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Stitch Fix CEO Katrina Lake Talks Data, Amazon—and Hot Tubs

In this exclusive interview, the cofounder of one of 2018’s World’s Most Innovative Companies shares her insights on breaking through in retail.

Stitch Fix CEO Katrina Lake Talks Data, Amazon—and Hot Tubs
Stitch Fix cofounder and CEO Katrina Lake is harnessing data, and a fleet of stylists, to outfit a nation. [Photo: Aaron Feaver]

Fast Company: You launched three new services over the past year: Stitch Fix for men; premium brands, which brings higher-end lines like Rag & Bone and Theory into your assortment; and plus sizes. You also recently added maternity and petite sizes. What role did data and technology play in determining that these were areas you should be getting into?

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Katrina Lake: We saw a lot of demand from existing clients. Even if our women’s clients weren’t looking for men’s clothes, they had men in their lives, either that they helped shop for or that they could see opportunities for us to serve them better. So we certainly had data around demand on men’s—and plus sizes. We actually had a wait list of almost 75,000 people before we even launched the business. As for maternity, we talk a lot of about how we’re able to personalize and how deeply we understand clients and products. People say, I love this, but I didn’t like the price. But we also understand when people take breaks from the service, and one of the reasons people would take a break from Stitch Fix was, I am pregnant. We were like, that’s an easy problem we should solve. We can really use data to be able to see where our opportunities are and to see where we can be serving people better.

FC: You also now work with brands to create unique garments based on what your algorithms tell you people like, an idea you’ve talked about as being a mirror of natural evolution, where mutations in things like plants lead to a more perfect, so to speak, specimen. Is data-driven fashion the future? 

KL: One of the things that can be hard about apparel is that sometimes it’s hard for people to articulate. Did you like this sweater because it was a good price or did you like this sweater because it was really soft? Or because it fit great? The reality is, you bought the sweater because of all of those things, and what we’re able to do with the data in aggregate is start to have a sense of which one of those things are the true drivers. Then, with [our line of] Hybrid Design [garments], we recombine those traits in new ways to reinvent products. We might have certain fabrics that work really well in a knit top and we’re going to change the neckline, and we’re going to do it in a different color. Or we’re going to do it in a slightly different silhouette. I don’t know if it’s going to necessarily be the perfect X or Y, but I think it’s an evolution of bringing more products that people are loving into the market.

FC: As Stitch Fix’s reliance on data grows, what role do your stylists—who take all the data and use it to actually curate an individual Fix—play? 

KL: The stylist’s job becomes more and more human, spending their time on building relationships with clients. I have clients whom I’ve had for many years. I have a client whom I’ve styled through three pregnancies, and when she was going back to work after her last pregnancy—she has five kids—my notes were a little bit more focused. I asked myself, Are there specific things that she’s looking for or gaps in her wardrobe?

FC: I wasn’t aware that you acted as a stylist. What makes you want to be that thick in the weeds? And how do you have time for it as CEO?

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KL: I have about five or six Fixes a week or so. It’s fun. I have a client who’s 50 years old and I think I’ve styled over 50 Fixes for her. I have a more recent client who’s 13. She’s my favorite. It’s fun because I think our inventory now is so much better, the breadth of it [in addition to premium brands, Stitch Fix has also introduced more brands in the $20-$50 range]. The things I send her, we literally didn’t have a year or two years ago. I sent her some sheer-panel leggings and a bodysuit that was like a mock turtleneck bodysuit and a Tommy Hilfiger jacket, with the little flag on the back, and it was perfect for her. She loved it. I could see [through her] Instagram and Pinterest accounts that she was going to love it.

If you were the CEO of Macy’s, it’s kind of a pain to go work in a store and clock in and work a register and learn how to do that. You’d spend a whole day there. It’s amazing that I can do a little slice of that every single day. For me it’s valuable because I can see who our clients are. I can see how our inventory looks today. I can see, Oh, this was a client that was kind of hard to style for. It gives me more insight into areas in the assortment that, yes, we have data around it, but experiencing it firsthand is sometimes even better. It also gives me a sense of a stylist’s experience. We have over 3,000 stylists that are employees of Stitch Fix who do this job every day, and it gives me kind of a firsthand look into what their experience is like.

FC: How do you address complaints from users in terms of things like quality? Do you ever drop brands based on user feedback? 

