Product personalization and brand retailer performance: The critical role of brand retailer-upstream supplier control

Abstract

Brand retailers are increasingly offering product personalization to accommodate the requests of individual customers. While prior research has examined product personalization from a customer's or a manufacturer's perspective, this study focuses on product personalization from a brand retailer's perspective. Under product personalization, brand retailers that outsource production to upstream suppliers face two significant challenges: product returns from downstream customers, and personalization costs charged by upstream suppliers. Employing an analysis of transaction data from an online women's wedding dress firm, this study finds that as product requests increase (i.e., more product features must be modified), personalization costs increase, but the likelihood of product returns decreases. Additionally, as time requests increase (i.e., delivery is more urgent), the likelihood of product returns increases. Furthermore, relationship-specific process control exacerbates (i) the effect of product requests on personalization costs, and (ii) the effect of time requests on the likelihood of product returns. Finally, relationship-specific outcome control and transaction-specific control alleviate the impact of time requests on the likelihood of product returns while exacerbating the effect of product requests on personalization costs. The findings suggest that retailers can realize greater benefits from product personalization by selecting control mechanisms tailored to personalization requests.