Source: Stitch Fix
Can Former Macy’s and Walmart E-comm Exec Fix Stitch Fix?
Stitch Fix has named former Macy’s and Walmart executive Matt Baer its new CEO.
Mr. Baer, who will also join Stitch Fix’s board of directors, will work with founder and interim CEO Katrina Lake as he transitions into this new role.
Ms. Lake said in a statement that she was impressed by Mr. Baer’s “experience across all areas of retail businesses and his ability to identify the interconnected opportunities to positively impact the experience of our clients in the short term while inspiring our teams to deliver an impactful vision for the future.”
“I’ve long admired what Katrina has built with Stitch Fix – fusing AI with stylists to offer the most convenient shopping experience out there today,” said Mr. Baer. “People are looking for a better way to look and feel great. Stitch Fix is uniquely positioned to deliver that for them.”
Mr. Baer most recently served as chief customer & digital officer at Macy’s, Inc., where he oversaw the digital businesses of Bloomingdale’s and the company’s namesake chain. He was involved in launching or scaling initiatives including redesigning the Macy’s app and website, Macy’s Live livestream shopping, the retailer’s third-party marketplace, same-day delivery, in-store and curbside pickup.
Stitch Fix’s new CEO was vice president of eCommerce at Walmart.com before joining Macy’s.
Ms. Lake speaking last week to analysts on Stitch Fix’s third-quarter earnings call said that “preserving profitability and cash flow remain top priorities” in the near term.
Stitch Fix has sought to reign in costs and announced it would close fulfillment centers in Bethlehem, PA, and Dallas. The facilities will be phased out to avoid disruptions in service as Inventory is moved to Stitch Fix’s remaining warehouses in Atlanta, Indianapolis and Phoenix.
“We have developed a three-node strategy that will allow us to more optimally serve the entire country and simultaneously showcase the greatest breadth and depth of inventory to our clients and stylists,” said Ms. Lake. “This consolidated network will allow us to deliver a better client experience, with access to more inventory for a given fix, while, at the same time, allowing us to operate with lower, more cash-efficient inventory levels.”
Ms. Lake says the three remaining fulfillment centers could expand capacity going forward if demand warrants.
Stitch Fix reported that year-over-year sales fell 20 percent in the most recent quarter with its net active customers down 11 percent.
Discussion Questions
DISCUSSION QUESTIONS: Is Stitch Fix’s business model viable? What will Matt Baer and his team need to do to turn Stitch Fix around?
Poll
Loading …BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Rick Watson
CEO, RMW Commerce Consulting
There’s no question that Stitch Fix has had it’s challenges, but they do appear to be a viable business. Adding the depth of experience that this former Macy’s executive brings will improve the probability of success. That said, there are no guarantees, and Matt Baer is joining at a time when the company is struggling.
Stitch Fix had its shining moment with the pandemic when shop from home was mandatory. Maintaining a growth strategy among connected commerce competitors will be challenging. I do think a better digital experience and elevated use of modern AI (advatar stylists) will present new opportunities, but I don’t see this model gaining tremendous market share.
There are a few retail jobs out there that are the equivalent of running into a burning buliding with a small kitchen fire extinguisher. This is one of them, as I’m not sure the core stylist concept survives in the long-term.
So then the question becomes, what kind of fashion retailer do you want to create?
* Off-price outlets are killing it right now.
* Brand-controlled pre-loved items are gaining in importance.
* Full-price fashion is a challenge.
StitchFix is a marketplace concept with few customers and no physical presence. It’s hard to understand how they will achieve any significant profit.
I think there will always be a group of consumers Stitch Fix makes sense for, but with so many rental services taking off, I think that group is getting smaller and smaller. It’s only a matter of time before rental services add the styling capabilities Stitch Fix offers, and then I’m not really sure how it differentiates and compels people to buy versus rent. So in summary, I’m curious to see if leadership changes can turn things around.
Mr. Baer has his hands full, and I wish him the best, but with sales down 20%, active customers down 11% and a consumer willing to shop again at physical stores for similar items, I’m not so bullish on Stitch Fix’s future. That said, if he can deliver a more seamless, high value experience, then there’s a niche he can carve.
Stitch Fix’s issues run far deeper than improving the website and the customer experience. With sales and customer numbers dropping off a cliff, there is a very big question over how relevant the service is – especially in a more constrained consumer economy. That the company hasn’t been able to make the model work in markets like the UK – where younger consumers spend big on fashion – speaks to problems with the business model. That said, I think Mr. Baer brings a lot of experience to the table – although I sincerely hope he does not bring with him Macy’s appalling low standards when it comes to merchandising!
The subscription clothing model is really only viable as a niche business, but somewhere along the way everyone decided that wasn’t good enough, and that’s where the trouble began. Apparel is an important category, but still impacted by economic pressures. As consumers ratchet down spending to be more strategic on what they buy they are looking for a more engaging experience when they do buy — giving a boost to companies with physical stores. But if they can accept their niche status and not try to be a wall street darling, they could have a comfortable long term business. Reducing costs is one step to help stabilize the short term, but it’s the customer experience that really needs their focus for wider, sustainable success.
Right sizing using enhanced AI to clearly define the true client demand and LTV will be critical to profitably capturing this very niche market. Have always appreciated the concept but life changes for customers and so do their needs, making this somewhat of a customer churn challenge.
I have been a StitchFix member almost since the very beginning, and even I can’t fully articulate what’s wrong with StitchFix. On a personal level, I have significantly reduced my number of “fixes” per year – from 4 down to 1. Why? Well, I just don’t need that many clothes! A regular delivery of “new” feels, I don’t know, bad for the environment or wasteful somehow. And the selections I get are no longer delightful – they’re very safe. They’re so safe that I wonder if I’ve sub-optimized myself into always getting boring recommendations from the algorithm. I certainly don’t feel like there’s a real stylist behind my options, and even if there was, I’m not sure I really want that personal of a relationship with one.
Is that just me? Or are these the feelings of all kinds of StitchFix members? When I wear my StitchFix-selected clothes, I ALWAYS, invariably, get compliments. However, not that many people see me wear this stuff anymore because I’m traveling a lot less. I think understanding WHY people are buying less is going to be key to the turnaround here. But I suspect that StitchFix is just the canary in the coal mine here for the future of consumption in general: less is more. How do you survive and thrive if consumers just decide that they need less?
I am immediately skeptical based on the comment “with access to more inventory for a given fix, while, at the same time, allowing us to operate with lower, more cash-efficient inventory levels.” Sounds like the first half of the sentence was written by the marketing department and the second half was written by the finance department. It’s not about “more”. It’s about “right”. It’s about how they qualify the customer and what the customer’s mission is. Brands, fit, wearing moment, budget. If they invite the customer to shop “more”, it sounds like they are inviting ever increasing returns. If they can figure how how to focus on “right”, they might have a shot
It’s great that Stitch Fix doesn’t require a subscription. With that said, I’m not sure how they will compete in the circular economy.
While they use recycled boxes that are smaller than the competition, price and sustainability will be the core differentiators in the years to come.
I want to see more sustainable apparel, apparel recycling initiatives, and stronger CSR to drive continued consumer interest.
The core Stitch Fix customer doesn’t need as many wardrobe changes as she used to. Many market factors are against Mr Baer: WFH, pervasive casual /athelesuire styling, resale, sustainability to name a few. Stitch Fix can probably retain a subset of their customers I believe it will be at a lower level of usage.