KL: Yes, we have dropped brands. We’re always in an evolution of making sure that we’re finding the right new brands, and also that we’re reevaluating the assortment. Specifically, on the women’s side, there was an instance where the fit just wasn’t working for our client and we gave a lot of feedback, and the client wasn’t at a scale where they felt they could invest and make the changes that they would need to in order to be successful with us. So we parted ways. It’s going to be a constant evolution, and I think it’s the good and the bad part that our customers tell us explicitly, every single day, “I love this. I hate this. This didn’t fit. This fit great.” That helps bring a lot of clarity in terms of whom we should be working with and which brands should be in our assortment.

FC: In many ways Stitch Fix defied the conventional wisdom about tech startup growth. You raised relatively little capital—$42 million over six years—and you were profitable early on even as you scaled incredibly quickly. Was this a deliberate strategy?

KL: What’s been intentional is bringing a customer-centric, new way of retail that focuses on personalization and building a human connection scalably. That strategy has been very deliberate. Building a healthy business has always been part of what I wanted to do. So there’s an element of that that’s deliberate. That being said, they say what doesn’t kill you makes you stronger, and I would definitely say that was true about our early experiences. There are a lot of things about Stitch Fix that just weren’t easy. Like, inventory in a business where you’re doing a business of personalization and you’re scaling at crazy, year-over-year growth rates. It is really hard to make sure that you have the right thing or the right product for the right person in the right size and the right inseam. I call it Stitch Fix Grit. There was a lot of grit that was involved the first year of this company.

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FC: What about raising money? Was staying lean intentional?

KL: That was more the environment that we were in. It wasn’t so much, “Oh, I’m going to create a company with as little capital as possible.” The reality was, it was really hard to raise money. There weren’t as many investors who felt a connection to me or the company and wanted to throw money at us. In some ways, we were kind of forced into a situation where you’re either going to figure it out or the company is not going to exist.

When you look at the homogeneity of venture investing and see that 94% of venture investors are men, there are a lot of systemic preferences that are going to create biases in terms of what people feel passionate about that I think are problematic. There’s also an element of . . . I was at a conference where there was an investor who said, “You know, I like to meet entrepreneurs in a more casual environment. I don’t have an office. I like to drink beers in the hot tub and hear their business idea.” I’m not naming names, but that happened. So there are things like that. When I was raising money, I didn’t know those were the ways that people raised money. I guess I’m glad I wasn’t in hot tubs, but I wasn’t even invited into hot tubs. I didn’t know those opportunities existed.

FC: What did you learn through the roadshow and IPO experience last fall? Despite your revenue and profitability figures, you got some flack from investors during the roadshow about slowing growth, and you ended up having a downsized IPO stock price, even though the stock then rallied back a bit.

KL: One of the things we would hear [during the roadshow] about Stitch Fix was, “What are the comps? There aren’t any good comps.” And that’s true. A lot of what you see out there is pure e-commerce or you see stores. This model is new, this idea of personalization. We don’t have an e-commerce website where people are showing up and clicking on things and putting them into a cart and price-comparing them. That’s not the way people engage with Stitch Fix. So the fact that there aren’t any good comps . . . I should have been more thoughtful about what that meant in terms of people understanding the business.

You can dig through [our blogs and other information on Stitch Fix’s technology] and get some sense of how the data science impacts the business, but it’s pretty hard to explain that in a 45-minute meeting. So you have to do a lot more educating to help people understand your business, and I think I underestimated that. But we’re very committed. We’ve been underestimated before. We operate in a better way when we feel like we’ve got something to prove. I never wanted to be an overhyped or overvalued company. We feel good to be in this position. But I don’t know that I expected that we would be in that position, so it definitely was a learning experience.

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As for the stock price, there’s not a lot that we can do to control it. I haven’t checked it today. I’m not going to check it today.

FC: Really? Why not?

KL: We’re really focused on creating long-term value. If you were on a diet, you wouldn’t want to weigh yourself five times a day. Ideally, you want to feel like you’re doing the right things so that a year from now, you’ll be in better health. That’s the same way we think about Stitch Fix. We’re doing a lot of things today that a year from now, four years from now, 10 years from now, will create a lot of value. In a lot of ways, the stock price is kind of a lagging indicator of what you’ve done. I don’t see a lot of value in tracking it every day.

FC: As the first female CEO to take her tech company public last year (and one of the few in general to do so), you have a huge spotlight on you. Is there a responsibility you feel as a female tech leader, given all of the discussion around gender imbalance in the tech world, not to mention the sexual harassment issues that are plaguing just about every industry? 

KL: I’ve come to embrace it. A couple years ago, I felt like I would be grouped as a female CEO and I’m like, I’m just a CEO. I’m just going to be a successful CEO, just like everybody else. To some extent now I feel less . . . I don’t know . . . hindered by that. I feel more empowered about being able to represent a different type of leadership and a different type of company.

