On November 17, 2017, all signs pointed to the fact that Katrina Lake had made it.
That morning, the five-foot-two 34-year-old arrived at the Nasdaq MarketSite in New York City, and, holding her 14-month old son in one arm, rang the opening bell. The ceremony officially opened public trading for Stitch Fix, the online personal styling company Lake founded, and made her the only woman to lead a tech IPO all year. 2017 was, unfortunately, not an anomaly: According to S&P Global Market Intelligence, only 4% of the 750 IPOs since 2009 have been from companies with female CEOs.
Much of the press surrounding Stitch Fix’s IPO focused on Lake’s rare status as a woman in a largely male dominated field. But what many of these narratives missed was the story of the company’s challenging road to the IPO, and how that path allowed Lake and her employees to once again embrace Stitch Fix’s fighting spirit. Lake is used to going up against tough odds — it’s something she did when kickstarting Stitch Fix seven years ago. Today, as Stitch Fix launches its first new product category since going public, Lake is continuing to prove that her vision for the future of retail is one to watch.
Stitch Fix’s hustle-til-you-make-it ethos has been part of the company’s DNA since the beginning. Lake, who grew up in San Francisco and Minnesota, began toying with idea of a different kind of women’s e-commerce company in 2011, while attending Harvard Business School. Armed with little more than SurveyMonkey and PayPal, she spent the company’s early months learning about the clothing preferences of friends and acquaintances, and then shopping and hand-delivering “Fixes” — the company’s name for its boxes of stylist-picked clothes which users receive each month, paying for what they want to keep and sending back the rest.
“There’s one approach of build it and they will come — build a fancy website and hope people will show up,” Lake says of her scrappy, early days. “The approach I had was let me get all the people first and then build what they’re looking for.”
Stitch Fix came of age post-Rent The Runway, and pre-MM.LaFleur, around the same time that many popular subscription boxes were hitting the market: Men’s apparel service Trunk Club launched in 2009, followed by beauty company Birchbox in 2010, and culinary-focused Blue Apron in 2012. However, tech trends come and go, so the of-the-moment popularity of the subscription box model didn’t make Stitch Fix’s attempt to raise venture capital funding any easier.
Reflecting on that time, Lake attributes the company’s early struggles to get VC investments to a couple of factors. For starters, the VC world is largely made up of white men, many of whom didn’t find value in what Lake was selling. If they did get the premise, they lacked passion for women’s clothing (Stitch Fix has since expanded to offer a men’s service) and didn’t want to invest in something they didn’t feel passionate about, even if it had money making potential.
Others took issue with how the business was run. Stitch Fix has 5,800 employees and distribution centers with millions of dollars of dresses and product sitting in them. To potential investors, it seemed excessive. “The feedback was, ‘why don’t you do this on consignment?’ and ‘can you do this with less humans?’” Lake says. “There was just a lot of feedback about what a tech company should look like.”
Lake decided to ignore the noise. “I said, ‘Okay, we’re going to be able to run a business our way and have control over our business and have control over our destiny, and even if VCs never want to invest in us again we’re going to be okay.’”
Stitch Fix was more than “okay” — the company became profitable in early 2014, far sooner than most venture capital-backed companies, and at a time when brick and mortar retail was seeing the first signs of a retail apocalypse. Today, the company is an over $1 billion revenue business. Its success has been driven by what it delivers each month: Curated clothing choices that are backed by information about someone’s personal preferences.
Thinking Outside the Box
Stitch Fix’s ability to keep current customers and attract new ones hinges on its ability to consistently send clothes that women like and that fit them well. That’s a challenge, but the company knows the deal: You’re not going to keep paying the $20 flat styling fee if you don’t like what’s arriving at your doorstep on a monthly basis.
Stitch Fix is far beyond SurveyMonkey at this point, and there are two types of data it uses to increase its odds of getting your style right. First, there’s the upfront data, which Stitch Fix gathers through the initial questionnaire new users answer, including answers to basic questions about their height and size, as well as preferred colors. This is much more information than in-store retailers have (think about it — you’re not filling out a Style Profile upon entrance), and even other online programs.
“I worked at Netflix for six years, and you think you know a lot about the customers but you really don’t,” Eric Colson, the former VP of data science and engineering at Netflix and current chief algorithms officer at Stitch Fix, told Refinery29. “You know their browsing history and what they’re watching, but you don’t know even know their gender.”
However, Colson says that the most valuable information is the feedback Stitch Fix gets from each Fix. According to an e-commerce study from independent researcher Clutch, 81% of online shoppers said they do not leave reviews because of a lack of time and incentive. Stitch Fix says that historically, 85% of shipments have resulted in direct feedback, and it’s easy to see why. There is considerable incentive: The more comments you leave, the better your chances are of getting clothes that suit your style and body type in your next Fix.
The latest example of this feedback being put to good use: The launch of an entirely new add-on for Fixes, called Stitch Fix Extras. The curated collection of intimate apparel covers seven categories — camisoles, shapewear, underwear, bralettes, tights, bras, and socks — which customers will be able to browse and add on to their upcoming Fix, expanding on the five stylist-picked items already included. In addition to well-known labels such as Hue and Hanky Panky, Stitch Fix is also offering its own new exclusive line, Everyday by Stitch Fix, with a classic cami, bikini, shapewear, thong, and ankle and crew socks. Everyday is more affordable than other brands offered, with prices ranging from $10 to $20.
Lake says the launch of Extras fills a gap in people's closets that was expressed through feedback data — it's something users have requested for years. The same was true of Plus, the expanded sizing category that the company introduced in 2017: A waitlist for the new line included over 80,000 people.
Colson envisions Stitch Fix’s data algorithms doing for retail what other disruptors, such as Lyft and Uber have done for transportation, taking the burden of hailing a cab or paying with cash away from consumers. “Five years from now, I think it will be antiquated to have to go and pick out your own stuff and know what might fit you well,” Colson says. “Those expectations are already beginning to change and will continue to change.”
In Stitch Fix's world, the only clothes you need to see and consider for your closet are ones that are completely personalized to you.
Dressing for the Future
Despite positive customer feedback and sales, Stitch Fix’s path to its IPO didn’t play out as Lake had originally envisioned. Two weeks before ringing the bell at the Nasdaq MarketSite, Lake did what’s known as a road show, giving 30-minute presentations on the company to potential investors. The same challenges she encountered when originally pitching VCs in 2011 and 2012 were present here, too.
“Honestly, it was pretty clear early on that things weren’t going amazingly,” Lake told Refinery29. “We didn’t know until towards the end if things were going to be bad, but it definitely didn’t feel like we were getting amazing traction with investors in those two weeks.”
Ultimately, Stitch Fix raised $42 million in funding leading in to the IPO and priced lower than Lake wanted, a realization that initially resulted in a feeling of “Ugh, this isn’t success.”
But that momentary disappointment was quickly replaced with something better: A sense of empowerment that has defined the brand since its early days.
“We’re going to have to prove to people in the public market that this is a business that deserves a place in the world, ” Lake told Refinery29. “We’re going to do it our way. We’re going to show our Stitch Fix grit and we’re going to prove that we’re going to create a lot of value for people.”
That determination gave her the flexibility to do something she might not have done otherwise: Bring her son onstage with her, and speak her mind about how companies should be run. Usually, market bell ringing ceremonies include two photos: One for company employees, and another for family. Lake chose to merge the two.
As for the gender-focused attention she received for being a woman leading an IPO? “I’ve come around to embracing it. I want there to be more, I believe there can be more, there will be more.”