For a decade, Katrina Lake has been one of the most celebrated tech CEOs in the country. Now, she’s ready to pass the baton.
The founder and CEO of Stitch Fix is handing over the reins of her company to Elizabeth Spaulding in August, in one of very few female-to-female transitions of power at a public company. Spaulding, who spent 21 years at Bain, has been Stitch Fix’s president since January 2020. Lake will remain at the company as chairperson of the board.
Lake launched Stitch Fix in 2019 as a solution for consumers who were overwhelmed by navigating the sheer volume of clothes on the market. By combining data with expertise from stylists, Stitch Fix curated boxes of clothes based on customers’ tastes and body types. Consumers responded to this curated approach: The brand now sells $1.7 billion of clothing annually.
In 2017, Lake made headlines for being the youngest female CEO to take a company public; the IPO raised $120 million. Still, she sometimes bristled at how she was portrayed in the media. “I am more heavily scrutinized, whether I fail or succeed,” she said. “At some points I resented being on lists of top female founders: I would ask, why am I not just a founder? Why do I have to be highlighted in this way?”
At the same time, she’s glad she’s been able to pave the way for other women to rise in the business world. More immediately, she’s handing the leadership of her company over to Spaulding, who has ambitious plans to accelerate the company’s growth. I sat down with both Lake and Spaulding to discuss the past and future of Stitch Fix.
Fast Company: What do you make of everything you’ve accomplished over the last decade?
Katrina Lake: All of this is fascinating to me because I wasn’t the kid who wanted to be a CEO. None of this was a manifestation of my dreams. I wanted to be a doctor for a long time. I even took the MCAT.
When people hear I went to Stanford, they think that’s where I decided I wanted to be an entrepreneur. I was there when Mark Zuckerberg had dropped out of Harvard and was hanging out at Stanford with Larry Page and Sergey Brin, wearing flip-flops and coding in garages. The truth is that Silicon Valley scared me out of starting a business. That culture didn’t feel like me at all.
I was never really trying to be a leader. If Stitch Fix had existed when I was starting out in the workplace, I would have happily joined the company. I was academically interested in the problems it was trying to solve and what the next generation of shopping would look like. My success was the byproduct of pursuing what I thought was a really interesting business idea.
With everything you’ve experienced, what advice do you give other female entrepreneurs?
KL: I had a long conversation with Whitney Wolfe before Bumble went public, and I’ve been trying to advise Elizabeth through this transition. One piece of advice is to lean into ambition, which is not something I did.
When I started Stitch Fix, I hadn’t dreamt big enough to tell venture investors that I wanted to be the youngest female CEO to take a company public. To me, success was maybe becoming a hundred-million-dollar business. I really like that Elizabeth is leaning into ambition and seeing possibility. We’re now doing roughly $2 billion in revenue, but rather than thinking about how we get from 2 to 3, she’s thinking about how we get from 2 to 10 to 20.
Stitch Fix has nearly 8,000 employees. What have you learned about creating a strong company culture?
KL: You can have the biggest dreams in the world, but if you can’t solve the people part of the equation, it won’t really manifest. You want to create culture where people are aligned and connected to the mission, because this allows you to hire great people who love the work.
I hate the notion of “culture fit.” If you’re just fitting in or blending in, you’re not actually bringing anything new to the table. I prefer to think about “culture additions,” which means bringing new people to help our culture evolve.
I think diversity is key here. Historically I’ve been good at creating leadership teams with diverse backgrounds, which allows us to attract phenomenal diverse talent. This allows us to take the best in what different types of people have to offer, rather than having a single blueprint for success. And when teams are not monochromatic, it deepens the idea that everybody adds to it. You create environments where people feel like they can be their most authentic selves.
Elizabeth, what attracted you to Stitch Fix?
Elizabeth Spaulding: A lot of tech companies dabble in commerce, but it’s not really their core business. They’re not deeply innovating in the full end-to-end customer experience, from inventory to supply chain to customer experience. Stitch Fix is a needle in a haystack, marrying the DNA of data and technology, then adding the human touch of styling. It demonstrates the power of personalization in transforming the way people shop.
The future of innovation is about taking this engine of personalization and translating it into a broader offering that every consumer can participate in. Our original model leaned heavily into our stylists, but now we have data about the $7 billion worth of clothes we’ve sold. It’s like Netflix’s transition from analog DVDs to streaming. We can use this data to send you a handful of products we think you’ll love, and we usually get it right within a few tries. Now, customers have the option of shopping in a personalized store and interacting with a stylist when they want.
How did COVID-19 affect your business?
ES: Back in March and April of 2020, consumers pulled back on what they were buying, not knowing what was going to happen next. But then we saw them quickly come back and saw the kinds of products they were asking for, and began to stock up on the goods we thought were going to be popular.
We also saw a change in what people were looking for. We saw a 350% increase in athleisure and a 10-times increase in requests for loungewear and tops for Zoom calls. And there seemed to be a shift toward quality. Customers weren’t looking for disposable fast-fashion items, but things that would fit well and that would last a long time.
During the pandemic, people who had never shopped for clothing online were willing to give it a try, so we saw a new wave of consumers. When I joined Stitch Fix last January, a quarter of [total] apparel sales were done online. Now it’s 40%, and we think it will be 50% in the next couple of years. We think consumers are moving in a direction we’re uniquely suited for.
Do you think consumers are shifting toward more sustainable fashion habits?
ES: I think the most sustainable thing we can do is buy fewer clothes. And in a world where this is the case, consumers will want to buy things that are more meaningful because they’re going to wear things a thousand times rather than five times.
What’s unique about our model is that we’re all about helping you find things you really love, like that perfect pair of jeans. We have a lot of customer data about products they’ve bought from us in the past and this allows us to simplify the process for our stylists of finding the ideal garment. They don’t have to go through tens of thousands of items to make a recommendation.
How do you stay profitable while encouraging consumers to own less?
ES: Consumers will always need new clothes. In fact, I think we’re going to see a lot of pent-up demand for new clothes [in the post-COVID-19 era] because many people cleaned out their closets and are now ready to dress again.
Our goal is to help them get items that really fit and wear on a more enduring basis, and moving away from a fast-fashion mentality. People often take stock of what’s in their closets and shop a couple of times a year. Our stylists can play a role, along with the data, to short-circuit the search for new clothes and offer a portfolio of items that really make sense to them.
Katrina, some of your priorities are sustainability and social impact. What are some projects on your horizon?
KL: We’re really curious about what role we can play in recycling. We have sold $7 billion worth of clothes that are in our customers’ closets. Maybe they’re ready for a new home.
We’re looking at resale, but we’re also interested in garment recycling. There are a lot of technologies coming to market that need help from commercial partners, which is where we can play a part. We have a mill and cut-and-sew factory in Pennsylvania we bought years ago. It’s been awesome to experiment with recycled fibers there.
I’m now focused on how we can become a leader in sustainability. It’s something that gives me a lot of energy, and I think these projects will be very meaningful for our company and our shareholders.