FOCUS
0
0.5
1.0
$1.5 billion
STITCH FIX REVENUES
$1.6 BILLION
FY 2014 2015 20172016 2018 2019
0
20
$40 million
PROFITS
$36.9
MILLION
FY
2014
2015 20172016 2018 2019
0
1
2
3 million
ACTIVE USERS 3.2 MILLION
FY 2014 2015 2016 2017 2018 2019
SOURCES: BLOOMBERG; THE COMPANY
34
FORTUNE.COM // NOVEMBER 2019
TECH
personalized approach to e-commerce.
The ongoing upheaval in the retail industry
makes Stitch Fix’s latest push that much more
challenging.
One crucial test for the company is Shop
Your Looks, a feature that suggests additional
items to customers to complement what Stitch
Fix sends them in their fixes. For example, cli-
ents who keep a jacket sent to them may later
receive a suggestion via email that they buy a
pair of sunglasses to go with it.
The hope is that Shop Your Looks will
prompt an impulse buy between boxes and get
customers to visit Stitch Fix more often. Lake
recognizes the risk of making Stitch Fix just
another online retailer that bombards shoppers
with an exhausting list of “suggested items.”
That means the e-tailer shows at most 30
to 40 suggested items online—a lot of choice,
but not the endless scroll shoppers see in
Amazon’s or eBay’s search results. So far, 60%
of people who have bought an item using this
feature have bought more than one.
In terms of its business, Stitch Fix is getting
mixed results. In the 12 months ended Aug. 3,
its revenue soared 29% to $1.58 billion com-
pared with the preceding year. During that
period, the company had a profit of $36.9 mil-
lion. But that profit was down 18% from the
previous year, as Stitch Fix spent heavily to
build out new services.
Stitch Fix must show nervous investors that
it can continue to attract new customers and sell more to exist-
ing ones, all while grappling with the apparel industry’s rampant
discounting of overstocked clothing.
As KeyBanc Capital Markets analyst Ed Yruma points out,
Stitch Fix also faces “long-term concerns” related to Amazon.
The self-proclaimed Everything Store’s overall apparel business is
growing rapidly, and in July it debuted its own personal shopping
service—putting Stitch Fix directly in its crosshairs.
As if that’s not enough, Stitch Fix has a serious rival in Nor-
dstrom’s Trunk Club, a slightly higher-end bespoke shopping
service. Meanwhile, Instagram and Pinterest have both made
their services friendlier to online retailers, adding a new wrinkle
to what is already a complex retail environment.
That means Stitch Fix must keep improving the accuracy of its
technology. An army of some 3,000 human stylists uses what the
algorithm spits out to help decide what to include in customer fixes.
Style Shuffle, a feature added last year that shows customers
prospective products one at a time and lets them vote on each, is
part of the company’s effort to improve its data crunching. The in-
formation collected through the tool—some 3 billion ratings have
been submitted—helps make customer suggestions more accurate.
Meanwhile, Stitch Fix is also working on expanding its clothing
selection, which is heavy on smaller brands. Big-name clothing
makers have gradually come on board, including New Balance
and Madewell. Part of the pitch is that Stitch Fix can share data
with them about what customers like. That kind of information
also helps Stitch Fix more accurately predict demand for its own
clothing brands, an increasingly crucial part of its business.
For her part, Lake doesn’t see any choice but to focus on data.
“If somebody is not receiving things that they love, they’re going
to stop [using Stitch Fix],” she says. “We live and die by our ability
to personalize for people. That is our lifeblood.”
MAINTAINING MOMENTUM
Stitch Fix’s growth has been fast-paced, even as it has remained profitable. Investors wonder whether it can keep it up.
