DISCUSSION
Stitch Fix’s woes reflect a broader subscription box problem
Written by Tom Ryan
Stitch Fix CEO Elizabeth Spaulding’s exit last week and plans by the company to lay off 20 percent of its workforce mark another troubling sign for the subscription box category.
Active members for the personalized clothing service grew from 3.2 million pre-pandemic to 4.1 million by October 2021 as subscription boxes offered some excitement to homebound consumers. Membership has shrunk to 3.7 million in its most recent quarter as the economy opened up.
The personalized styling opportunity may be weakening, as indicated by Nordstrom’s decision to close Trunk Club last May. The macro environment may be showing subscription boxes to be highly discretionary, as well.
In reducing its outlook in early December, Stitch Fix’s CFO Dan Jedda told analysts, “We know that high rates of inflation are impacting consumer purchases, and high levels of inventory are impacting pricing, with deeper discounting across the retail industry.”
Among other subscription boxes, Blue Apron and Rent The Runway announced layoffs last year while restructuring. Birchbox announced in November it was considering bankruptcy.
Analysis by PYMNTS and sticky.io found that by spring 2022, cost had become the main obstacle to subscription enrollment due to inflation. Among existing subscribers, “subscription fatigue,” or finding the subscription experience no longer novel or relevant, was seen setting in as the pandemic subsided.
The Atlantic last year concluded the subscription space was undergoing a shakeout. Columnist Amanda Mull wrote, “As more markets become oversaturated with these kinds of services, more buyers will get bored of the concept entirely, and investors will eventually become weary of waiting for profit.”
The promise of recurring revenue and access to data to deliver personalized curation is expected to continue to support opportunities for subscription boxes.
In a Harvard Business Review column, Nir Eyal, a former Stanford lecturer and the author of “Hooked: How to Build Habit-Forming Products,” wrote that the leading drivers of churn for subscription boxes are the novelty wearing off, choices becoming too complicated and not offering enough “stored value” — or supportive data, content or connections — to build long-term relationships with customers. He said, “Subscription services don’t win on unit price or quality alone.”
- Stitch Fix announces Elizabeth Spaulding will step down as Chief Executive Officer; Founder and Chairperson of the Board Katrina Lake to become interim Chief Executive Officer – Stitch Fix
- Stitch Fix Q1 2023 Earnings Call Transcript – Stitch Fix/The Motley Fool
- Subscription box companies struggle to adjust to life after lockdowns – Financial Times
- Blue Apron Provides Business Updates, and Outlines Plans for Cost Reductions and Liquidity Management – Blue Apron
- Rent the Runway, Inc. Announces Second Quarter 2022 Results – Rent the Runway, Inc.
- Birchbox Said Weighing Options, Including Bankruptcy – WWD
- That Isn’t ‘Box Fatigue’ — It’s Consumers Shedding Subscriptions That Lack Value – PYMNTS
- This Is Peak Subscription – The Atlantic
- 3 Reasons Subscription Services Fail – Harvard Business Review
- Are subscriptions a winning strategy to get through the pandemic? – RetailWire
Discussion Thread0
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