As we have seen in lately reports, digital transformation is disrupting the retail industry. E-commerce sites are changing the consumer’s behavior, shifting purchases from brick and mortar stores to on-line. In the apparel industry, Stitch Fix created a business model that uses data to offer, not only clothes, but personal recommendations in style. Are we in front of a new winner?
How does Stitch Fix work?
Stitch Fix is an on-line clothing shop that provides personal styling services at affordable costs . When signing up, customers need to fill in their personal profile and respond to a small questionnaire of their fashion preferences: Does the customer like formal or casual style? What are her favorite colors? Is she willing to take risks? Also, customers are required to share price preferences, body type, weight, bra size, and their Pinterest account. The company uses customer’s data, to create algorithms that feed the recommendation engine. Artificial intelligence is used to create an initial list of recommendations, and then a human stylist will reduce the list to 5 pieces that will be shipped to the customer.
Customers need to pay $20 per fix, but this amount will be credited if at least one item is purchased. Customers can try the pieces at home, keep the things that they like, and return the ones they don’t. Stitch Fix encourages customers to provide feedback on each item they received. This serves as additional information to refine the algorithm and improve client’s satisfaction. 
With this model, Stitch Fix is creating value by:
- Reducing shopping time. “A few years ago, market research firm OnePoll surveyed 2,000 women and found that each year women spend more than 100 hours on 30 trips to shop for clothes, 15 shoe-shopping excursions taking 40 hours, and a full 50 hours per year window shopping.”  By eliminating the need of buying, customers can spend their time in other activities such as working or going to the gym.
- Making it easier for customers to follow latest fashion trends. For some people it is super easy to be on top of the latest trends, and love spending time following bloggers and Pinterest boards. But for others, it is hard to keep up with them. Stitch Fix solves this problem by advising customers based on their preferences and latest trends.
- Increasing overall shopping expenses. All of us have at least one friend who hates shopping clothes. Some people don’t like going to stores, and hate trying a lot of styles and not finding what they want. By “pushing” products to customers, Stitch Fix is increasing consumption in this specific target segment, increasing the overall size of the apparel market.
Stitch Fix has more than 2.2 million active clients, has sales nearly at $1B and raised $120M in its IPO [4,5]. Even though it seems to be a winner in the digital era, there are still some challenges that the company needs to solve. For example, can artificial intelligence be enough to recommend outfits to customers? How many customers are willing to adapt this new purchasing habit? How scalable is the business model? Are the any opportunities to partner with brands and have new sources of revenues?