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Stitch Fix lays out ‘blueprint for future of retail’

·4-min read
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Stitch Fix (SFIX), the online personal styling company, wants to give customers an online shopping experience that more closely mimics picking clothes in a department store.

“So much of what e-commerce has been is search and scroll and it’s inconvenient,” Elizabeth Spaulding, Stitch Fix’s CEO, said at Yahoo Finance’s All Markets Summit this week. “Think about going to a website where 95% of it is irrelevant to you. And you’re doing all the work to search for what’s relevant.”

Stitch Fix, which reached $2 billion in annual net revenue in 2021, aims to transform the e-commerce and online shopping experience by moving from search and filter to browse and discover through its “freestyle” offering, which it expanded in September. In the latest quarter, Stitch Fix had close to 4.2 million active clients, an 18% increase year over year, according to the company.

“What freestyle does, is it’s your own personalized store. You can open up our app or mobile web experience and we are dynamically generating a home feed and a shopping feed of looks just for you,” said Spaulding.

Shoppers see curated clothes based on items they’ve shown interest in or items they may have purchased in the past.

'Rich understanding of consumer preference'

“It’s dynamic. So we’re refreshing [freestyle options] regularly throughout the day based on the inventory that’s available, new brands, and offerings that we’ve added to our catalogue,” Spaulding said.

In 2019, the U.S. apparel industry was valued at about $368 billion, but retailers took a hit during the pandemic. McKinsey Global Fashion Index analysis projected a roughly 90% drop in economic profit in 2020 for fashion companies, following a 4% increase in 2019.

Given that the pandemic is ongoing and continues to be a threat to in-store shopping, many executives in the fashion industry view e-commerce as their biggest opportunity by far.

stitch fix freestyle
Source: Stitch Fix

“What [freestyle] does for us is it opens up the full addressable market for Stitch Fix. A close to half a trillion dollars...of fashion in a category that is moving away from stores and moving online,” said Spaulding.

Stitch Fix’s algorithms and data science are the secret sauce behind its freestyle shopping experience, which leverages consumer feedback on a real-time basis.

“Many of our clients play around with a widget in our app called Style Shuffle where you essentially thumb up and thumb down items and outfits,” said Spaulding. “A million clients play that every month. We have over 9 billion data points. That is generating just such a rich understanding of consumer preference.”

Push into comfortable clothes

Stitch Fix, founded in 2011 and based in San Francisco, started out by gathering just a few data points from consumers such as their fit, price preference, and favorite brands.

“I like to think about the last 10 years of our Stitch Fix history as very much like our DVD era,” said Spaulding. “We’ve been sending five-item racks of clothing, unique and recommended to each of our consumers and now we’re moving into our streaming era of personalized shopping.”

Spaulding says inclusivity is key to how Stitch Fix is building out and expanding the freestyle experience.

“A lot of fashion historically has really left people out, and our focus is around inclusivity and this being right for each individual consumer,” she said. “We’ve dramatically grown our plus business in the last few years as we think about brands that we onboard, making sure there’s great representation.”

UKRAINE - 2021/09/24: In this photo illustration a Stitch Fix, Inc. logo is seen on a smartphone. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
UKRAINE - 2021/09/24: In this photo illustration a Stitch Fix, Inc. logo is seen on a smartphone. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

Stitch Fix’s styling data has given Spaulding insight into office outfit trends going into 2022 for men and women as client requests for a wardrobe refresh is up 44% in the fourth quarter compared to the same period last year.

The new business comfortable trend has emerged, as workers navigate the current hybrid work environment in corporate America where some companies are requiring in-person work, while others are offering the option to stay remote permanently.

“We’ve made a big push into just more comfortable, structured clothing rather than what might have been attractive but less comfortable in the past,” said Spaulding. “That movement towards looking good but also feeling good is a shift that we expect to stay.”

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