What StitchFix Figured Out About Mass Customization JD May 26, 2015 entrepreneurship 128 Brick and mortar retail experiences have barely changed in decades. Take fashion as an example. You travel to a store, select clothing from a mind-boggling array of choices, try on items in an ill-lit fitting room, stand in line to make a purchase, and if it doesn’t work out, go back to the store and stand in line once again to return the items. You may or may not have been assisted by a person who could theoretically provide a highly personal experience, but probably didn’t. While still an overwhelming majority of our shopping transactions take place this way (brick and mortar shopping experiences are still over 90% of total transactions), this traditional experience isn’t providing what more of today’s consumers want: personalized experiences at lower costs, reduced complexity through curation, and the desire to feel good about their purchases. Addressing these requires a significant shift in mindset and business model – and traditional retailers know it. As they search for a new formula to stay relevant in a fast-moving environment, up and coming, more agile players are emerging with solutions to the unmet needs of today’s retail consumers. San Francisco-based Stitch Fix is such a player. It’s an online service that provides personal styling at affordable prices. The company delivers five highly curated pieces of clothing to its clients’ homes monthly. Clients pay a $20 styling fee and, if they decide to purchase any of the five items they received in their shipment or “fix,” that $20 goes toward the purchase. Additionally, if a client decides to buy all five items in their shipment, they receive a 25% discount off the entire purchase. I had a chat with Stitch Fix founder Katrina Lake recently to learn more about the principles that guide the personalized styling company’s approach to mass customization. Fueled by her deep knowledge of retail, as well as regressions and econometrics at Stanford, she started with a hypothesis that some aspects of loving a garment are objective, while others aren’t. Here’s how Lake brings it all together into a highly innovative, tech-driven personalization ecosystem: 1. Reduce complexity through relevant curation. Like many personalized radio services (think Pandora), this service is designed to get better the more that you use it. Algorithms produce recommendations for stylists who use their personal experience and knowledge of the customer to curate those recommendations down to just five items per fix. As you purchase, answer questions and/or communicate with your stylist, each fix becomes increasingly accurate. In addition to reducing the number of choices customers have to select from, Lake wanted to establish a model that helps identify pieces that “make you feel more confident,” whether on a date or at a job interview. These intangibles provide high value to time-strapped consumers. 2. Combine algorithms with human judgment. Stitch Fix combines technology, data science, and the human touch of seasoned stylists to make personalization scalable. One-hundred percent of what the company sells is based on recommendations that emerge from customer surveys, Pinterest boards, weather patterns, and personal notes to stylists. It’s the algorithms that emerge from this information, and the data scientists behind them, that Lake credits for much of the success of their model. Lake enlisted data scientist Eric Colson to act as their Chief Analytics Officer. In his previous role at Netflix, Colson helped determine which films would pop up as suggestions for viewers based on previous viewing choices. “There is no other Eric Colson on the planet,” says Lake. And Colson understands that the algorithms he helps to build underpin the value that Stitch Fix brings to customers. “There is no selling here, only relevancy,” Colson says. In other words, Stitch Fix only gets value from its customers if customers get value from Stitch Fix. Meanwhile, if clients express interest in broadening their horizons, stylists can make suggestions outside of the client’s clothing comfort zone by sharing new styles and designs, further optimizing personalization for the client. 3. Honor implicit contracts. If a customer doesn’t buy a “fix,” items specifically handpicked for that client, Stitch Fix wants to know why. They learn this through surveys and even personal notes to stylists. “It’s amazing what information clients will offer up to our stylists,” says Lake. Far beyond opinions like “I hate stripes” or “blue just doesn’t look good on me,” clients have opened up about everything from weight loss journeys to pregnancies long before family members have been informed. “The bar feels high when clients share so much.” Lake sees it as Stitch Fix’s responsibility to use this and other information shared by clients to improve the next fix. 4. Build a holistic ecosystem. In addition to serving clients, Stitch Fix further transformed its model by addressing the needs of an underserved group — stylists. Many stylists, Lake found, want more flexibility and remote work arrangements. Ultimately, Lake created such an environment, allowing these stylists to thrive. Flexibility in hours and location widened the pool of talent from which Stitch Fix could choose, helping them land the best stylists, while providing opportunities for educated and eager workers who otherwise may have opted out of the workforce. By addressing the needs of stylists in a way that others haven’t, Lake created a more holistic ecosystem that will help drive sustainable growth of the company. Are technology-driven personalization services like these supported only by early adopters? Not at all, says Lake. Stitch Fix customers include a broad swath of not necessarily tech-savvy consumers frustrated by an unchanged retail experience that is simply not meeting their needs. Retailers like Nordstrom are taking note, and recently purchased Trunk Club, an online personal shopping service for men. As the demand for customization married with a digital experience increases, retailers must find a path to scalable personalization through a balance of art and science, objective and subjective – with enough human touch that customers feel taken care of.