You're a busy woman who doesn't have time to shop for clothes. But what if a stylist mailed you five pieces of clothing, specifically chosen for you, and you bought what you liked and mailed the rest back in a prepaid envelope?
That's the business model behind Stitch Fix, a San Francisco-based startup that is equal parts technology and retail and has largely grown by word of mouth from women who love the service. Founded 3 years ago, the company has been compared to a clothing version of Pandora for its data-driven personalization: The more you use Stitch Fix, the better the service gets at picking blouses, sweaters, dresses and accessories in cuts and colors that you love.
Stitch Fix works with more than 200 labels and brands, including Kut from the Kloth, Sanctuary Clothing and 41 Hawthorn. Clothing is algorithmically selected based, in part, on a 10-minute style questionnaire that customers fill out. Stitch Fix has 60 people in its San Francisco headquarters and 200 working in its South San Francisco warehouse. But the company also employs 300 stylists around the country, many of them women who have a sharp eye for fashion and love to set their own hours and work from home. In October, Stitch Fix announced it raised $12 million in a second round of funding led by Benchmark.
The San Jose Mercury News recently sat down with founder and CEO Katrina Lake; the interview has been edited for length and clarity.
QUESTION: I first heard of Stitch Fix about a month ago, when a friend of mine posted on Facebook about getting her "Fix." Since then, at least half a dozen friends, all working moms in their early 40s, have tried the service. Have you reached some kind of critical mass in terms of awareness and growth? I originally thought that Stitch Fix was selling hipster clothes to girls who live in Omaha, but everyone that I know who uses it is a working mother who doesn't have time to shop.
ANSWER: We cater to a broad range of profiles. We certainly have women in Omaha who might have a local Kohl's but are excited to get boutique inventory; that's definitely one of the profiles. But that "working mom" profile is our bread and butter. Someone who is time-starved, feels like she is super-busy and doesn't have time to shop but is excited to have fresh clothes. The time-starved mom is, on average, 39. We also have the working gal profile, she's more like 30. We have a lot of teachers.
Q: What are your biggest geographic markets?
A: It's mostly California, New York, Texas – where the population is. But some cities and places are really interesting: In Minneapolis we do quite well. We don't have a lot of customers in Wyoming, but from an average ticket perspective, our customers in Wyoming buy more clothes than customers in other states.
Q: Did you go to Harvard Business School with the idea for Stitch Fix in mind?
A: I was in consulting in San Francisco and I worked with very traditional brick-and-mortar retail clients, like Applebee's and Kohl's. I got really interested in innovation in retail, and new retail concepts. I ultimately applied to business school with the intent to start the company. I didn't have money of my own and I knew I needed funding, so I treated business school as a two-year time period to focus on getting the company off the ground. In April 2011 we closed a round with (angel investor) Steve Anderson; in May 2011, I graduated.
Q: Did you actually learn anything in business school? As you can imagine, there's some debate in Silicon Valley over whether an MBA is worth it.
A: It was absolutely the right thing for me. I had no history of being an entrepreneur. I loved the classes. I learned to be able to present thoughts quickly, which helped with pitching, leadership, running meetings. I was very deliberate about what I was going to get out of it.
Q: How much of the Stitch Fix secret sauce is based on the questionnaire that customers originally fill out? And then you are collecting data that is refined over time — people send clothes back and say, "I hated this shirt, but I loved this dress."
A: The initial profile is very important. One of the problems in fashion is: How do you build an algorithm? We collect information from you, what we know from inventory, what we know from other people, and all of that helps to inform the data and algorithm side, which generates recommendations for the stylists. It's a combination of art and science. As we get to know more about you, we are able to style for you better.
Q: So the average "Fix" comes with five pieces of clothing. Is the hope that over time customers will fall in love with and keep all five items?
A: The goal is not to have you keep all five; our goal is for you to keep two items. The cadence people are comfortable with is to buy two things a month. Women like to browse and nibble when they shop, and that's the behavior we expect in a Fix.
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