Three years ago, twenty-somethings Peter Crawfurd and Michael Yang were would-be web entrepreneurs in search of a business idea.

Their top criteria: something they could start with limited funds, and something with big potential to scale.

Avid consumers of tailored dress shirts, they decided to capitalize on their knowledge of custom-made clothing and offer men a more convenient, affordable, hands-on alternative to visiting their neighborhood tailor. The result was Hong Kong based e-retail company ShirtsMyWay, which launched in February 2009 and boasts more than 7 trillion possible designs for men’s dress shirts.

Meet one of the hottest startup trends–mass customization.

The internet is now host to countless companies selling custom-designed furniture, throw pillows, rugs, eyeglasses, T-shirts, shoes, handbags, computers, skateboards–you name it.

Technology has obviously made reaching customers from the far corners of the globe possible. But how do mass customization companies make selling one-off products profitable?

Balancing Customer Choice With Production Capacity
From a revenue standpoint, offering customers a seemingly infinite number of choices may seem counterintuitive. But those in the mass customization trenches say that in some ways, it’s a more efficient way to run a retail business.

“With traditional, non-personalized goods, you have to produce thousands in the factory and then sell them all,” Crawfurd says. “What we do is on-demand production. We don’t need to go out and buy thousands of meters of fabric. There’s very little waste.”

The trick is finding that sweet spot between offering your customers enough options to keep them satisfied and not overwhelming your production system, says Dan Olszewski, director of the Weinert Center for Entrepreneurship at the Wisconsin School of Business.

“From the customer standpoint, you want it to look like you have millions of unique products, even though you may only have a few different degrees of change for each,” Olszewski says.

ShirtsMyWay offers just 25 fabric choices. But factor in sleeve length, collar type, cuff type, pocket shape, stitching options, monograms and the like, and the design possibilities seem infinite.

As businesses move away from ‘spray and pray’ (ordering thousands of items, hoping people will buy them) towards a shared model where customers are investing their time to design/build the product and businesses are able to produce ‘on-demand’ customized goods, they (businesses) will become extremely dependent upon strong design, smart technology and outstanding customer service for success.