How AI Helped Stitch Fix Dominate Sustainable Online Fashion

Stitch Fix cover image

Shopping — you won’t find too many people on the fence about this activity. They either love it or hate it.

While some love the rush of finding the perfect shirt or shoes, others see it as an uncomfortable outing or a waste of valuable time.

But, whether you’re a lover or a hater, Stitch Fix can work for you. Why is that? Well, after you answer a few simple questions about your style, body type, and price limits, Stitch Fix will send you boxes of pre-selected outfits.

For the shopping-lovers, it’s an opportunity to try on a hand-selected outfit with an element of surprise. For those that don’t enjoy shopping, it allows them to refresh their wardrobe without investing their own time or effort.

And with 85% of respondents around the world reporting that they shopped online in 2020, this industry has nowhere to go but up.

Founded in 2011 by Katrina Lake and Erin Morrison Flynn, Stitch Fix has become one of the US’s most successful personal styling services. Using AI and data science to generate personalized recommendations for users, Stitch Fix boasts more than 4.1 million users in 2021.

So, how has this cutting-edge brand managed to become so successful despite fierce competition and a global pandemic? This article will break it down — plus, provide tips you can use when growing your own brand.

Stitch Fix’s Journey To Success

Katrina Lake
Katrina Lake

Source: Entrepreneur

When Katrina Lake founded Stitch Fix over 10 years ago, it was originally called “Rack Habit” and only offered clothing for women. Run out of Lake’s apartment, Stitch Fix started out relatively small with $750,000 in seed money.

From the beginning, Lake didn’t harbor any dreams of being a CEO or Silicon Valley mogul — instead, she wanted to use her intellect and talent to explore what “the next generation of shopping would look like.” Interestingly, she states that her massive success is a “byproduct of pursuing what thought was a really interesting business idea.”

And her “really interesting business idea” worked. In 2013 alone, Stitch Fix raised $4.75 million in Series A funding and another $12 million in Series B funding — leading to a valuation of around $41 million.

By 2014, Stitch Fix was profitable — a huge coup for a brand that was, at the time, less than four years old. 2014 also saw the company raise another $25 million in Series C funding and boast an updated valuation of around $330 million.

That’s an incredible 705% increase year on year.

In an effort to grow the brand and serve a wider audience, Stitch Fix launched a new clothing line almost yearly: maternity options in 2015, men’s clothing in 2016, plus-size options in 2017, and kid’s clothing in 2018.

And each year, revenue was on the rise. From $73.23 million in 2014 to $977.1 million by 2017 — Stitch Fix was trending up. 2017 also saw Stitch Fix go public with NASDAQ as the first female-led company to successfully launch an IPO in over a year.

Though this was a huge achievement, Lake still “bristled at how she was portrayed in the media.” In an interview with Elizabeth Sergan of Fast Company, she explained:

“At some points, I resented being on lists of top female founders: I would ask, why am I not just a founder? Why do I have to be highlighted in this way?”

A fair question, in our opinion.

As an “incredibly capital-efficient company that has shown other firms how to grow sans burning bars full of cash”, Stitch Fix made a bold move going public in 2017.

But it paid off — they raised the money needed to fuel further growth, provided long-term liquidity to shareholders, and “bolstered the profile of the firm by showing off its history of profits and huge revenue growth.” Furthermore, they reached a valuation of $1.6 billion.

2018 saw the brand generate more than $1 billion in sales, though they did struggle a bit with shares dropping in value later in the year.

By 2019, Stitch Fix had around 8,000 employees — 5,100 of which were stylists and more than 100 of which were data scientists. Though 100 may seem like a high number, this brand is committed to using AI and machine learning to rocket themselves to further success — and that requires a lot of brainpower.

Like most other companies, 2020 hit Stitch Fix hard, causing the brand to let go of 18% of its workforce in order to drive down costs. However, they still performed well in terms of customer growth, reporting 3.4 million customers in June 2020.

Now, in 2021, we’re about to see how some big changes will affect the brand, as founder and CEO Katrina Lake is handing over the role to the company’s current president, Elizabeth Spaulding.

Though Lake will stay involved as a chairperson of the board, this transition will definitely have ripple effects throughout the brand. Spaulding has ambitious goals and a great deal of experience, and we’re excited to see what happens next.

What Can You Learn From Stitch Fix?

