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Stitch Fix Revolutionizing Personalization With Data Case Solution

Solution Id Length Case Author Case Publisher
2221 1761 Words (8 Pages) Sayan Chatterjee, Dan Basch, Hollie Fennell, Jessa Vinson, Bridget Yoger Ivey Publishing : W20939
This solution includes: A Word File A Word File

Stitch Fix is an innovative company that has grown to become a leading online personal styling service in the world. Founded in 2011 by Katrina Lake in the United States, the company combines data science and human judgment to make personalized choices for customers and deliver them apparel, shoes, and other accessories which match the budget, lifestyle, and taste of clients (Stitch Fix, 2021). The company’s business model is based on selling clothes to clients according to their suggestions. The company offers close to 1000 brands and it has also established its in-house brand to cater to its active clients which are close to 3.4 million (Viktor, 2021). The “fix” that is sent to the client is a box of five items that range from $55 to $400. The client has the choice to return them if it does not appeal to them. Other sources of income for the company are the $20 styling fee, subscription offerings, and its newly launched marketplace named Shop your Looks (Viktor, 2021). 

Following questions are answered in this case study solution:

  1. Introduction

  2. Problem Statement

  3. External Environment

  4. Internal Analysis

  5. Alternatives

  6. Recommendation

Case Study Questions Answers

2. Problem Statement

As an e-commerce based personal styling company, Stitch Fix has had the first movers’ advantage by providing a unique shopping experience to its clientele. In recent years, although the client base has increase the growth of the company has slowed which has impacted its profitability. The company’s Selling, General, and Administrative expenses have increased and adversely affected the profits of Stitch Fix. The replication of the business model by competitors and the increase in competitive rivalry in the online personal styling segment have impacted the growth of the company. In order to sustain its business and stay competitive in the longer run, Stitch Fix needs to rethink its competitive advantage and its business strategy. 

3. External Environment

i. PESTEL Analysis
Political factors

The US government has played a key role in the initial development and financing of the Internet and it has also led to the growth of e-commerce companies especially in the online retail industry. 

Economic Factors

The growing economy has increased the disposable income of individuals in the US which brings in more clients for companies like Stitch Fix. Other than that, the increased penetration of the internet and mobile phones in the country have been favorable for e-commerce companies and increased the outreach of online retail companies. 

Social Factors

Consumer purchasing behavior has changed over the years. In the digital world, individuals find it convenient to sit at home and shop. Online personal styling service saves time for customers and gives them a hassle-free shopping experience. In the case of Stitch Fix, its clients may include shop-a-phobic who do not want to deal with crowds and store assistants (L & P, 2020). 

Technological Factors

Technology is central to e-commerce companies and innovative technology has brought radical differences in the retail sector. In the case of Stitch Fix, data science is deeply ingrained in the company (Lake, 2018). The company depends on its algorithms to match the needs of the clients with the inventory available at Stitch Fix. 

Environmental Factors

The business model of Stitch Fix is environmentally sustainable. The online company helps in the reduction of a carbon footprint as it deals with its clients online and makes use of fast delivery systems to satisfy its employees and urge them to use the online shopping medium. 

Legal Factors

For companies to survive in the competitive environment, they need to operate in the legal framework to avoid financial costs associated with legal battles.

ii. Porter Five Forces Model

The bargaining power of buyers is high in the industry as customers have the lookup for prices of apparel and switch to a competitor if they are not satisfied with one company. 

The bargaining power of suppliers is low to medium as suppliers are available in huge quantity and companies can choose the supplier which makes the best offer to them. 

The rivalry among the competitors is high and the increase in competition has affected profit margins. Stitch Fix’s main competitors include Amazon, Uline, and Nordstrom Truck Club (Inc Fact, 2021).

Barriers to entry are low but for new companies to enter they need to compete with already existing companies that have to build their brand name and trust with employees. The huge investment in technology and continuous innovation are some challenges for new entrants in the market. 

The traditional retail industry that includes boutique stores where personalized services are provided still exist meaning that the threat of substitute to Stitch Fix does exist. This threat is low as the changes in social norms and inclination towards online shopping have brought in numerous customers to e commerce-based retail companies. 

iii. Competitors Analysis

Amazon Prime Wardrobe, Nordstrom Trunk Club, and Wantable provide similar services like Stitch Fix. In the case of Amazon Prime Wardrobe, it is free for its prime members provides 8 items in its basket but has no stylist on board. The Echo Look product of Amazon facilitates the customers to virtually decide if apparel best fits them. The company is also investing in services that can give a personalized recommendation of fashion to customers. Amazon is investing in technology to develop algorithms that can bypass human stylists and reduce costs for the company. 

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