Details about Stitch Fix’s personalized marketing strategy were released Tuesday, along with recent revenue numbers that showed active clients on its site grew by 18% to an estimated 3.2 million, with an annual revenue per client of about $488 for the period ending August 3, 2019, up 9% compared with a year ago.
RBC Capital Markets Analyst Mark Mahaney called out the company’s direct-buy function in a research note published Wednesday as “intriguing” and a possible “game-changer.”
The new offering called Shop Your Look is part of a new direct-buy function that allows shoppers to choose and purchase items directly from the company's Web site.
The personalized feature is based on items that consumers already have purchased from Stitch Fix, but also serves subsets of “algorithmically generated items delivered to clients in the form of a shoppable styling recommendation for pieces already in their closet, ”said Stitch Fix founder and CEO Katrina Lake during an earnings call.
The company is testing new styles and personalizing marketing campaigns like Shop Your Look, as it tries to head off competitors like Amazon and Nordstrom’s Trunk Club, and others.
This year, the company also made its first investment in a longer-length marketing strategy and channels with the launch of an integrated brand campaign to drive awareness.
Searches on the site tie into the company’s marketing strategy, which focuses on return on investment and quick payback. It’s not always about the lowest customer acquisition cost and “a hypothetical lifetime value,” but rather optimizing for payback within a few quarters, according to Lake.
Stitch Fix’s philosophy in marketing, which is not new, is to not acquire customers just for the sake of acquiring them, but to acquire them “thoughtfully.” It’s really about personalization. It’s also about not spending the dollars to market in the “depth of summer,” when the company just didn’t see the efficiencies.
Paul Yee, CFO at Stitch Fix, said “we ended last year with marketing as a percent of revenue at 9.6%. That’s the low end of our stated long-term range of 9% to 11%.”
The company reported that advertising for the quarter came in at 9.0% of net revenue versus 9.1% in the year-ago quarter. This is the result of a choice to spend less in July and deploy marketing dollars more effectively at other times of the year.
For the full year, advertising was 9.6% of net revenue compared to 8.3% in fiscal 2018, driven by investments in the brand investments concentrated in the third quarter.