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12/09/2020

Stitch Fix Leverages Data Flywheel for Growth and Positive Outlook

Jamie Grill-Goodman
Senior Editor
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Stich Fix continues to harness its data flywheel and innovate new solutions for its customers, a move that is paying off for the online personal styling service.

The company reported net revenue of $490 million in Q1 2021, a 10% growth year-over-year and 11% growth quarter-over-quarter, topping estimates. It also grew its active client count to nearly 3.8 million in the quarter, a year-over-year increase of 10% and its highest sequential client addition on record.

What’s more, at a time when many retailers are neglecting to give any outlook at all, Stitch Fix said it expects revenue to grow 20%-25% in fiscal 2021 to deliver net revenue of $2.05 billion to $2.14 billion.

So what’s setting the e-commerce retailer apart, beyond the overall growth in digital purchasing this year?

For one, Stich Fix has grown its athleisure assortment as a percent of its women's inventory by over 150% compared to pre-COVID levels, helping it to serve elevated demand among work-from-home needs.

In Kid's, the retailer is now sourcing a meaningful portion of in-demand styles using a rapid sourcing model in which product arrives to distribution centers in as little as 10 weeks. This contributed to a strong back-to-school season in which Stich Fix grew first Fix shipments by 60% year-over-year it said. 

Founder and CEO Katrina Lake noted in the recent earnings call, that the speed with which the company shifted the assortment to be able to meet the needs of its clientele, “really helped our business to kind of not just survive, but really thrive during this time. We've also reacted to the current environment by expanding our assortment of more affordably priced products across categories.”

The retailer is also finding new ways to use data form its Style Shuffle game in the Stitch Fix app. Since its launch, Style Shuffle has collected over 6 billion ratings with millions of customers having played.

“During Q1, we've seen on average more than 50% of our app engaged users playing daily,” president Elizabeth Spaulding said. “With such strong client engagement Style Shuffle has evolved into a key vehicle for data collection that has strengthened our algorithms and allowed us to build enhanced features that improve client outcomes.

Now the company is working on allowing customers to become “co-creators” in designing their personalized Stitch Fix storefront. In November, it expanded its direct-buy capabilities with the beta launch of shop by category, which leverages Style Shuffle data, as well as the valuable customer insights it has gained over time, to create a highly personalized shopping feed for each client.

“Underlying these distinctive data assets with a proprietary style graph that we leverage for each individual client feed,” Spaulding explained. “Each category shop is built around specific themes like athleisure, sweaters for seasonal staples, which are curated using each client's real-time Style Shuffle likes, along with algorithmically generated recommendations inspired by these likes. Through this item-based format, clients now have the ability to purchase specific items that they see in style shuffle.”

Stich Fix plans to algorithmically generate a wide array of categories relevant to each individual client in the future.

“Shop by category is just one example of how we're leveraging our data flywheel to create a differentiated, engaging and personalized shopping experience,” Spaulding said.

Stich Fix also recently rolled out an initiative in the UK called Fix Preview, where it shows its clients proposed items for their next Fix (a curated box where shoppers can purchase items delivered to their door). The new experience enables clients to engage more directly with their Fix before it ships and have more adjacency in selecting the items they receive.

Stick Fix started testing the new feature in August and recently introduced it to 50% of its UK clients. Spaulding said Stich Fix plans to roll Fix Preview out to 100% of UK clients and has started testing it with U.S. clients, with the intent to learn and scale in the quarters ahead.

“We believe that Fix Preview along with our ongoing momentum and direct-buy will allow us not only to attract high quality clients, but also to convert our large prospect population that we estimate is in the millions.