My alliances have even changed a little bit since having a kid. As somebody who has created 6,000 jobs and is somebody who is out there saying, “I’m creating the future of retail,” what also comes with that is creating the future not just in terms of how people are going to buy things, but creating the future in terms of how are we going to work together? What does the workplace look like? What is the company culture that’s successful? That’s a great responsibility that we don’t always talk about as being a founder’s responsibility, and it is. Are we creating workplaces where our children are going to work, and what type of place do you want your child working? Do you want your child working some place where they’re going to be able to have equal opportunities, where they’re going to be able to be successful because of their own merits and not because of stereotypes, or because of constraints of who’s in charge? You have this other lens of what is the future that I want to create, and I don’t know if it’s a burden, but I think it’s a great responsibility that I have and that I take really seriously.

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FC: What sorts of things are most important to you in creating an idealistic workplace for future generations? 

KL: If you look at my management team, we’re not perfect, but we’re very diverse. It’s doing more than saying, oh you know, we do talks where we bring in women. That’s a nice thing to do, but what does it actually end up doing? Does that actually end up creating more women in leadership jobs? There are a lot of things that people can say that they do that sound really nice, but at the end of the day, what impact does that really have? There are a lot of companies that are beloved by the press that are tech companies that have virtually zero female leaders—and in retail, too. It’s embarrassing for both of those industries. Part of what we do is we live and breathe it every day and demonstrate by having a leadership team and board that is actually diverse.

FC: Eyes are also on Stitch Fix because you’re one of the few e-commerce companies that is taking on Amazon. If Stitch Fix can thrive in an Amazon-dominated world, there’s hope for other online retail companies. What’s your argument for why Stitch Fix will indeed thrive?  

KL: You can’t underestimate Amazon. They’ve done a lot of amazing things. In retail, and in particular in apparel retail, they’re extraordinarily good when you’re looking for the cheapest and fastest X or Y. When you look at some of the brands that have been very successful at Amazon—its Essentials brand, Hanes, and Fruit of the Loom—these are categories where people already know what they want and they’re looking for the cheapest price. Amazon is amazing at making that transaction happen in the most efficient way. But if you say, “Let me find a yellow dress. I’m going to a wedding in Mexico. I have a vision of myself wearing a flowy, yellow dress that’s kind of fitted on the top but looser on the bottom.” You can imagine these things that you would want to buy, and the tools that are available to you in e-commerce today—it’s very hard to find those things that would be right for you and your body. We’re focused on a very different value proposition, which is not, what’s the cheapest and fastest? It’s, how do I get the things that are right for me and my style and my body? I don’t see any other e-commerce player really attacking that value proposition in apparel.

FC: What about Amazon’s Prime Wardrobe service, which lets customers try on clothes at home and send them back free of charge? 

KL: It’s not a service that helps you with curation and the personalization. Wardrobe is still a try-on process. So it’s similar to Zappos in that it just makes it easier to try and return things. The burden of search and discovery and trying to find out which of the millionth pair of jeans is right for you, is still a really hard problem to solve.

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FC: What will Stitch Fix look like in five years?

KL: The backbone of what we really are about is personalization. That can be agnostic to the number of items [people receive in a Fix], how frequently people are getting Fixes, or what social channels people are using. The staying power of this business is going to be getting to know people, getting to know products, and being able to generate great recommendations that are the intersection of those two things. In the last year we launched three new businesses: men’s, premium brands, and plus sizes. Five years from now, I hope there’s going to be more to come on that front. But I think there’s going to be more to see in terms of the personalization capability that we have and seeing that extended in all different kinds of ways.

FC: Are there any crazy categories you fantasize about starting? Stitch Fix for pets? 

KL: I fantasize most about travel. My husband and I are debating, should we bring our 18-month-old to London?—which is probably a horrible idea. But if somebody in London who has a toddler could be like, Oh my God, these are the five things my toddler loves; this is a great hotel for kids; these restaurants serve really great food but are also great for kids . . . . If somebody was coming to San Francisco, I could tell them where to stay, where to go, where to eat, which parks are best for the age of their child. It would be so amazing to have that expert curation in travel. We’re nowhere near doing that business, but if you go through all the decisions you make in your life, and think about what it would be like to have the help of an expert, like a stylist, basically, helping you with that, there are a lot of opportunities for taking a business like ours and applying it to other industries.


Stitch Fix is No. 13 on the 2018 World’s Most Innovative Companies list. Check out all 50 companies here.

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About the author

Nicole LaPorte is an LA-based writer for Fast Company who writes about where technology and entertainment intersect. She previously was a columnist for The New York Times and a staff writer for Newsweek/The Daily Beast and Variety.

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