Businessmodel of Stitch Fix

Customer Segments

Stitch Fix has a mass market business model, with no significant differentiation between customer segments. The company targets its offering at all consumers who want styling assistance.

Value Proposition

Stitch Fix offers four primary value propositions: customization, convenience, pricing, and brand/status.

The company enables customization. Clients use its service by filling out an online survey specifying their size, style, and price preferences. A personal stylist then analyzes this information, as well as details from other sources. These sources include clients’ social media profiles (e.g., Pinterest pages) and feedback on previous fixes if it is a returning client. These inputs are used to make educated guesses about the type of apparel clients would prefer – for example, stylists can assume that a customer has a 50% chance of keeping a particular type of denim. The stylist then selects five pieces of clothing (“fixes”) that represent the best fit. Clients then schedule a date to receive the items. If they decide to obtain a subscription, they can also choose the amount of time between shipments.

The company offers convenience by making its service easy to use. Customers can purchase the clothing they like while returning the rest. Each piece also comes with styling tips.

The company offers a price value proposition. The stylist service fee is only $20. The average price point for its apparel is $55 per item; that said, there are a wide variety of prices. If customers decide to buy all five selected pieces, they get a 25% discount on their entire purchase. If customers do not want an item, they can use an included prepaid envelope to return it for free.

The company has established a strong brand due to its success. It has shipped millions of packages to customers since its founding. It offers a wide variety of items, including pants, skirts, shorts, dresses, sweaters, shirts, outerwear, scarves, jewelry, shoes, and bags. These items are sourced from over 250 womenswear brands and over 30 menswear brands, both established and up-and-coming. Specific women’s apparel names include Kut From The Kloth, Citizens for Humanity, Joie, and Gorjana. Specific men’s apparel names include Ben Sherman, Original Penguin, Scotch & Soda, 7 For All Mankind, Mavi, and Converse. Lastly, Stitch Fix has won a number of honors. One of these is recognition by Tech in Motion with a Timmy Award for being one of the large firms in San Francisco with the “Best Technology Work Culture“ (2015).

Channels

Stitch Fix’s main channel is its website. The company promotes its offering through its social media pages and participation in trade shows and conferences.

Customer Relationships

Stitch Fix’s relationship is primarily of a dedicated personal assistance nature. It assigns customers a personal stylist who uses provided information to select clothing items. It also provides e-mail support. That said, there is also a self-service component. The company’s website provides a size chart, a style guide, and answers to frequently asked questions.

Key Activities

Stitch Fix’s business model entails offering personalized styling services to its customers.

Key Partners

Stitch Fix operates the Influencer program, an affiliate program through which it invites third parties to promote the service through their platforms (website, mobile apps, etc.). These parties earn a cash payout for clients that use a link on the platform to visit the company’s website and place an order. Program benefits include the following:

• Invites to private events hosted just for influencers
• Opportunities for giveaways, cross-promotions, and other partnerships
• Access to insider news through the company‘s influencer newsletter and Facebook group
• Best practice guides and content toolkits to assist with generating more referrals
• Occasional gifts and other surprises as tokens of appreciation ### Key Resources

Stitch Fix’s main resources are its human resources – namely the thousands of stylists who select items for customers based on their preferences. It maintains important physical resources in the form of five distribution centers and four office spaces. Lastly, as a startup it has relied heavily on funding from outside parties, raising $46.8 million from four investors as of June 2014.

Cost Structure

Stitch Fix has a value-driven structure, aiming to provide a premium proposition through significant personal service. Its biggest cost driver is likely cost of services, a variable expense. Other major drivers are in the areas of customer support/operations and sales/marketing, both fixed costs.

Revenue Streams

Stitch Fix has two revenue streams: a stylist service fee of $20 for one-time orders and a subscription fee for customers who want to receive orders on a recurring basis.