How Does The American Women'S Clothing Company Achieve Annual Sales Of $700 Million?

As one of the few female CEO in Silicon Valley, Katrina Lake created Stitch Fix at the beginning, and the audience was the women who were busy working with her.

In less than six years, the San Francisco based start-up company used big data and stylist suggestions to match different customers.

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Shoes and accessories.

Stitch Fix founder Katrina Lake

Stitch Fix recently reported that its sales reached $730 million in the last fiscal year, and the company has been making profits since 2014.

Although Stitch Fix executives say they do not have a clear listing plan, according to the world clothing and shoe net, the company is ready to apply for IPO this year.

If Stitch Fix is listed, it will become one of the largest retail new shares in recent years.

"Weird" mode brings us $700 million annual sales.

For a woman who hardly has time to shop, Stitch Fix can find out a little suit for her interview or a shirt for the first date.

Customers only need to pay a sum of 20 dollars.

Fee can be ordered or applied regularly to receive a box with five sets of clothes specially selected for them.

Customers try clothes at home, leave the clothes they want, and do not want to return them without charge.

Once the buying behavior is generated, the $20 paid before can be used as a cash coupon, and once the customer buys the 5 sets of clothing, it can enjoy 25% off discount.

"You can browse eBay or Amason, where you can find almost every product in the world, but trying to find the most suitable one for you is very challenging."

Lake, 33, said that this is the key to Stitch Fix's success -- customization.

A newspaper pointed out that Stitch Fix was not the first company to try this business model.

Similar start-up companies, from clothing Trunk Club to beauty makeup specialist Birchbox, have found this "tailor-made" market.

They also send regular packages to consumers and offer free return service to customers who do not want them.

However, many of these start-ups have encountered problems that can not reduce costs, and it is also very difficult to retain customers.

Nordstrom, a high-end department store in the US, bought Trunk Club in 2014 for $350 million. However, in just two years, Nordstrom reduced its assets to Trunk Club, up to $200 million.

Mark Cohen, a professor of business at Sears, Sears, a famous American department store, is now struggling with the development of most business models. It is quite difficult for them to make long-term profits, "said Mark Cohen, a professor at the Business School of Columbia University.

Is there such a loyal user who wants to receive these products every month? Will anyone be interested in buying so many costumes and accessories?

At least so far, Stitch Fix seems to be an exception, which has been successful in other areas where similar companies are struggling.

So how did Stitch Fix come true?

3400 stylists, 80 big data scientists pick clothes.

Katrina Lake, founder of Stitch Fix, essentially sent consumers what they most wanted: making shopping easier.

When registered as a Stitch Fix user, you will be asked to fill out a form that is specific to clothing size, style preference, clothing demand and price acceptance.

Customers need to provide a total of 50 related information, including weight, underwear size, home page links to social networking sites.

According to these information, Stitch Fix produces a series of potential collocation patterns. Subsequently, one of the 3400 stylists of the company (most of these stylists are part-time) will design their "personal wear" for customers and select and match them from more than 200 clothing brands that cooperate with Stitch Fix.

Lake believes that such a business mode makes customers totally dependent on Stitch Fix.

She pointed out that 35% of Amazon's purchases were driven by "recommendation" on the website, and 50% of talent matching on the social networking platform LinkedIn was completed through the recommendation of big data. Therefore, the importance of recommendation mechanism in pactions is obvious.

On Stitch Fix, 100% of purchases are done by recommendation, and even all returns are regarded as valuable data, so that Stitch Fix stylists can get negative feedback from customers so as to better adjust their styling style or product description.

Stitch Fix has a team of 80 data scientists, including astrophysicists and computational neuroscientists. There are 49 Ph. D., who believe that the combination of computer and stylist will pick out the right clothes better than the customers themselves.

The algorithm of Stitch Fix takes advantage of the customer's stature data and refers to its dress style, occupation and postal code (used to predict the weather) to measure how many customers will have the possibility to buy the product they receive.

The stylist will browse the information again, and finally choose 5 products to be placed in the customer's box.

In the "physical retail era", a woman needs to try on 20 jeans to find the one she likes. That's the end of the day.

Stitch Fix believes that if they can predict accurately, customers will stay.

"It's about experience and relevance," they guessed what I wanted, and I kept the product they sent me. "

Eric Colson, former vice president of Netflix data science online video platform, said.

Now, he has a very data title in Stitch Fix: Chief algorithm officer.