Source: Stitch Fix

Clearly, Stitch Fix has been wildly successful. As one of the most well-known clothing subscription retailers around, this brand seems to have cracked the code.

But what can you learn from Stitch Fix and its impressive leadership team? Let’s discuss.

1. Lean Into Diversity

Diversity is what makes a team — and a company — truly strong.

And we mean all kinds of diversity: cultural diversity, ethnic diversity, neurodiversity, gender diversity. Hire people of various ages, sexual orientations, physical abilities, races, and more.

Leaning into diversity has been one of the biggest reasons Stitch Fix boasts such a strong company culture, where employees are truly connected to the brand mission. Lake explained the approach taken, saying:

“I hate the notion of a ‘cultural fit.’ If you’re just fitting in or blending in, you’re not actually bringing anything new to the table. I prefer to think about ‘culture additions,’ which means bringing new people to help our culture evolve.”

By actively prioritizing diversity when hiring, you are able to “attract phenomenal diverse talent” — which leads to stronger overall company culture. Brands that only stick to what they know will grow stagnant over time. To truly evolve, you need to embrace diversity.

In Lake’s words, “when teams are not monochromatic, it deepens the idea that everybody adds to it. You create environments where people feel like they can be their most authentic selves.”

The takeaway? Prioritize diversity in your hiring process. Look for candidates that bring something new to the table — who don’t just “fit” your company, but enhance it.

With this approach, you’re sure to enhance your brand’s quality and chances of success.

2. Use Data To Grow Strategically

It doesn’t matter what kind of brand you are, data is important. It helps you understand what your customers want and need — which allows you to tailor your products and services to meet their expectations.

But it’s the brands that actually use their acquired data to grow strategically that make it big.

Spalling explains what makes Stitch Fix unique, saying that while many companies “dabble in commerce”, they’re not “deeply innovating in the full end-to-end customer experience, from inventory to supply chain to customer experience. Stitch Fix is a needle in a haystack, marrying the DNA of data and technology, then adding the human touch of styling.”

Stitch Fix is now using the data they’ve collected over years to evolve its business model — going from one that relied heavily on the human element (stylists) to one that leans into the data that $7 billion worth of clothing sales has produced.

In the future, AI will become even more integral to their approach, as customers will “have the option of shopping in a personalized store and interacting with a stylist when they want.”

The takeaway? Let your data lead the way. When you see an opportunity where using data could cut down on costs and enhance your customer experience, you have to explore it.

Innovation and evolution are what keep brands alive and relevant. And data makes both possible.

3. Focus On Your Brand Values

Brand values are great — they live on your “About Us” page and allow consumers to see what your company stands for.

However, if you don’t integrate those values into every aspect of your business, you’ll likely lose consumer trust. There’s nothing worse than a brand that claims to be eco-conscious getting caught with one-use plastic — a PR nightmare.

Stitch Fix’s values are clear: they’re dedicated to creating a more sustainable and equitable world — supporting eco-friendly, innovative business processes and promoting gender and racial equity in hiring.

From gender representation to universal parental leave to employee pay equity, Stitch Fix outlines which values drive them in terms of promoting equity. And when it comes to sustainability, they’re honest about the material used — highlighting recycled fabrics, conflict-free minerals, and waste reduction.

Moreover, having stepped down as CEO, Lake is now focusing a great deal of time on helping Stitch Fix become a leader in sustainability. She’s looking into resale and garment recycling in an effort to see how Stitch Fix can live out its values more thoroughly.

At the end of the day, Lake knows that “these projects will be very meaningful for company and shareholders.” By dedicating time and money to further its brand values, Stitch Fix is signaling to consumers that they make good on its promises.

The Takeaway? Integrate your brand values whenever possible. And when you’re able to do so successfully, tell your customers about it.

Consumers want to know that your brand is staying true to its word — it enhances brand loyalty and trust, which leads to higher sales.

Final Thoughts

Stitch Fix is by no means the only clothing subscription service around — but it is one of the most successful and innovative brands we’ve come across.

If you’re looking to follow in Stitch Fix’s footsteps, make sure to lean into diversity in the workplace, use your data wisely, and integrate your brand values whenever possible. All of these moves will help you to become a more effective, successful brand.

And if you want to level up your customer data, consider using advanced brand tracking software to gather the insights you need to inform better, smarter marketing strategies.

Originally published at https://latana.com.

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