Stitch Fix, a San Francisco-based company, applies data capabilities to make online retailing more like a personal shopping assistant. CEO Katrina Lake created Stitch Fix as a retailer grounded in data science. The focus on data is apparent in its hiring of more than 80 data scientists, who work in a group reporting directly to the CEO. Typically, data analytics is a support function reporting to a technology or other support executive, but this organizational structure keeps the company’s leaders focused on data as a driver of success.

Customers complete a questionnaire about their size, tastes, desired price ranges, and clothing needs. Periodically, according to the schedule selected by the consumer, Stitch Fix sends out a box containing several items compatible with the consumer’s questionnaire responses. Clothing purchases have an emotional component, so human stylists make the final selections in each box based on the data-driven recommendations, personal information that shoppers choose to share, and their own sense of style. For each box, the company charges a $20 styling fee, which is applied to reduce the price of any items purchased. The consumer decides which items to keep and returns the others along with feedback. The choices and feedback shape the next round of selections.

This business model involves significant risks. The company must acquire a wide variety of inventory and then hope that consumers will want to pay for those items. If consumers return most of them, the company has to pay for buying, storing, and shipping clothes without earning much from the expense. The primary quality control Stitch Fix uses is the application of data analytics to ensure that the choices the company makes are likely to appeal to its customers. When this works, Stitch Fix sells items fast enough that it can pay vendors with earnings from sales. In addition, data analytics helps the company control costs. 

Having employed highly educated scientists to solve problems with data, Stitch Fix gives them latitude to apply their skills throughout the organization. The group has created programs for timing reorders of inventory, selling which warehouses will fill particular orders, and arranging work flow in warehouses.

As of 2019, Stitch Fix had 3.4 million active clients (customers who received a shipment during the previous 12 months), revenues exceeding $1 billion, and an inventory drawn from hundreds of brands. It has expanded from women’s apparel to include offerings for men and children. However, growth in the number of active clients has slowed, and other retailers have observed Stitch Fix’s initial success and are preparing to compete. The company has planned an entry into the United Kingdom, where it will hire local stylists who can recommend brands familiar to local consumers. Managers at Stitch Fix also have to figure out how to stay ahead of the curve in anticipating consumers’ wishes. The better the company predicts what shoppers will order, the less it will spend on shipping and inventory of unwanted items. Even more importantly, it will retain more loyal customers to fuel future growth.

Questions for Discussion

1. In general terms, according to the information provided, what measures of efficiency and effectiveness are important for controlling Stitch Fix’s corporate performance?

2. How can Stitch Fix’s organizational culture support the achievement of its goals?

3. How do you think the establishment of Stitch Fix might have created a need for organizational change at other clothing retailers? How might their responses create a need for organizational change at Stitch Fix?