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Case Code: ITSY096
Case Length: 13 Pages 
Period: 2011 - 2019     
Pub Date: 2018
Teaching Note: Available
Price:Rs.300
Organization : Stitch Fix
Industry : Fashion; E-commerce
Countries : US
Themes:  Analytics/ Big Data Strategy
Case Studies  
Business Strategy
Marketing
Finance
Human Resource Management
IT and Systems
Operations
Economics
Leadership & Entrepreneurship

Algorithms to Style People: Stitch Fix Applies Data to Fashion

 
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EXCERPTS

ALGORITHMS AND THE HUMAN TOUCH

 
The following was how Stitch Fix generally functioned: Customers had to sign up on its website and complete a detailed questionnaire regarding their size, whether they were mothers or currently pregnant and also their due date, how they wanted their clothing to fit, what their style was akin to, what were the parts of the body that they wanted to flaunt or play down, what colors they liked and hated, how frequently they dressed for specific occasions (such as work, events, and dates), and what their preferred price points were...
 
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PREDICTING DEMAND AND FASHION TRENDS

Stitch Fix used hundreds of algorithms such as an algorithm that allocated a shipment request to a warehouse (on the basis of available inventory and distance to customer), an algorithm that computed the amount of and the type of inventory the company should purchase, and an algorithm that computed a customer’s level of satisfaction with the service..
 

LAUNCH OF IN-HOUSE BRANDS

Based on the customer response data and the data about their style and fit preferences, Stitch Fix’s data scientists saw that the algorithms could analyze the data and decide, by a set of traits, what customers were looking for in a skirt or a pair of trousers. However, the issue was that sometimes there was no suitable item in the company’s inventory. The algorithms spotted a gap in Stitch Fix’s merchandise. In June 2016, Stitch Fix launched an in-house brand of garments under the Hybrid Design initiative...
 

EXPANSION INTO NEW CATEGORIES

In September 2016, Stitch Fix launched the styling service for men as well. In February 2017, it launched Stitch Fix Plus that offered plus-size garments to women. At the time of launch, the company had a waitlist of over 75,000 women who wanted to avail of the service. In the plus-size segment for women where there were very few shopping options – whether online or brick and mortar – Stitch Fix Plus debuted with over 90 brands...
 

GROWING FROM STRENGTH TO STRENGTH

Stitch Fix’s revenue increased from US$342.8 million in fiscal 2015 to US$730.3 million in fiscal 2016 and further to US$977.1 million in fiscal 2017 (Refer to Exhibit VI for Stitch Fix’s financial performance from 2014 to 2017). The company was on course to achieve revenue of US$1.2 billion in fiscal 2018. The number of active customers of the company had increased from 867,000 in August 2015 to over 2.19 million in June 2017 to a further 2.5 million by the end of January 2018 – Stitch Fix defined an active customer as an individual who had reviewed an order in the previous 12 months..
 

CHINKS IN STITCH FIX’S ARMOR?

There was, however, skepticism on whether customers who, at the start, were elated to get a customized box of clothing would continue to buy over the months and years. A Forrester analyst, who had classified Stitch Fix as a subscription-box service, said, “People will try something because they’re intrigued--but then realize, ‘This isn’t something I need on a regular basis.’” For instance, a specific customer of Stitch Fix since 2015, who loved shopping from the comfort of her home and who liked the pieces that Stitch Fix selected for her, ceased using the service in 2016.
 

EXHIBITS

Exhibit I:Stitch Fix’s Recommendation System
Exhibit II: A Visualization of Stitch Fix’s Algorithms
Exhibit III: A Stitch Fix Box
Exhibit IV: An Instance of Algorithms Compensating for a Human Stylist’s Shortcoming
Exhibit V: Employment of Algorithms under Specific Scenarios
Exhibit VI: Stitch Fix’s Financial Performance (2014-2017)