Although its fate has since changed, Stitch Fix was sitting pretty at the start of the year, as its data-driven decisions informed its pivot to a kid-focused approach. As the retail market continues to evolve, we’ll see how this data-driven company pivots along with it. And in this piece, we’ll share ways to capture meaningful online intel and ensure your brand stays in the game!
On December 6, 2020, as consensus forecasts were a 20 cents per share loss, Stitch Fix reported a quarterly profit of 9 cents per share, better-than-expected revenue, and record sequential quarterly client additions, thanks in part to its Amazon veteran CFO hire and its quick pivot to capture the kid clothing market ahead of a back-to-school season others were unprepared for, due to the pandemic.
Since then, Q1 numbers and Q2 projections have fallen short – but they’re still hopeful for a rebound before the year is out. Why? They’re data savvy, as we’ll explore in this post, as well as:
- The COVID-19 impact on retailers
- Stitch Fix curating fashion for consumers
- Emerging trends at the heart of Stitch Fix’s success
Data-informed decisions have helped many retailers thrive during this trying time. Here are some stats illuminating the successes and struggles experienced this past year:
- 60% of store closures in 2020 were permanent
- In-App purchases grew 34%
- Ecommerce is expected to grow 50% in the US and Europe in the next four years
- Stitch Fix shares in Q4 were up 200%
Retailers That Aren’t Reeling from COVID-19
Many businesses experienced massive hits due to the pandemic. GNC filed bankruptcy and announced closing between 800-1200 stores. Victoria’s Secret’s sales declined 37% and were forced to close 250 stores, while Pier One Imports became an online-only store. It’s a scary time for retailers. It appears 60% of store closures are permanent.
And this paints a bleak picture, or it would if not for the fact that many businesses saw increases during the events of 2020. Fifty-one percent of Amazon sellers reported higher sales. And globally, in-app purchases grew 34% (YOY).
This increase could be due to many savvy businesses transitioning to new operating models.
In Europe and the U.S., ecommerce is expected to experience a 50% growth spurt in the next four years. And in 2020, it was predicted that 55% of all companies would become digital, incorporating digitally enabled products and services. We can see evidence of brands making the switch:
- Nielson reports a 63% percent growth in ecommerce sales for the pet retail industry.
- Supplying a little more context is Petco, whose sales also increased in 2020.
- And New Balance isn’t having to run to keep up with the competition, as they are also embracing the digital shopping revolution.
Luxury even pivoted as needed. Hermes who is famous for their live fashion performances, switched to live-streaming. Sales of this company’s watches alone increased 28% in the fourth quarter of 2020 and their online presence boomed.
Aside from making the switch to online though, how are these companies increasing their revenue? The answer can be found in hyper personalization. And Stitch Fix is still a great case study there . . .
Stitch Fix’s Consumer-centric Approach
Stitch Fix consumer centric approach is key. Customers create a style profile and then a personal stylist puts outfits together and ships them directly to the customer. They then try them on in the comfort of their own homes. Personalized home shopping is certainly a hit. In Q4 of 2020 the company’s shares were up 200%.
Recently, this fashion forward company introduced “Trending For You,” which wisely riffs off of TikTok’s “for you” posts. This client acquisition tool enhances the feed-based shopping experience. And the company came up with an algorithmic recommendation engine for its clients too, which more widely caters to clients’ preferences.
Topping all of that though was its pivot to an unlikely lucrative segment – one with very picky tastes indeed – kids. And they uncovered this segment with data analytics. During the back-to-school timeframe alone, sales rose 60%.
What went wrong? After seeing “its strongest January on record,” Stitch Fix realized it was in for a “’mixed bag’ on shipping and processing delays so far in February, and they expect the trend to continue through the rest of the fiscal third quarter.
For the full fiscal year 2021, the company now expects revenue to grow 18% to 20%, down from its prior outlook of 20% to 25%. Wall Street was forecasting revenue growth of 22.6% for the fiscal year.” The Word Cloud below shows complaints around shipping delays, which corroborates their reasoning:
With 66% of customers expecting companies to understand their individual needs and monitoring for negative sentiment is essential – even when you’re doing well. And that’s far from the only “must” for retailers to have in mind. Another strong driver – one that supports Stitch Fix’s prediction for a strong second half of 2021, is its commitment to something that has the potential to transcend shipping delays: Sustainability.
Sustainability, Equity & Social Impact
In case you haven’t heard it multiple times yet this week, sustainability is the new way consumers shop. The fashion industry has faced persistent scrutiny following numerous controversies, which has resulted in greater transparency regarding garment supply chains from brands. And many brands are pivoting to meet consumer wishes.
One key aspect of this revolution is the influence of Gen Z, as they’re more concerned about climate change compared to older generations. Nine in ten Generation Z consumers believe companies have a responsibility to address environmental and social issues.
And Stitch Fix, being the progressive company that they are, have already taken this into account.
Sustainability and Equity are at the heart of this growing business. They made goals and have taken steps to source all materials for their private label brands and have measures in place to ensure they are sustainable products. And they’re making equity central to their sustainability efforts—in name and in practice, which is wise as nearly 64% of consumers are more likely to purchase a product if the brand aligns with these views.
Stitch Fix has made commitments to diversity, creating a grant and mentorship program for BIPOC entrepreneurs:
But, as we can see – even being on top of an important emerging trends won’t necessarily save your bottom line. Building consumer and market research into your brand’s daily tasks is a must, if you hope to sort out which way your specific consumer sentiment is shifting.
And you may even find your own kid segment is out there waiting to be discovered once you do. Reach out for a demo and we’ll show you how it’s done, regardless of category.