The San Francisco-based online personal styling service has raised $12 million in a round of funding led by Benchmark that includes Baseline Capital and Western Technology Investments. Stitch Fix is also adding to its board and executive ranks. Benchmark general partner Bill Gurley; John Fleming, former executive vice president of Wal-Mart Stores Inc., and former president of Gap North America Marka Hansen are joining the board; Lisa Bougie, former general manager of emerging markets at Nike Inc., is chief merchandising officer; Jennifer Olsen, previously of Crate & Barrel, joining as chief marketing officer, and Meredith Dunn, former senior director, customer and stylist delight at Stella & Dot, signing on as vice president of styling.
Stitch Fix has a network of stylists who select clothes with an average price of about $60 per piece from more than 200 brands — Splendid, Ella Moss, Kensie Jeans and Sanctuary are a few — for customers who fill out quick a questionnaire that covers their style, size, budget, shape and lifestyle. “We can all shop online, but having somebody else shop for you and really think through what you have asked for and why is an amazing concept,” said Hansen.
Stitch Fix has grown quickly and is using the latest funding, which is on top of an earlier $4.75 million round, to fortify its infrastructure and workforce to handle the growth. Katrina Lake, founder and chief executive officer, estimated Stitch Fix now reaches hundreds of thousands of customers across the U.S., predominantly women in their early 30s. More than 70 percent of its customers return for a second “Fix,” the name Stitch Fix has given to a box of five items customers receive, and the repeat-business percentage is even higher for those who go on from a second Fix to a third Fix.
“Building and scaling the team is definitely a big priority for us,” said Lake. “For the first two years, we had a wait list and, even today, we are a little more oversubscribed than we anticipated. If you go to schedule a Fix today, we have a three-week wait, which is a little longer than we would like, but our philosophy is we would rather you wait three weeks and get a great Fix rather than pull together something that isn’t as great.”
At its headquarters, Stitch Fix has about 60 employees, but the number of people on the payroll increases to 200 when warehouse facilities and off-site stylists are counted. In total, Stitch Fix has some 60 stylists, only 10 of whom operate out of its offices. The rest work on flexible schedules from home.
As the new vice president of styling, Lake said Dunn’s “priority right away is building a training program for on-boarding remote stylists. Currently, we only have stylists in California, but, ultimately, we would love to have them nationwide. We have a two-hour training that we have remote stylists go through at our headquarters. As we scale outside of the Bay Area, we will need to train remotely.”
Bougie’s focus will be on the product. “Lisa can help us be more proactive to get the right product for our customers and get the product that they didn’t even know they are looking for,” said Lake. “Her scope is around helping us improve and broaden our product and continue to build relationships with our vendors.”
Stitch Fix can develop a wide array of proprietary merchandise to realize higher margins and specifically tailor clothing to its customers, and there’s a possibility it will leverage its data tools to improve the customer experience at brick-and-mortar retailers, although Lake maintained that’s not a main concern at the moment.
Lake wouldn’t discuss whether Stitch Fix is profitable except to note, “Our business model is such that we can see profitability.” She elaborated, “Our margins are comparable to what any of the other retailers would have, but the difference is in how fast we can turn the inventory. We are able to get through 85 percent of our merchandise in season at regular price, so that’s where the margins become a lot better.”
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