Stitch Fix Tests New Ways to Generate Revenue

The sheer vastness of apparel available to consumers might seem appealing on the surface, but many people feel overwhelmed by so much choice and will continue to flock to StitchFix, the e-commerce company’s chief said.

“There is an over-saturation of millions of products to choose from. Version 1 of the internet was, ‘Let’s get everything on line.’ The flipside is that it’s so hard to find jeans that fit you well,” Stitch Fix CEO Katrina Lake told the Fortune Brainstorm Tech conference in Aspen, Colo. on Monday. “We really have a different approach of how to solve that overabundance of product.”

Stitch Fix’s central service uses a blend of personal stylists and algorithms to choose five clothing and accessory items to send a customer at a time. The customer pays for those he or she keeps, and sends back they rest.

And Stitch Fix’s recent financial performance seems to bear out Lake’s thesis. In its most recent quarter, revenue jumped 29% to $408.9 million, and the number of active customers rose 17% to 3.1 million people.

That has gone a long way to restoring Wall Street’s confidence in the stock, which had slumped in 2018 among fears the Stitch Fix’s business model could run out of gas.

Last week, Goldman Sachs upgraded Stitch Fix’s stock, saying in note there was ample room for the company’s to jump on new opportunities and praising its more recent expansions into plus-size, men’s and kids clothes. Shares have risen 64% in 2019 so far, giving the company a stock market valuation of nearly $3 billion.

Investors have been impressed by the fact that Stitch Fix is finding new ways to get existing customers to spend more: last quarter, net revenue per client rose 7.7%, its fourth straight quarterly increase.

That has come in part from additional things it offers, such as letting a shopper buy an item she already got from Stitch Fix but in a different color. Stitch Fix is looking into increasing the number of items in a so-called ‘Fix’ to more than five in some circumstances.

Another thing Lake sees as a plus for Stitch Fix: growing concerns about the wastefulness of the apparel industry. Lake believes that the precision of Stitch Fix’s algorithms helps manufacturers more closely align supply with demand.

“The major thing I am most passionate about is the overproduction in apparel and how much of that can actually be prevented if you can have better data and a better understanding in your business of what you actually need to produce so you’re not harming the environment more than you need to,” she said.