Stitch Fix finds California stylists too pricey

Discussion
Photo: Stitch Fix
Jun 10, 2020
Tom Ryan

In a cost-saving move, Stitch Fix is laying off approximately 1,400 California-based personal stylists, or about 18 percent of its workforce, and replacing them with stylists living in lower-cost cities.

The company contemplated the move for over a year.

In a recording to employees obtained by Modern Retail, Minesh Shah, VP of operations, said California was becoming more “expensive and complex” to operate in. He said, “As we scale and as we grow, it makes less financial sense for us to have such a large presence here.”

Of the company’s approximately 8,000 employees, 5,100 are stylists. With help from artificial intelligence, stylists select items for customers each month as part of the subscription service.

Stitch Fix will do most of the layoffs in September. In July and extending into next year, the company will hire about 2,000 stylists in lower-cost cities, such as Pittsburgh, Cleveland and Dallas.

Stylists affected can relocate and stay with the San Francisco-based company, although Katrina Lake, CEO, acknowledged Monday on Stitch Fix’s quarterly call that many won’t because the position is a part-time role.

“We want to continue to invest in our stylists,” said Ms. Lake. “The reality was as we look at kind of our aggressive goals, we’ve made a decision that was a hard one, the one that we needed to make.”

She called stylists a “differentiated part of our model, especially today. And as we’re thinking about being truly, a replacement for going into stores, I think that higher touch, that high empathy model is really, really valuable.”

In May, Facebook caused a stir by announcing that employees choosing to permanently work remotely will receive salary cuts if they move to less expensive areas. The decision has sparked a debate on whether corporations should look to pay remote workers based on their location.

A survey of about 1,800 San Francisco Bay Area workers from Blind found 35 percent would consider relocating even if they had to take a pay cut. Of those, 40 percent would only accept a decrease of less than 10 percent.

DISCUSSION QUESTIONS: Do you see more pros than cons in Stitch Fix’s shift to employ personal stylists from lower-cost areas? Does paying remote workers based on local cost of living make sense for both workers and companies?

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"I would have spun this one differently—there is a reduction of cost moving people to lower-cost areas but a chance to offer a better customer experience through localization."

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10 Comments on "Stitch Fix finds California stylists too pricey"


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Mark Ryski
BrainTrust

It seems that Ms. Lake’s “high empathy model” which she claims to be “really, really valuable” doesn’t apply to the 1,400 California workers she’s about to lay off. Furthermore, what Lake and her leadership team seem to be discounting is the California-style sensibility these stylists bring to the service. With all due respect, stylists in Cleveland or Pittsburgh may be lower cost and fine stylists, but they don’t have a California sensibility.

Dave Bruno
BrainTrust

As a Californian working for an Atlanta-based company, this story hits close to home. The cost of living in this beautiful state is indeed high, no doubt, and wages are definitely higher. However, I believe market forces will determine if Facebook’s decision to pay people less if they move out of state is feasible. As for Stitch Fix, there is a very practical challenge they will face by abandoning California-based stylists: moving all their stylists out of state will reduce their ability to stay close to the lifestyle and fashion trends of more than 40 million consumers. Heck, just losing feet-on-the-street visibility to the choices made by 12 million Los Angelinos will compromise their stylists’ value proposition. Even though I fear I may have some bias, I am not sure this move will pay dividends.

Stephen Rector
BrainTrust

If Stitch Fix has customers in the Midwest, wouldn’t it make sense to have local stylists to better “localize” the boxes? If I were the PR team, I would have spun this one differently – yes, there is a reduction of cost moving people to lower-cost areas, but the opportunity to offer a better customer experience through localization of the boxes might have sounded better?

Steve Montgomery
BrainTrust

While I understand the desire to lower their labor cost, I believe a more rational approach would be to mix in some stylists from the identified markets and monitor the results. A small decrease in the number of stylists based in CA would not shock the system.

Joe Skorupa
Guest

Stitch Fix seems to care more for lowering labor costs than focusing on driving customer satisfaction and increasing purchases-per-customer. By treating employees as interchangeable units of human capital, Stitch Fix, like Facebook (which is in a category by itself due to recent actions by Mark Zuckerberg), is in danger of damaging its reputation and weakening engagement with its customers.

Cynthia Holcomb
BrainTrust
Stitch Fix is a retailer of basics for “everyone” as their tag line reminds shoppers. While it’s plausible the “higher touch, high empathy model is really, really valuable” argument can be true, laying off 1,400 California-based personal stylists indicates other internal challenges within Stitch Fix. We have all witnessed the slow-motion rise and demise of dozens of big-name apparel brands over the years. The fall usually begins with the cost-cutting of the pillars of the brand. Macy’s, J.C. Penney and others are current examples. Laying off 18 percent of the California Stitch Fix stylist workforce to hire 2,000 stylists in Cleveland, Pittsburgh, and Dallas as a cost-cutting measure seems to this outsider as a signal of internal challenges facing the Stitch Fix business model. Lost in translation will be the Stitch Fix brand. Such a move is curious. Possibly Stitch Fix has gone beyond its peak and now faces the same issues brick and mortar stores like Gap, retailer of high priced basics, are facing.
Craig Sundstrom
Guest

I agree. Here in the Bay Area, even localized moves from San Francisco to Oakland are inevitably described as “not being able to afford the best,” and while I tend to dismiss that as San Francentric cheerleading, it’s harder to rationalize leaving for more remote areas.

Dave Wendland
BrainTrust

First, I wanted to share an article I wrote about my “Stitch Fix Experience.” I believe it nicely sets the stage for this discussion.

Next, to Tom’s question, I think Stitch Fix’s shift to employ lower cost stylists is prudent and good business. Ensuring that these workers have the credentials to do the job, location should not matter. And, given the need for cost-containment across the entire supply chain (especially in retail-oriented industries) and the growing desire for “work from home” talent, timing is ideal to shift to this new model.

Patricia Vekich Waldron
Staff

Wouldn’t it be interesting to know what percentage of Stitch Fix customers live in Dallas, Pittsburgh or Cleveland?

Craig Sundstrom
Guest

In the case of style, I would think “higher cost areas” and metro areas are where fashion trends originate. So assuming the same level of fashion sense is expected, this seems like an ultimate test of the ability to do distance working.

Is this my Bay Area pride talking? Perhaps, but I have a hard time picturing a French fashion house (effectively) moving from Paris to, say, Strasbourg or Lyon.

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"I would have spun this one differently—there is a reduction of cost moving people to lower-cost areas but a chance to offer a better customer experience through localization."

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