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Stitch Fix CEO: ‘Data science and algorithms are at the core’ of the company

In a new interview with Yahoo Finance's Sibile Marcellus, Sitch Fix CEO Elizabeth Spaulding explains how the company utilized data science and algorithims to improve its offerings.

Video transcript

SIBILE MARCELLUS: In the latest quarter, StitchFix reported a profit. Revenue increased 29% year over year. And revenue per active client surpassed $500 for the very first time. How did algorithms and data science play into that in terms of the recommended styling options that many users chose to purchase and where?

ELIZBAETH SPAULDING: Well, first of all, thank you, Sibile, for having me today. Excited to tell our story. Absolutely, data science and algorithms have been at the core of Stitch Fix from the very beginning. The vision of the business was to take the power of data science, algorithms, and creative human judgment to curate a unique set of items for each of our clients one on one.

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The original model of Stitch Fix was taking a few data points from each of our customers, understanding their style preference, their fit, their price preference, brands they loved, and use the power of our data and algorithms together with the human touch of stylists to just send five items to each customer. And over time, we have increased the keep rate of those fixes every quarter on record, achieving a business that was north of $2.1 billion in our fiscal year that just ended early August.

And the power of that data science is really powered by multiple things. We have a 10-year advantage here. To give a few examples of where that data comes from, you know, we send items to clients. They keep some, they send some back. But 85% of the time on each of those items, we're getting multiple points of feedback. Many of our clients play around with the widget in our app called Style Shuffle, where you essentially thumb up and thumb down items and outfits. 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.

And I like to think about the last 10 years of our Stitch Fix history as very much like our DVD era. 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.

And COVID, for our category, really ushered in dramatic change. You know, we were about 25% as a category online, shifting 1 to 2 points a year, and we're now 40% online. And so this has allowed Stitch Fix to really embark on our next chapter, which is personalized shopping and being able to do that same experience, but in an on-demand streaming fashion where every one of our clients has their own unique personal store.