A 2014 OnePoll survey showed that women spend more than 190 hours shopping for clothes and shoes annually.1 What if we could reallocate that time and leave our fashion choices up to an online personal shopping site? With a team of 80 data scientists (including astrophysicists, computational neurologists, and 49 Ph.Ds), Stitch Fix has found a way to employ machine learning to pick out our clothes better than we can.2 Gone are the days when we have to spend countless hours trying on dresses to wear for that interview. Now we can rely on Stitch Fix to get it right.
What is Stitch Fix?
Stitch Fix, a San Francisco based online startup, was founded by HBS graduate Katrina Lake in 2011. The service partners data science with a team of 300 human stylists to provide women a personalized collection of boutique-brand clothes, shoes, and, accessories. When clients sign up for the service, they are asked to fill out a 10-minute survey that aggregates information on 50 data points including their size, location, body type, and fabric, color, and pattern preferences. The program can even read images in the client’s Pinterest profile to better understand her style when she cannot articulate it into words.3
The machine learning algorithm uses this data to curate a package of 5 items to send to the customer. The customer pays a $20 “styling fee” and tries on the clothes at home, keeps what she wants and returns what she doesn’t want. She pays the retail price of the clothes she keeps and the $20 is applied as a credit to her purchase.5 The program then uses this feedback to compile an even better set of items for her next fix.2 Stitch Fix partners with 200 labels and brands and has created a private label line for basics.4
Wow, but does it actually work?
It looks like Stitch Fix is actually getting it right. 80% of people who order a box order a second box within 90 days. Furthermore, Forbes estimates that Stitch Fix brought in $250 million of revenue and was profitable in 2015; this sales number is predicted in increase by 50% in 2016.2
Oppositely, established retailers like Nordstrom and Gap continue to face losses due to increased ecommerce competition. Stitch Fix founder, Katrina Lake, believes that in-store conversion is low because customers do not have the hands on help of staff who know their size or preferences. Oppositely, Stitch Fix can use all of your data to ensure you never leave a box empty handed.
Future Recommendations for Stitch Fix
While Stitch Fix has found a way to democratize the VIP treatment of personal shopping, there are many more opportunities to grow with their data analytics. Industry analyst Jeff Kagen acknowledges that there is room for improvement: “I think this is just the beginning, many new business models will form with A.I. as the center of their universe… This is the Model T for the A.I. revolution.”3
Eric Colson, Chief Algorithms Officer at Stitch Fix and the former VP of Data Science at Netflix acknowledges the power of their programing: “The clothes are not exclusive. We don’t price them better than anyone else. We don’t do fast shipping. We’ve just got to be more relevant.”2 However, as data-driven personalization becomes more prevalent in ecommerce, Stitch Fix needs to offer these perks and focus on a more streamlined, customer service-centric experience to be competitive. Moreover, they have opportunity to use their sales data to improve their private label product offering to provide exactly what their customers want.
Additionally, there is an opportunity to utilize their data to improve the in-store shopping experience. Rather than shipping boxes, customers could have the option to go to a store to try on their curated package of items. Data-driven associates could immediately provide additional product recommendations and replace items that initially did not work out due to style or fit. If Stitch Fix doesn’t want to enter the brick and mortar retail business, they could sell the algorithm to a big box retailer who would benefit from the customer data in store and online.
Finally, there is an opportunity for Stitch Fix to curate specialized packages for formal events and special occasions. Rent the Runway is set to hit $100mil in revenues in 2016 by providing customers with a convenient way to find special occasion dresses.6 However, searching for styles on their website is cumbersome and their customer data is not personalized. Stitch Fix could increase incremental revenue by providing customers with specialized boxes for various formal events. Further, they could create a line of special boxes for occasions like job interviews, birthdays, or pregnancies. These could make great gifts and help current Stitch Fix lovers spread the word to potential new customers in a fun way.
- Johnson, Emma. “The Real Cost of Your Shopping Habits,” Forbes, January 15, 2015, http://www.forbes.com/sites/emmajohnson/2015/01/15/the-real-cost-of-your-shopping-habits/#702eb2e321ae, accessed November 16, 2016.
- Mac, Ryan. “Stitch Fix: The $250 Million Start Up Playing Moneyball,” Forbes, June 1, 2016, http://www.forbes.com/sites/ryanmac/2016/06/01/fashionista-moneyball-stitch-fix-katrina-lake/#1b6b1a2e2eac, accessed November 16, 2016.
- Gaudin, Sharon, “At Stitch Fix, Data Scientists and A.I. Become Personal Stylists,” Computerworld, May 6, 2016, http://www.computerworld.com/article/3067264/artificial-intelligence/at-stitch-fix-data-scientists-and-ai-become-personal-stylists.html , accessed November 16, 2016.
- Hull, Dana. “Q&A: Stitch Fix founder Katrina Lake, on melding fashion and technology,” The Mercury News, March 14, 2014, http://www.mercurynews.com/2014/03/14/qa-stitch-fix-founder-katrina-lake-on-melding-fashion-and-technology/, accessed November 16, 2016.
- Stitch Fix, “Women,” https://www.stitchfix.com/women, accessed November 16, 2016.
- O’Connor, Clare. “Rent the Runway to hit $100M Revenues in 2016 Thanks to Unlimited Service,” Forbes, June 15, 2016, http://www.forbes.com/sites/clareoconnor/2016/06/15/rent-the-runway-unlimited-women-founders-revenues/#e4c060d49e4f, accessed November 16, 2016.