How Stitch Fix’s Katrina Lake is changing the retail industry

While she was a student at Harvard Business School, Katrina Lake had an idea.

What if retail companies could harness technology to help women find clothes online that matched their fit and style preferences?

E-commerce has been around as long as the Internet, but few retailers were using data on customers to send them targeted merchandise.

“If you look at innovation in e-commerce, so much is focused on ‘How can I get it delivered to you the fastest?’” said Lake, 33. “I really felt there was a huge opportunity for retailers to embrace technology a little bit more.”

Her idea became a business called Stitch Fix in 2011. Users fill out online style profiles, which include size information and preferences on spending. That data is sent to personal stylists who pick out five clothing items or accessories, such as jewelry, purses or shoes. These items are packed into a box and shipped to the Stitch Fix customer, usually on a monthly basis, though the shipping frequency can be changed.

Users are charged a $20 fee for each “fix,” though this this fee is applied as a credit if the customer keeps even one item. All the items can be returned, though customers are enticed to keep all five with a 25 percent “buy 5” discount.

It’s fair to say that Stitch Fix has had tremendous success in the ensuing five years. They won’t share data on the number of users, but they have received more than $45 million in venture capital investments and have more than 4,000 employees, which includes 2,800 stylists. When we spoke to Lake back in September, she said they had “over 2,000 employees.” So they may have doubled their headcount in less than a year.

Technology website Re/code reported in March that Stitch Fix is projecting more than $200 million in revenue this year.

Fans of the service — I am one of them — rave about the experience. It eliminates the hassle of going shopping in a crowded mall by allowing women to try on clothes in the comfort of their homes. More importantly, Stitch Fix is renowned for its ability to predict what clothing or accessories a customer will like. Lake said 80 percent of customers get another box within 90 days.

Lake said the goal of Stitch Fix is to revolutionize how people shop online. “A lot of people don’t like what shopping looks like today,” she said. “They don’t like driving to a mall and waiting for things to be 40 percent off, or waiting in line to return things to a mall. They don’t like buying and returning e-commerce, realizing something doesn’t fit them at all. At Stitch Fix we hope that we can convert people to loving shopping again.”

Stitch Fix’s success is rooted in its use of data, Lake says. And she said the more someone uses the service, the more accurate it gets.

Every time a woman offers feedback on a box, even if she disliked most of her items, it helps Stitch Fix’s prediction algorithm improve, Lake said. “We’ve really seen improvement over time,” she said. But the stylists themselves are a key component, Lake added. “The part of the business I have been most surprised and astounded by is how valuable that combination is.”

What she’s saying is stylists shouldn’t worry they will be replaced by an algorithm any time soon. And she would know. Even though she’s CEO, Lake still styles five fixes, or boxes, a week herself.

“I have a few clients that I call my regulars,” she said. “I have a client who is 19 and is in college and a client who is 62 and lives in Oakland.”

Some of Lake’s biggest challenges going forward involve keeping up with her company’s growth. In the past year the company has been busy adding distribution centers in order to ship boxes to customers faster. The nearest one to Austin is in Dallas. They started selling shoes this spring, and Lake says plus sizes are still in the company’s expansion plans.

Soon I may not be the only Stitch Fix fan in my household. The company could be poised for another growth spurt this fall. That’s when Stitch Fix is going to start selling its styling services to men.

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