Author Topic: SFIX - Stitch Fix  (Read 19953 times)

SHDL

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Re: SFIX - Stitch Fix
« Reply #20 on: January 03, 2019, 10:29:33 AM »
On the surface, SF's metrics (profits, operating margin, etc.) appear to be getting worse.  Why is that?  Does the company have to expense "investments" that would ordinarily be capitalized by a traditional retailer?

I imagine their tech “investments” are a big driver here.

In terms of numbers, their filings indicate that their tech team grew from about 170 employees in 2017 (95 engineers and 75 data scientists, according to their S-1) to more than 280 employees in 2018 (180 engineers and 100 data scientists, according to their 10-K).  Each employee probably earned a base salary in the $100k-300k range and cost the company around $200k-900k.  So the incremental cost of growing the team by 110 was likely around $22-99m.  If so, that explains a big chunk of their $90m y-o-y increase in SG&A expenses. 


SHDL

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Re: SFIX - Stitch Fix
« Reply #21 on: January 17, 2019, 11:42:55 AM »
So as part of my research, I tried placing an order with them.  Here’s how it went in case anyone’s interested:

I first had my wife create an account with them.  They made her answer a very long list of questions about her physical appearance (height, weight, other measurements, age, …) and preferences (which body parts she wants to (de-)emphasize, personal colors, favorite brands, preferred price range, …). 

Then I had her place an order, with a note attached telling them pretty much exactly what type of item she wanted (blouse, sweater, …) and for what occasion (work, casual, …), along with a few other special notes/requests (how conservative the office environment is, fabric quality, …).

It took over 2 weeks for the items to arrive.

The items that arrived were all of good quality and fit perfectly, and all special requests were honored.  Out of the 5 items that arrived, 2 were excellent picks (much better than what was expected), 1 was shall we say “adventurous” (a bold design that she had never tried before), and 2 didn’t work in terms of color/style and were sent back.  They asked for detailed feedback on each item as part of the check out process.

In total, she spent about $220 total on 3 items. 

I tried to do a price comparison online but that wasn’t really possible because the exact same products were nowhere to be found (including those from very well-known brands, interestingly).  But my very rough guess is that she probably could have bought comparable items for about $150 elsewhere. 

So was this a good deal?  For one thing it was certainly a nice time saver — it probably would have taken her at least a few hours searching around and trying things on to get the items she got from another seller.  Our personal circumstances are such that spending $70 or so to save those several hours is worthwhile, but of course not everyone will feel the same way.  Also, return shipping is really easy for us because we live in a building where we can just leave the package with the front desk concierge, but I think it’s a much bigger hassle for many other people. 

And most importantly:  My wife was pretty happy about the experience and wants to place another order. 
« Last Edit: January 17, 2019, 12:48:49 PM by SHDL »

KJP

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Re: SFIX - Stitch Fix
« Reply #22 on: January 18, 2019, 08:02:24 AM »
So as part of my research, I tried placing an order with them.  Here’s how it went in case anyone’s interested:

I first had my wife create an account with them.  They made her answer a very long list of questions about her physical appearance (height, weight, other measurements, age, …) and preferences (which body parts she wants to (de-)emphasize, personal colors, favorite brands, preferred price range, …). 

Then I had her place an order, with a note attached telling them pretty much exactly what type of item she wanted (blouse, sweater, …) and for what occasion (work, casual, …), along with a few other special notes/requests (how conservative the office environment is, fabric quality, …).

It took over 2 weeks for the items to arrive.

The items that arrived were all of good quality and fit perfectly, and all special requests were honored.  Out of the 5 items that arrived, 2 were excellent picks (much better than what was expected), 1 was shall we say “adventurous” (a bold design that she had never tried before), and 2 didn’t work in terms of color/style and were sent back.  They asked for detailed feedback on each item as part of the check out process.

In total, she spent about $220 total on 3 items. 

I tried to do a price comparison online but that wasn’t really possible because the exact same products were nowhere to be found (including those from very well-known brands, interestingly).  But my very rough guess is that she probably could have bought comparable items for about $150 elsewhere. 

So was this a good deal?  For one thing it was certainly a nice time saver — it probably would have taken her at least a few hours searching around and trying things on to get the items she got from another seller.  Our personal circumstances are such that spending $70 or so to save those several hours is worthwhile, but of course not everyone will feel the same way.  Also, return shipping is really easy for us because we live in a building where we can just leave the package with the front desk concierge, but I think it’s a much bigger hassle for many other people. 

