In the age of digitalization, the Print on Demand (PoD) model has emerged as a popular choice for many looking to venture into the apparel business. However, the economics of PoD are not universally favorable. They are particularly suited for influencers with an established audience that can be monetized. Let’s delve into the reasons behind this phenomenon, the value chain of personalization, and the need for the apparel decoration industry to digitally transform.
1. The Value Chain of Personalization and the Margin Waterfall
The value chain of personalization in the PoD model can be visualized as a margin waterfall. Here’s a breakdown:
- Initial Cost: This is the base cost of producing a blank apparel item.
- Decoration and Personalization Cost: Adding designs or personalizations increases the cost. This includes the cost of printing, embroidery, or any other form of decoration.
- Operational Costs: These are the costs associated with managing orders, shipping, returns, and customer service.
- Marketing and Customer Acquisition Costs (CAC): This is the cost to attract a customer to buy the product. It includes advertising, promotions, and other marketing expenses.
The final selling price of the product needs to cover all these costs and still leave a margin for profit. For influencers with an existing audience, the CAC is significantly lower. They can leverage their followers on social media platforms, blogs, or YouTube channels to promote their products, reducing the need for expensive advertising campaigns.
2. Profitability and Customer Acquisition Costs
For those without an existing audience, the CAC can be prohibitively high, often making the PoD model unviable. Since influencers already have a dedicated audience, they can monetize this base without incurring high marketing costs. This allows them to maintain profitability even if other costs in the margin waterfall are high.
3. Digital Transformation in the Apparel Decoration Industry
To compete with the PoD channels, especially those catering to the tech-savvy Gen Z, the traditional apparel decoration industry needs to undergo a digital transformation. Here’s why:
- Streamlining the Proofing Process: The traditional method of proofing personalizations is time-consuming and can be error-prone. Digital platforms can offer real-time previews, allowing customers to visualize the final product before placing an order. This not only enhances the customer experience but also reduces errors and returns.
- Efficient Ordering Process: Digital platforms can automate many aspects of the ordering process, from selecting sizes and colors to payment and shipping options. This efficiency reduces operational costs and enhances the customer experience.
- Catering to Gen Z: The Gen Z demographic is accustomed to instant gratification and digital interactions. To capture this market segment, businesses need to offer seamless online experiences, from browsing to purchase.
While the Print on Demand model offers numerous advantages, its economics are especially favorable for influencers with an existing audience. The reduced customer acquisition costs, combined with the potential for high personalization margins, make it a lucrative option for them. On the other hand, the traditional apparel decoration industry must embrace digital transformation to remain competitive, streamline operations, and cater to the preferences of the younger generation.