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Stitch Fix CEO Says Retail Needs an Antidote to Amazon’s Endless Aisle

If you’ve ever had the experience of firing up Netflix only to waste half an hour scrolling through the seemingly endless list of viewing options, then you understand why unlimited choice isn’t necessarily a good thing.

That’s the thinking behind Stitch Fix, according to founder and CEO Katrina Lake.

The e-commerce service, which combines the latest in data analytics with old-fashioned human stylists, sends subscribers just five items at a time. The system is designed to make acquiring new clothes easier.

“I think fundamentally what I find is that what people really want is they want jeans that fit, or a shirt that looks good or a dress to wear to a wedding. The part of the shopping experience they don’t want is sifting through literally millions of things that you can filter and sort through online,” Lake said at the recent Code Conference. “And so we think that we use experts and data science combined to be able to take that burden of discovery out of the consumers’ hands and to be able to ultimately deliver them with what they really want, which is the clothes that make them feel their best.”

Lake said it’s a model that’s connecting with consumers. Though Stitch Fix is now ramping up its ad spend from basically nothing in the beginning to roughly 8 percent of revenue, the company grew to somewhere between a quarter and a third of a billion dollars organically, she said. “What that actually is a sign of is product market fit,” Lake said.

With Stitch Fix, users receive their five items—called a Fix—and only pay for the pieces they elect to keep, all for a $20 styling fee, which can be applied to the items they purchase. If they don’t opt to keep anything, however, they forfeit the fee. It’s that last bit that rubs some users the wrong way, including the session moderator, Jason Del Rey, senior editor, commerce for Recode. Del Rey, who tried Stitch Fix ahead of the conference for research purposes, ended up keeping a belt from his Fix, which he wasn’t wild about just because he didn’t want to lose the $20—something other subscribers do, too.

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Partially to overcome this negative user experience, Stitch Fix launched Style Pass at the end of last year. The new feature allows fans to pay $49 per year and get unlimited styling with no per Fix fee. The result, Lake said, is a win-win for shoppers and the company.

“I think the Style Pass does remove some of the guilt or burden of the $20 styling fee,” she said. “And what we found in tests was that it increased share of wallet, and so it made it that you had a higher propensity to get another Fix. It means that you are actually spending more on an aggregate basis with us over an annual bases than without Style Pass. It is meant to remove a little bit of that friction.”

The company has recently launched another way for shoppers to spend more. The Extras feature allows users to select add-on categories like socks and underwear. And while the incremental sales are one benefit, the larger advantage of Extras is that it has created a roadmap that could allow Stitch Fix to pivot its model.

“Building that capability is interesting because now it allows us this testing bed, to do all kinds of new stuff,” she said, referring to the Extras selection a marketplace. “From an operational perspective, now our warehouses know how to ship Fixes with 10 items in them, and six items in them. There’s a lot of kind of infrastructure stuff that we had to do in order to do that that actually opens up a lot of capabilities that allow for more flexibility in Stitch Fix in the future.”

Having this agility is important in an environment when imitators are rampant. Just look at Blue Apron, which had early success with its meal kit subscription model only to have tons of others move in on its territory—including Amazon.

When asked whether Amazon’s Wardrobe service, which allows shoppers to select apparel and try it on at home before deciding whether to buy it or not, is intimidating, Lake deflected, saying it’s not the same thing at all.

“Part of the value proposition of Amazon, part of what makes Amazon amazing is this sea of choice. It’s literally millions of things to choose from, and in a lot of ways, ours is almost the opposite,” Lake said. “It’s not endless choice, in fact, it’s a very select group of things that we think are highly, highly relevant for you. And I think that discovery element is actually some of the hardest part of apparel. I think a lot of times, you’re not looking for jeans that are going to ship to you fastest, you want the jeans that are going to fit your body best.”