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Stitch Fix’s quarterly earnings spotlight changes in the subscription economy

The personalized clothing box company’s results may signal how such firms are faring in the current economic climate.

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Since a pandemic high, inflation and subscription fatigue have unraveled some of the success of subscription service Stitch Fix.
Since a pandemic high, inflation and subscription fatigue have unraveled some of the success of subscription service Stitch Fix.
Daniel G. Wells III, CC BY-SA 4.0 via Wikimedia Commons

One of the mainstays of the subscription economy shared mixed quarterly results Tuesday after the markets closed, with better than expected revenue but worse than expected earnings. Stitch Fix offers personalized clothing boxes and rode the pandemic wave of retail therapy to a high in 2021.

Since then, however, inflation and subscription fatigue have been unraveling that success story, and sales have slumped. The company changed CEOs this year and conducted several rounds of layoffs. And in recent months, it has pinned its strategy on the buzzwords of the moment: artificial intelligence.

When subscription boxes like Stitch Fix hit the scene about a dozen years ago, they offered curation of the vast new universe of e-commerce, said Bryan Eshelman at consulting firm AlixPartners.

“It really goes back to the the beginnings of retail when a shopkeeper would know their customers, would know what they wanted, what they liked,” he said.

Now, that knowledgeable shopkeeper is AI trained on personal data. “To really get at personalization opportunities that human beings, even if they had that one-to-one relationship, wouldn’t be able to understand,” Eshelman said.

Stitch Fix was built on algorithmic recommendations. Now, it’s using advances in AI to make predictions more precise, but that’s not so unique any more, per Sucharita Kodali, a retail analyst at Forrester.

“Now, there are chatbots that can answer, you know, whether it’s on the Nordstrom side or Macy’s or wherever, you know, ‘I’m going to a party tonight, you know, what should I wear?'” she said.

All without having to sign up for a subscription you’ll probably forget about.

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