He said: "all the clothes sold by Stitch Fix are not exclusive, and the price is not the most attractive. Logistics is not the fastest. Our advantage is that we have made better choices and collocations for our customers."

In Colson's view, big data played a key role in helping customers choose the right clothes.

For example, for a woman who wants to pick a pair of trousers, big data can help her to reduce her massive selection to only a few.

"Customers will say," it's a great surprise! If I were my own, I would never think of doing such a choice and matching! "At the same time, big data also simplified the complicated steps needed for traditional dress selection to just a few steps.

Stitch Fix board member, Vc firm Benchmark's Bill Gurley pointed out that some people call this mode the fashion industry's "rocking Qian Shu", and in his view, Stitch Fix is currently unmatched in the research and development of related big data.

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Stitch Fix team, from financing failure to investors seeking investment.

In the early days of the venture, Stitch Fix had been rejected by more than 20 venture capitalists, including Sequoia Capital.

In Lake's view, although she had the analyst's mind and the desire to develop big data in the company at the time, she lacked the technical background and the ability to write code, and her company was questioned by the VC agencies.

On the other hand, 94% of the US venture capitalists are male, and Lake believes it is difficult for them to understand the potential of a company that provides services to women.

For 8 weeks, Stitch Fix did not get a cheque.

At the critical moment, it was the earliest angel investor. Steve Anderson from Baseline Venture of venture capital agency saved the money with a sum of $2 million.

It is this $2 million that allows Lake to hire big data experts like Colson to develop its big data business.

Lake was determined to become a profitable company from the very beginning because of the financing difficulties at the beginning of the business.

In order to make profits, Stitch Fix inevitably needs some advertisements at the beginning, but ultimately it depends on quality and word-of-mouth.

Stitch Fix declined to disclose its return rate, but by the beginning of 2013, it began sending tenth million clothes to its customers.

This amazing number has attracted the attention of Vc firm Gurley Bill Gurley.

A long time ago, Gurley noticed that her assistant Amie Fineberg spent two hours on her payroll, Uber, and an unknown "private style wear company".

Out of curiosity, Gurley inquired about Stitch Fix and met with Lake.

At that meeting, Lake showed him a profit list for the next three years, which made Gurley extremely shocked.

"This has never happened in my investment career," Gurley said. "Investing in Stitch Fix can be said to be the fastest decision I have ever made."

The investor who had invested in Uber spent 8 months in lobbying Lake to accept his investment. At that time, Lake was not short of money and had no financing plan.

Is the profit model being questioned feasible in China?

Stitch Fix said its typical customer was a 25-45 year old woman who was not sensitive to the price of clothing at a price of more than 55 dollars.

Lake pointed out that its potential market could reach US $40 billion.

However, Forbes questioned the sustainability of Stitch Fix.

According to a survey of 4667 American consumers by Forrester in 2015, only 3% of people were willing to order such services, while 59% said they were not interested in it at all. They thought that the products they received were nothing but discount goods and promotional products.

In addition, retaining new customers is more difficult than attracting new customers.

Stitch Fix said that 80% of the customers will purchase second times in 90 days, but Forbes estimated that to maintain profits, customers of Stitch Fix had to buy at least 2 pieces of 5 garments received each time.

A newspaper also raised the same query that "private customization" is not a matter that can be popularized on a large scale, so retaining old customers is particularly critical. The question is whether people will carry out such a high frequency and large amount of clothing purchase.

Virginia optometrist Lauren Rivellino was once a fan of Stitch Fix, but a year later, she stopped using the service.

"I really can't pick out any bad things about them. I just don't buy so many clothes anymore."

At present, the Stitch Fix mode has Chinese apprentices, and it is one of the companies that have won millions of Yuan Angel wheel financing in 2016.

In the view of founder Chen Xi, in a strong electricity supplier in China, such a mode wants to succeed, just to avoid the "Red Sea" of the female market. Therefore, the positioning of the clothes is the men who have the purchasing power but have no time to go shopping.

"Men and women have different shopping logic, women enjoy the process, while men pay more attention to the results. What they want to do is to find an efficient way of buying for them."

Chen Xi said.

However, the clothing has also been questioned, including how to smooth the cost of logistics and how to locate the audience more accurately.

In addition, some users complain that the online communication questions of "drop clothes" stylist are all basic problems, and there is no in-depth communication.

It seems to be clear whether the "male version" Stitch Fix will succeed in China.

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