Stitch Fix Is Going High-End

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It’s been a busy year at Stitch Fix.

Back in February, the fashion subscription box startup expanded into plus-size, only just a few months after it launched a menswear business. In May, Stitch Fix revealed the company had brought in a whopping $730 million worth of sales in 2016, and that it was inching toward becoming a billion-dollar brand. Last month, the company also quietly began preparing to file for IPO.

Today, Stitch Fix is stretching its muscles even further, jumping into the premium fashion category, or affordable luxury. It will now start carrying brands commonly associated with destinations like Bloomingdale’s and Nordstrom: Rag & Bone, Helmut Lang, Kate Spade, Rebecca Minkoff, Alice & Olivia, Steven Alan, and Theory are just a few brands now available for women, and the men’s category now includes labels like Todd Snyder, John Varvatos, JBrand, and Citizens of Humanity. The price cap on items that arrive in “fixes,” or boxes of clothing that arrive at customer’s doors, is increasing to $600, as opposed to the previous $450 ceiling.

The move will no doubt help Stitch Fix’s ever-increasing sales figures. But the launch of premium products also signals that as Stitch Fix continues to grow, it’s looking to up its cachet and make serious moves in the fashion space (earlier this summer, it hired a director of brand development who was previously the accessories director at Elle).

Since the company was founded by Lake in 2011, it has developed a cult-like following. Initially one of the handful of brands that jumped on the box-subscription craze, Stitch Fix set itself apart with sophisticated algorithms and an ever-growing team of personal stylists who work closely to create fixes for subscriber’s tastes. For a monthly $20 styling fee, subscribers get access to a personalized fashion service, where the style profiles they customize give stylists a clue of what to handpick for their “fix” (five items of the company’s assortment of clothing, shoes, and accessories). Last year’s $730 million sales figure speaks to how revered the service is. Customers pay for what they keep and send the rest back for free, and Stitch Fix services are known to only get better the more subscribers interact with the company.

Until now, Stitch Fix has thrived by targeting customers who don’t know how or don’t care to shop, and are looking for the extra hand. While CEO Katrina Lake tells Racked the decision to add affordable luxury labels to its portfolio stemmed from Stitch Fix customers asking for more high-end brands, she adds that additions to its brand portfolio will certainly help it reach more fashion-conscious customers.

“For new, brand-focused clients who haven’t tried the service before, adding 100-plus premium brands to our offering is a compelling reason to use Stitch Fix,” says Lake.

The expansion into affordable luxury also speaks miles to the loyalty Stitch Fix has developed; its subscribers are actually willing to trust a service enough to buy pricey items like premium denim and luxury outerwear, all without picking out such pricey items on their own, let alone seeing the product first.

“There’s very high trust component of what we do because we're not transactionally focused,” says Lisa Bougie, Stitch Fix’s general manager of its women’s business. “We aspire to create enduring relationships with our clients. The other part, of course, is that our clients love the experience of having a stylist do the shopping for them. We’ve really hit on the effortless experience.”

Part of what shoppers love most about Stitch Fix is the customization of it all, and brands will love it too, since Stitch Fix is now offering its proprietary data to partnering brands. While plenty of the premium brands joining Stitch Fix already make exclusive product for stores like Bloomingdale’s, Lake tells Racked that half of the product assortment of affordable luxury brands will be exclusive to Stitch Fix, and in many scenarios, the items will be created specifically based off of data Stitch Fix has provided. Mike Smith, the GM for Stitch Fix Men, says the company is eager to hand over this information to brands in order for them to perfect their product.

“We are a very good partner because we provide this type of data, which isn’t true about a lot of other retailers,” he says. “We want to take care of our clients, so if they’re sending back a shirt with construction for a medium-sized guy, the data will help them get a better medium shirt.”

Take Paige, the luxury denim brand, for example, which is rolling out petite product for the first time exclusively for Stitch Fix. Paige was given data containing Stitch Fix customer feedback showing that jeans for short women were missing from the market, giving it the opportunity to swoop in.

“I've never worked with a company that's done so much homework, so much research and background work with algorithms to give specific information on what sells best to give us opportunity to do a better business,” says Paige Adams-Geller, the founder of the denim brand. “It’s a great opportunity to launch something that you know will reach so many shoppers and sell right out of the gate, because they can send the product to the specific petite range of customers they have.”

Part of what’s contributed to Stitch Fix’s exponential growth over the last few years has been its foray into private label, a move not all that different from developments made by Target or Amazon. For now, Stitch Fix has no plans to extend its in-house design business into the affordable luxury sector. Instead, it will focus on expanding its premium business, and will roll out jewelry, bags, and footwear into its premium portfolio in February.

Although the brands Stitch Fix is bringing on today fall in the mid-priced category, Bougie says a future where the startup is working with high-end luxury companies like a Proenza Schouler or a Prada is “not out of scope of potential.” While that might sound dubious — luxury brands are, after all, super careful about their distribution methods, and Stitch Fix products can start as low as $28 — it certainly isn’t impossible, considering Stitch Fix keeps on growing while the rest of retail is going through dramatic shifts. Premium and luxury brands alike face a rough retail environment: Foot traffic is down, counterfeits are up, and department stores are hooked on discounting and shuttering doors by the hundreds.

There’s also, of course, Amazon to factor into the equation. The e-commerce giant has giant ambitions for fashion, with plans to become the country’s largest retailer, and although plenty of brands work with Amazon, many do it begrudgingly because of the company's bullish strategy to mark down merchandise in order to out-price competitors, which often ends up impacting a label negatively. These days, fashion labels are looking for retail partners that provide lucrative results by actually selling product without affecting brand equity by slashing prices. This is where Stitch Fix is seen as a victor, says Adams-Geller. Not only does it have an ever-growing customer base, and a footprint that doesn’t include burdens like storefronts, it’s also committed to full-price.

“One of the things that’s enticing about this relationship is that there’s no discounting and no buy-backs at Stitch Fix,” says Adams-Geller. “The most important thing to me, especially since the brand is my namesake, is to protect its reputation, and I think that’s Stitch Fix's philosophy too.”

"It's a very clean relationship, where we are buying goods at wholesale and selling them at retail," adds Bougie. "Our model is very effective because [of] our stylists being able to select great product for the client. That plus machine learning. As long as that works, we can do that with anyone and anything.”