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With personalized styling and now kids clothing, Stitch Fix looks to avoid the pitfalls of subscription boxes

With personalized styling and now kids clothing, Stitch Fix looks to avoid the pitfalls of subscription boxes
A sample box of clothing from Stitch Fix Kids. (Stitch Fix)

Times are rough in the world of subscription retail.

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Birchbox — which ships makeup, skincare and haircare goods — sold to a hedge fund investor in May after struggling for months to find a buyer.

Loot Crate — which ships apparel and collectibles related to video games, comics and pop culture — laid off more than a quarter of its staff last year.

And Blue Apron, the provider of meal preparation kits that went public a year ago, has seen its stock drop to a third of its IPO price.

One subscription retail service, though, has so far dodged its competitors’ pitfalls: Stitch Fix.

The stock price of the personalized online clothes-shopping company has more than doubled since its November IPO. On Tuesday its shares jumped more than 10% on news it would begin selling children’s clothing before closing up $1.87, or 6%, to a record $32.99.

As of June it had more than 2.7 million customers — up 30% from a year earlier. It reported nearly $9.5 million in profit in its most recent quarter, which ended April 28, a turnaround from the same period last year, when it was unprofitable.

It has added new arms to its business too — in 2016, it started offering men’s clothing. On Tuesday, it announced a service catering to children who wear sizes 2T to 14, ranging in price from $10 to $35 per item.

“What Stitch Fix has focused on that others haven’t as much is personalization, which is necessary for the survival of any subscription box,” said Lily Varon, an analyst at Forrester Research.

The novelty of a subscription box — in which a customer pays for a company to ship them a mystery box of goods within a certain category, whether it’s makeup, fashion or food — wears off fast, Varon said. Which is why any subscription service that wants to succeed needs to also offer customers convenience, provide a product or service that customers frequently use, and have some kind of emotional component.

Stitch Fix, Varon believes, has all three: People frequently buy clothes, it takes the hassle out of going to a store, and the comprehensive questionnaire new clients fill out makes customers feel that Stitch Fix’s personal stylists really know who they are.

At signup, customers pay a $20 styling fee and fill out a lengthy questionnaire that asks about their size, shape, budget and style. Stitch Fix’s personal stylists and data scientists then compile and ship a box of five garments and accessories, based on the customer’s profile. Customers return what they don’t want and pay for what they keep.

Although Stitch Fix says it is not technically a subscription service because customers can make one-off purchases, its customers can use it as a subscription service by electing to have Stitch Fix send them boxes of clothing and accessories on a regular basis.

Stitch Fix also has an advantage over its competitors because of the amount of user data it collects, said Erik Morton, senior vice president of strategic development at CommerceHub.

"The most interesting thing about them ... is that they are using data science to actually manufacture custom clothing for their customers. This is a private label plus data science strategy that could threaten established clothing brands,” Morton said.

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“Those brands are already worried about Amazon’s foray into fashion through their own private labels, and now Stitch Fix, another tech-enabled company, is competing directly with established brands too."

As part of the launch of Stitch Fix Kids, the company announced its own exclusive brand of children’s clothing, Rumi + Ryder.

Stitch Fix got its start as a scrappy operation, with co-founder Katrina Lake asking friends and family to fill out style questionnaires, shopping for clothing from retailers herself, and personally shipping boxes of clothes to her clients.

As of 2017, the company employed more than 3,500 full- and part-time stylists and dozens of data scientists, and had five warehouses across the United States.

But it’s too soon to consider Stitch Fix an industry stalwart, Varon said. Although the company might be doing better than many of its online subscription counterparts, Varon said its real competition could come from traditional retailers that might decide that they too want to launch or acquire a subscription box service.

“You imagine the kinds of services a Nordstrom or Nike or Under Armour could provide,” Varon said. “That’s where I see the strongest competition.”

2:50 p.m.: This article was updated with additional reporting.

This article was originally published at 9:45 a.m.

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