And most importantly:  My wife was pretty happy about the experience and wants to place another order.

Thanks for the info.  Did the Fix include brands that your wife wasn't previously aware of?

My fixes did introduce me to a new brand, which was great for me.  But now that I know my fit in that brand, I buy directly from the brand's DTC website.

ajc

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Re: SFIX - Stitch Fix
« Reply #23 on: January 18, 2019, 08:19:58 AM »


I tried to do a price comparison online but that wasn’t really possible because the exact same products were nowhere to be found (including those from very well-known brands, interestingly).  But my very rough guess is that she probably could have bought comparable items for about $150 elsewhere. 



Part of this article addresses that - https://www.businessoffashion.com/articles/news-analysis/stitch-fix-introduces-over-100-contemporary-brands.

Stitch Fix is using client feedback and their data science teams to create unique offerings that only they sell. I think KJP pointed out that a few places do this, but I don't know of anyone who is actually doing it in such a tailored and scientific way. In other words, you really can't buy many of their items anywhere else and in fact they're produced specifically to appeal to client's taste preferences in ways that their competition doesn't actually have the data on or fully understand. Therefore, I'd say what your wife bought was really a more well-designed product in the sense that comparable ones for $150 would've been somewhat less appealing. At this stage it's more like the difference between a meal with ever so slightly too much spice or something like that. The thing to keep in mind is that the product differences are almost unnoticeable at this point, but a few years from now they'll become more apparent as Stitch Fix continues to deepen their understanding. If you take their Hybrid Designs as a simple example of this, Eric Colson has already noted in various talks that they were very good sellers and in this article you can see that the sales performance of some of them was extraordinary - https://qz.com/1028624/stitch-fix-let-an-algorithm-design-a-new-blouse-and-they-flew-off-the-digital-racks/. So, the differences right now in the Stitch Fix experience and clothing are mostly imperceptible, but I think it's unlikely to be that way for many more years.

This other article (https://www.forbes.com/sites/pamdanziger/2018/12/01/nikes-new-consumer-experience-distribution-strategy-hits-the-ground-running/) on Nike's new consumer experience strategy (which Stitch Fix made the cut for), also gives some further and different insights about where the fashion industry and brands are headed. If you combine this with the Business of Fashion article above, you can see that Stitch Fix clearly stands to benefit significantly from this trend given that their service is more personalized than everyone else in most respects.

Finally, Stitch Fix also took market share (https://seekingalpha.com/news/3423111-online-holiday-sales-17-percent-2018) this holiday season even though usually they do not see a bump in these months. Basically, they're a full price, year-round, personalized service, so Black Friday, Xmas, etc, isn't something they participate in, nor do they do marketing for any of this stuff.

Related to your experience with Stitch Fix, there's one thing I've noticed which is actually a little incredible. Twitter is obviously known for no-holds-barred commentary. If someone thinks something is a piece of shit, then Twitter (and YouTube comments) is likely going to be the place you'll find them saying that.
On the other hand, looking over the Stitch Fix feedback on Twitter these past few months it is pretty much uniformly positive and enthusiastic (https://twitter.com/search?q=stitch%20fix&src=typd). Scroll down as far as possible. I mean, for anyone who knows how rough-and-tumble that place can be, it really is somewhat crazy.
Also, having performed that search regularly over the past few years, it's clear to me Stitch Fix has actually improved their service, since there was a time a while back when there was at least a visible amount of dissatisfaction with them coming from a chunk of clients. That's not to say everyone's happy today or anything, but I think their performance on this score is worth a mention for its outlier status.



cameronfen

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Re: SFIX - Stitch Fix
« Reply #24 on: January 18, 2019, 10:15:19 AM »
I think SFIX is growing on me.  Personally I think retail whether its online or offline makes no money.  Amazon never turns a large profit on it's own items and the place most of these people make money is by charging a fee to independent sellers.  The average retailer has a price to sales ratio of .5 and online retailers have no significant cost advantage as the lack of stores advantage is negated by their much higher shipping costs.  To piggy back on other people, the advantage SFIX has and where the most value imo is in their own brands that they will create by learning about the behavior of shoppers (and so the retail side is important in expanding their data moat).  These companies trade at a price to sales of roughly 2x with the high end brands (berburry, lvmh etc.) generating formidable roe.  But even something like a gilidian or a fruit of the loom or a Zara are high roe profitable companies that have withstood the test of time. 

