While many retailers are struggling to find growth opportunities, online personal styling service Stitch Fix is seeing impressive growth nearly two years post-IPO. The company reported on Wednesday better than expected results for the third quarter of 2019, stemming from expanded product offerings, a unique use of data and a $16 million marketing push.
In Q3, active clients reached 3.1 million, a 17% year-over-year increase. A portion of that growth was attributed to the brand’s first integrated marketing campaign, beginning in February of this year. It spent an incremental $16 million on brand marketing in the third quarter. Previously, the brand, founded in 2011, had focused its marketing efforts on educating consumers about what Stitch Fix is and how it works.
“That was really important eight years ago, when we created the category,” said Deirdre Findlay, chief marketing officer at Stitch Fix, speaking at the Glossy Summit in Miami last month. “Now we are at a place where a lot of people are claiming to do what we do, and we need to further differentiate the brand.”
The company rolled out a three-phase campaign tied to awards season, which sees ramped-up attention from consumers, especially those with an eye toward fashion. “When you don’t have multibillion-dollar brand budgets, you need to be smart about how you take advantage of media,” said Findlay.
The campaign included a social campaign, in which current clients shared what they love about the service, a red-carpet activation in L.A. and New York City following the Grammy Awards, and a 60-second TV spot that launched just before the Oscars. Overall, the brand tries to keep its marketing mix varied to keep existing customers interested and attract new members.
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“We definitely rely heavily on Facebook, Instagram and Google to meet our needs from a growth and performance marketing standpoint. We’re leaning into new channels like TV and out-of-home, and radio has been really successful for us to deliver our message. What we’ve found is that when we lean into brand channels a bit differently, it lifts everything and makes performance marketing more efficient,” Findlay said.
Another growth driver for the brand, according to the earnings call, came from the success of its women’s business along with its growing men’s business, launched in September 2016. Stitch Fix also expanded to the U.K. in May, which could be an area of growth for the brand down the line. The company’s net revenue hit $409 million, a 29% year-over-year increase.
For women’s, the number of customers who kept at least one of five items from each delivery rose 8%, making it the fourth consecutive quarter of year-over-year growth in that area. In men’s, private-label brands (driven by the company’s data on choice customer styles) comprised over a third of revenue in the category.
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It’s the brands use of data and analytics that continues to set it apart from others in the space and spark growth, said Janet Kloppenburg, president at research firm JJK Research Associates, Inc.
“They have a very unique strategy, and in that, they’re growing their revenues very quickly, exceeding $1 billion in seven or eight years while maintaining profitability most of that time,” said Kloppenburg.
“Our approach to data science is a competitive advantage for us,” said Mike Smith, president and COO of Stitch Fix. “It’s pervasive in our business and fuels our growth and innovation, enabling us to be more effective in service to our clients.”
