Elizabeth Spaulding has big plans for change despite slowing growth


New Stitch Fix CEO: "We're in the Middle of a Transformation"

Leadership

Stitch Fix CEO: "We're in the Middle of a Transformation"


New Stitch Fix CEO: "We're in the Middle of a Transformation"


Elizabeth, thank you so much for joining us to talk about stitch fix. You know, people think about your company as this fast growing company that innovated a stress free way to shop for clothes online, but that's not the picture that invest got recently when you told him that you are not satisfied with the company's latest financial report losses, quadruples revenues fell. Many of your clients dropped off and you announced job cuts. What happened? What changed? You know, we're in the middle of a transformation and the original model of stitch fix is so disruptive. It is an opportunity to bring so many clients into our ecosystem and you know, we're in the middle of growing and expanding that model. We know that the fixed model while so exciting because it allows clients to find what they love, It really addresses a smaller total addressable marker market than what we're becoming and that shift from the historic model to our destination of shopping and styling which were in the midst of is taking time and it has been bumpy, it's not linear. And part of why I mentioned that we're not satisfied that we know we can do better. We know that as we get this broader ecosystem that we're building really working, it will bring in more clients, it will allow us to reignite growth and so that's what we're in the mist to doing well. Actually you told investors that we can and must do better. And that you said you're now moving with quote a sense of urgency. So what's the most important thing you need to do to change things up. Yeah, I think the most critical thing is bringing more great clients into our ecosystem. We love and are very encouraged what we're seeing with our active clients. They're spending more than ever. We've had our sixth quarter on record of revenue per active client because of the innovation we've brought into the model by expanding our offering. We are just beginning to make that full offering available and some of the new services we have to offer to new clients and that really will be the pathway to new client growth and getting it ready. Well, you recently launched this new shopping approach, you call it freestyle, how does it work? And what's been the feedback so far? We'll just to explain what the fixed model is and what freestyle is. So people can kind of visualize and understand it. The fixed model. You give us information about yourself, you play a widget, we have called style shuffle where you some up some down ratings of items and then based on that we'll send you a box of clothes at a time, five items you keep what you love some back what you don't. That is our original model. It's still a very big part of our business. What freestyle is is it really dramatically opens up the purchase occasions, the product categories you can sell and allows you susie or me Elizabeth to participate in stitch fix anytime versus maybe episodically getting that box of clothes every few months. And so freestyle has become actually a significant part of our existing fixed client spending. But we're at the very, very beginning of that becoming an acquisition vehicle to bring customers in and we know it's 2 to 3 times the total addressable market of fixes alone. Well we know that during the pandemic stitch fix did very well because people were in lockdown and they really needed an online shopping outlets and stitch fix was a create creative way of doing that. But now we're seeing that consumers are comfortable about going into the mall, they're comfortable about shopping at traditional retailers. What impact might this have on your business? Yeah, I mean as you're saying, we absolutely benefited during covid of people changing their behaviors. You know, apparel went from 25 to almost 40% online and that meant more people discovering and starting with stitch fix. Now, as you mentioned, consumers are shopping in stores again. Um, that said behaviors have changed. And so what we're excited about is this new way to shop with freestyle together with our picks model really becoming the starting point of this recovery based rather than search based shopping. And you know, we're just at the beginning of that journey and we anticipate a lot of new ways to bring clients in even if their behaviors have shifted back to stories, we still know close to 40% of our category, sales are online. I saw the memo that you wrote to your staff on the first day that you became Ceo, which is now just about a year ago. And you said in that memo that you have a clear plan to dramatically grow the number of people we reach and you predicted that you would take the company from four million clients to tens of millions more. Do you think you can still deliver on that promise? Yeah, absolutely. I think as any Ceo, as you know, you have to focus on the long term, not just a single quarter and over the last, you know, 4 to 6 quarters, a lot of things have been, you know, bumpy in the macro environment whether it's apple privacy changes, whether it was a huge pandemic shift to e commerce and now stabilizing back with people shopping in stores. But those are all temporal in terms of these moments, we're creating a product that really does drive consumer value and we are just at the very early stages um of opening up as a shopping channel which is totally net new in terms of clients coming into the business and we really haven't even turned on those marketing channels in some ways stitch fix have had our hand tied behind the back in terms of bringing clients in just because of the nature of how we acquired customers. So I think that's what gives us a lot of confidence and it's less about A single quarter or a few quarters and more about the next couple of years of really building the experience and opening up new channels to bring in customers. Well you have a very interesting background uh before you joined a stitch fix, you worked for many years, 20 years actually at bain and company as a consultant and I'm sure you advised many companies on making transformations and strategic changes. What's the most important lesson you learned from all of that consulting experience that is helping you now as you try to reinvent stitch fix the clarity of the vision and strategy needs to be that rudder and Northstar horizon that stays constant. And I think the last two years have taught us that um culture is so important and it needs to evolve for this hybrid work environment. I think one of the biggest challenges that I've observed is being so remote over the last two years and now we're finally in this mode of being able to be back together again and building trust. So I think strategy, adaptability, execution and then just building an exceptional um exceptional high trust culture. Looking back on your career. I imagine that you got a lot of advice on leadership and I imagine you also gave a lot of advice on how to be a good leader. I mean what would you say is the leadership lesson that you're relying on um these days as you proceed as the first time new Ceo I think there are probably two major pieces of advice that I'm relying on, Some that I think came to me early. Some that's more recent advice that I've really brought into the first is being very clear at defining reality and what is the core strength of the business. And so we have a very good sense of that um for stitch fix and using that to expand the business based on our core strength. The second is just the importance of radical simplicity. You know, transforming and evolving. A company is complex hard work, but the more we can make the spirit of what we're doing incredibly simple and clear to our teams um and how that applies to their day to day work so that they know that they're contributing to pushing us forward on that mission. Um You know, the power of three things, the power of five things not over complicating it, making it really easy for the average individual within the organization. Each of us to understand how it applies to the work that we're doing