SHDL

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Re: SFIX - Stitch Fix
« Reply #25 on: January 18, 2019, 10:15:46 AM »
Thanks for the info.  Did the Fix include brands that your wife wasn't previously aware of?

My fixes did introduce me to a new brand, which was great for me.  But now that I know my fit in that brand, I buy directly from the brand's DTC website.

I’d say yes, in fact she wasn’t aware of any of the brands except Calvin Klein. 

The interesting thing is (as I briefly touched upon in the post above) none of the items they sent us were available for direct purchase from the brands’ websites.  For example one of the items she really loved was a pair of office appropriate dress pants from Kut From The Kloth.  But then when I visit their website all they have are casual items like denims and cords. 

So I totally buy ajc’s hypothesis above (very informative post as always BTW) that the items they sent us were actually Stitch Fix exclusives despite their (non-private) branding.  And if so, they are making the right move IMO because by doing so they are creating a way to avoid direct price competitions with the brands’ DTC websites.

KJP

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Re: SFIX - Stitch Fix
« Reply #26 on: January 18, 2019, 10:45:19 AM »
Thanks for the info.  Did the Fix include brands that your wife wasn't previously aware of?

My fixes did introduce me to a new brand, which was great for me.  But now that I know my fit in that brand, I buy directly from the brand's DTC website.

I’d say yes, in fact she wasn’t aware of any of the brands except Calvin Klein. 

The interesting thing is (as I briefly touched upon in the post above) none of the items they sent us were available for direct purchase from the brands’ websites.  For example one of the items she really loved was a pair of office appropriate dress pants from Kut From The Kloth.  But then when I visit their website all they have are casual items like denims and cords. 

So I totally buy ajc’s hypothesis above (very informative post as always BTW) that the items they sent us were actually Stitch Fix exclusives despite their (non-private) branding.  And if so, they are making the right move IMO because by doing so they are creating a way to avoid direct price competitions with the brands’ DTC websites.

Interesting.  The item may be a Stitch Fix exclusive for now, but if it's successful how long will that last?  In other words, if a product is really a hit on Stitch Fix, why won't the brand eventually add it to their regular lineup that's available at other retailers or DTC? 

Switching gears, you can see why brands really like Stitch Fix.  Kut From The Kloth just got a new (full price!) customer.  What was its acquisition cost for that customer?

SHDL

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Re: SFIX - Stitch Fix
« Reply #27 on: January 18, 2019, 11:19:35 AM »
Interesting.  The item may be a Stitch Fix exclusive for now, but if it's successful how long will that last?  In other words, if a product is really a hit on Stitch Fix, why won't the brand eventually add it to their regular lineup that's available at other retailers or DTC? 

That’s a valid concern for sure.  If Stitch Fix is playing their cards right, they probably either (a) have contracts in place that prevent the brands from selling competing products elsewhere, and/or (b) are scattering their orders across multiple brands so that no one else really knows how big of a hit each design is.  More generally I think Stitch Fix has good leverage in its relationship with the brands, and the key question really is how well are they using it. 

Longer term, I think they will make their private brands a much bigger piece of the pie.  And when that happens this will likely be less of a concern.
« Last Edit: January 18, 2019, 11:37:26 AM by SHDL »

SHDL

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Re: SFIX - Stitch Fix
« Reply #28 on: January 18, 2019, 01:58:35 PM »
Also one more thing:  If, for example, Stitch Fix knows that a certain style is very well received by a small but profitable group of customers, they can order just enough items to fill that niche and send them out in a targeted fashion.  The brands involved on the other hand are in no position to make such decisions/moves given their lack of data, and that is unlikely to change any time soon.

Spekulatius

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Re: SFIX - Stitch Fix
« Reply #29 on: January 18, 2019, 03:36:32 PM »
Very good exchange above. I don’t own this and it doesn’t really fit what I am looking for, but I agree this is an interesting business to look at. I suspect the most important comment may be this one:

Quote
And most importantly:  My wife was pretty happy about the experience and wants to place another order.
To be a realist, one has to believe in miracles.