled its experiment in direct, custom sales last year.
The National Retail Federation's Rucker said that a big concern for such ventures involves making the transition from producing and shipping in bulk to producing and shipping in single pieces.
Rucker pointed out that one-to-one sales involve a dramatically different fulfillment process. For example, such sales can require manufacturers to shift from using bulk shippers and retailers to a middleman or carrier to send goods directly to their consumers.
Currently only offered to a small test group, MyCereal.com gives new visitors a survey that gauges their health requirements and taste buds. Once finished with the survey, visitors can choose a cereal in two ways. One avenue is to choose a blend from a list of suggestions based on health conditions--for example, if the consumer has diabetes. The other method is to cherry-pick ingredients to create a custom blend, complete with nutrition information and the customer's personalized label.
The customer must order a minimum of seven servings, or "pouches," at $1 each, putting the average cost for a box of cereal at $7, plus shipping.
General Mills has not yet set any definitive plans to widely launch MyCereal.com to the public, but a company spokesman said the test has met with positive results so far.
"We're testing this to see if there is a viable business model. It helps us get a better understanding of our customers," said Greg Zimprich, a General Mills spokesman.
Where others have gone before
The breakfast-food maker isn't the first to try such a service. In September 1999, P&G launched Reflect.com, a Web site for consumers to create personalized creams, shampoos, makeup and perfumes. Late last year, Millstone Coffee, another P&G brand, created a coffee Web site dubbed PersonalBlends.com that lets coffee drinkers order a blend that is based on their taste preferences, or what the site calls their "tasteprint." Mattel and Nike have also tried selling personalized products via the Web.
Like many other online retailers, Reflect.com is struggling to acquire customers and create enough buzz to make the venture worthwhile, analysts say. Early in the project, the company had trouble with its buying engine because it was too complex for consumers, making the process more of a headache than a blessing.
For Levi's, the proposition didn't make sense, Rucker said. In 1999, the company began selling custom jeans via the Web directly to the consumer, but it pulled the service shortly afterward.
"Presumably (General Mills and others) have done the math and hopefully have seen it is going to be worth it for them--but it wasn't worth it for Levi's. Intuitively it should be the better business model, but it obviously wasn't for Levi's," she said.
To reduce costs and cue the personalization process, sites such as Reflect.com use smart software, or what's known as predictive modeling, to foretell demand for certain products. Using market research and customer histories, the modeling software can estimate which combinations of ingredients will create a product that will be popular at any given time.
"Technically there may be a million combinations, but in reality they'll never make a million types of cereal in a year," said Jim Williamson, a senior research analyst at IDC.
Despite some high hurdles, industry experts said research on custom product manufacturing holds big potential rewards for companies such as General Mills.
Manufacturers can benefit by maintaining control of products, keeping abreast of what consumers want and how their preferences change, and saving on costs in product research, marketing and distribution, analysts said.
Moreover, giving consumers exactly what they want, when they want it, can create the ultimate brand loyalist.
"The upside is that consumers will come up with a combination they can't get in the store, and they'll always go back," Williamson said.
For General Mills, however, the experiment could be more defensive than anything else. "People spend half a trillion dollars a year on food and groceries. This is big business. It's worth investing a little bit to understand how this will affect their future," Williamson said.
Said Zona Research's Staff: "This is essentially a built-in market research tool for General Mills. If they have overwhelming requests for a cereal that combines apricots and wheat flakes, then they're going to come out with a new brand."