{"id":15067,"date":"2016-11-16T17:22:08","date_gmt":"2016-11-16T22:22:08","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/stitch-fix-sses-big-data-to-personalize-shopping\/"},"modified":"2016-11-16T17:23:24","modified_gmt":"2016-11-16T22:23:24","slug":"stitch-fix-uses-big-data-to-personalize-shopping","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/stitch-fix-uses-big-data-to-personalize-shopping\/","title":{"rendered":"Stitch Fix Uses Big Data to Personalize Shopping"},"content":{"rendered":"

A 2014 OnePoll survey showed that women spend more than 190 hours shopping for clothes and shoes annually.1<\/sup> What if we could reallocate that time and leave our fashion choices up to an online personal shopping site?\u00a0 With a team of 80 data scientists (including astrophysicists, computational neurologists, and 49 Ph.Ds), Stitch Fix has found a way to employ machine learning to pick out our clothes better than we can.2<\/sup>\u00a0 Gone are the days when we have to spend countless hours trying on dresses to wear for that interview. Now we can rely on Stitch Fix to get it right.<\/p>\n

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What is Stitch Fix?<\/em><\/strong><\/p>\n

Stitch Fix, a San Francisco based online startup, was founded by HBS graduate Katrina Lake in 2011.\u00a0 The service partners data science with a team of 300 human stylists to provide women a personalized collection of boutique-brand clothes, shoes, and, accessories.\u00a0 When clients sign up for the service, they are asked to fill out a 10-minute survey that aggregates information on 50 data points including their size, location, body type, and fabric, color, and pattern preferences.\u00a0 The program can even read images in the client\u2019s Pinterest profile to better understand her style when she cannot articulate it into words.3<\/sup><\/p>\n

The machine learning algorithm uses this data to curate a package of 5 items to send to the customer.\u00a0 The customer pays a $20 \u201cstyling fee\u201d and tries on the clothes at home, keeps what she wants and returns what she doesn\u2019t want.\u00a0 She pays the retail price of the clothes she keeps and the $20 is applied as a credit to her purchase.5<\/sup> The program then uses this feedback to compile an even better set of items for her next fix.2<\/sup> Stitch Fix partners with 200 labels and brands and has created a private label line for basics.4<\/sup><\/p>\n

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Wow, but does it actually work?<\/em><\/strong><\/p>\n

It looks like Stitch Fix is actually getting it right.\u00a0 80% of people who order a box order a second box within 90 days.\u00a0 Furthermore, Forbes estimates that Stitch Fix brought in $250 million of revenue and was profitable in 2015; this sales number is predicted in increase by 50% in 2016.2<\/sup><\/p>\n

Oppositely, established retailers like Nordstrom and Gap continue to face losses due to increased ecommerce competition.\u00a0 Stitch Fix founder, Katrina Lake, believes that in-store conversion is low because customers do not have the hands on help of staff who know their size or preferences.\u00a0 Oppositely, Stitch Fix can use all of your data to ensure you never leave a box empty handed.<\/p>\n

\"screen-shot-2016-11-16-at-5-03-34-pm\"<\/a>\"screen-shot-2016-11-16-at-5-03-56-pm\"<\/a><\/p>\n

\"screen-shot-2016-11-16-at-5-04-10-pm\"<\/a>\"screen-shot-2016-11-16-at-5-04-23-pm\"<\/a><\/p>\n

Future Recommendations for Stitch Fix <\/em><\/strong><\/p>\n

While Stitch Fix has found a way to democratize the VIP treatment of personal shopping, there are many more opportunities to grow with their data analytics.\u00a0\u00a0 Industry analyst Jeff Kagen acknowledges that there is room for improvement: “I think this is just the beginning, many new business models will form with A.I. as the center of their universe… This is the Model T for the A.I. revolution.\u201d3<\/sup><\/p>\n

Eric Colson, Chief Algorithms Officer at Stitch Fix and the former VP of Data Science at Netflix acknowledges the power of their programing: \u201cThe clothes are not exclusive. We don\u2019t price them better than anyone else. We don\u2019t do fast shipping. We\u2019ve just got to be more relevant.\u201d2<\/sup> However, as data-driven personalization becomes more prevalent in ecommerce, Stitch Fix needs to offer these perks and focus on a more streamlined, customer service-centric experience to be competitive. Moreover, they have opportunity to use their sales data to improve their private label product offering to provide exactly what their customers want.<\/p>\n

Additionally, there is an opportunity to utilize their data to improve the in-store shopping experience.\u00a0 Rather than shipping boxes, customers could have the option to go to a store to try on their curated package of items. Data-driven associates could immediately provide additional product recommendations and replace items that initially did not work out due to style or fit.\u00a0 If Stitch Fix doesn\u2019t want to enter the brick and mortar retail business, they could sell the algorithm to a big box retailer who would benefit from the customer data in store and online.<\/p>\n

Finally, there is an opportunity for Stitch Fix to curate specialized packages for formal events and special occasions. Rent the Runway is set to hit $100mil in revenues in 2016 by providing customers with a convenient way to find special occasion dresses.6<\/sup> However, searching for styles on their website is cumbersome and their customer data is not personalized. Stitch Fix could increase incremental revenue by providing customers with specialized boxes for various formal events. \u00a0Further, they could create a line of special boxes for occasions like job interviews, birthdays, or pregnancies. These could make great gifts and help current Stitch Fix lovers spread the word to potential new customers in a fun way.<\/p>\n

 <\/p>\n

(799 Words)<\/p>\n

Footnotes<\/p>\n

    \n
  1. Johnson, Emma. \u201cThe Real Cost of Your Shopping Habits,\u201d Forbes, January 15, 2015, http:\/\/www.forbes.com\/sites\/emmajohnson\/2015\/01\/15\/the-real-cost-of-your-shopping-habits\/#702eb2e321ae<\/a>, accessed November 16, 2016.<\/li>\n
  2. Mac, Ryan. \u201cStitch Fix: The $250 Million Start Up Playing Moneyball,\u201d Forbes, June 1, 2016, http:\/\/www.forbes.com\/sites\/ryanmac\/2016\/06\/01\/fashionista-moneyball-stitch-fix-katrina-lake\/#1b6b1a2e2eac<\/a>, accessed November 16, 2016.<\/li>\n
  3. Gaudin, Sharon, \u201cAt Stitch Fix, Data Scientists and A.I. Become Personal Stylists,\u201d Computerworld, May 6, 2016, http:\/\/www.computerworld.com\/article\/3067264\/artificial-intelligence\/at-stitch-fix-data-scientists-and-ai-become-personal-stylists.html<\/a> , accessed November 16, 2016.<\/li>\n
  4. Hull, Dana. \u201cQ&A: Stitch Fix founder Katrina Lake, on melding fashion and technology,\u201d The Mercury News, March 14, 2014, http:\/\/www.mercurynews.com\/2014\/03\/14\/qa-stitch-fix-founder-katrina-lake-on-melding-fashion-and-technology\/<\/a>, accessed November 16, 2016.<\/li>\n
  5. Stitch Fix, \u201cWomen,\u201d https:\/\/www.stitchfix.com\/women<\/a>, accessed November 16, 2016.<\/li>\n
  6. O\u2019Connor, Clare. \u201cRent the Runway to hit $100M Revenues in 2016 Thanks to Unlimited Service,\u201d Forbes, June 15, 2016, http:\/\/www.forbes.com\/sites\/clareoconnor\/2016\/06\/15\/rent-the-runway-unlimited-women-founders-revenues\/#e4c060d49e4f<\/a>, accessed November 16, 2016.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

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