Thread by @mario_cibelli

Some more thoughts on $SFIX and its evolving consumer service - no views on the share price in the short-term.

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Stitch Fix's current 'no look' fix business in the U.S. has grown quite large despite addressing a fairly small portion of the overall apparel market.

Not to knock the current product but it is decidedly non-traditional and has had the burden of carrying significant friction when it comes to acquiring customers.

The upfront style profiling can take 15 minutes or more to fill out properly. Consumers have to invest time and energy just for the *opportunity* to purchase something they want.

This is the exact opposite of one click to buy/frictionless commerce that consumers have become accustomed to over the last decade.

Not being able to preview what's in a fix and then having to fork over a $20 styling fee if you decide to send everything back is some pretty serious consumer friction especially versus traditional e-com apparel which is two way free shipping with few exceptions.

This is like boxing with one hand tied behind your back when acquiring new customers.

So who was attracted to such a high friction service initially? Broadly speaking consumers that really disliked shopping, needed style suggestions or those that were extremely pressed for time would likely derive the most value from version 1.0 of the fix model.

Version 1.0 of the service clearly appealed to some consumers but was a tough sell for many hence millions that filled out a profile but never took a first fix.

My instinct is that 'you can't see it' and 'you still owe me $20 if you return everything' kills off a tremendous amount of trial usage.

And think of all the consumers that actually did keep nothing and were still out $20. They would be the very opposite brand evangelists for Stitch Fix.

Of course this less traditional consumer proposition was done for a reason which was to capture a richer set of data to allow for more personalization and ultimately a much better apparel buying experience.

Note - I continue to believe that matching unique individuals to a highly fractured apparel market is and will continue to be difficult to do well but I won’t delve into this topic for now.

Increased upfront friction to create better service is an equation that makes perfect sense for a broader set of consumers, well beyond the niche that likely found version 1.0 of the fix attractive. The trick really is just getting consumers to better understand this proposition.

Allowing previews of fixes should be a significant boost on this front.

Think about all the ‘keep nothing, out $20’ consumers that can be eliminated with previews - some will choose to never receive a fix (no harm, no foul) and others will add something to the fix that they now will buy that they wouldn’t have otherwise.

Then there’s keepers who will now add an additional item to the fix that they will now buy. Management discussed a 10% order value lift in the U.K. across 75% of consumers.

For fun play with some assumptions here and you can about fully bridge sell side expectations for growth in EBITDA between FY 2021 & 2022 on only this new feature alone if these patterns were to hold in the U.S.

Fewer zero keeps and more one and above keeps could be a very nice trend for Stitch Fix.

The opportunity for more frequency as consumers begin to preview in mass is interesting as well. Stitch Fix will get two ‘unboxing’ events now - one digitally and one physically.

Set it and forget it will still be there for consumers but the digital preview will be a valuable and important indicator for Stitch Fix.

Stitch Fix’s super actives - those that spend well above the averages - can also be catered to in a different way going forward. Experimenting with breaking the ‘5’ barrier could occur here first.

Vetted customers with good buying behavior that find 8 previewed items attractive may be able to receive all of them. Perhaps they keep 6 or 7 of the 8 helping to really blow out revenue per fix for some portion of the consumer base.

Preview also seems poised to reduce new customer acquisition friction. While Stitch Fix’s service will still be decidedly different from traditional ecommerce, the consumer proposition with previews can only get better.

Browsing pre-selected articles of clothing mimics more traditional apparel shopping which will feel more familiar to newly acquired consumers.

It’s really a nice look under the hood of Stitch Fix’s recommendation engine without having to fully commit to the service. This should expose a lot more acquired customers to Stitch Fix’s value proposition than in the past.

More broadly it also seems like a big win to simply drop the ‘no look’ aspect of service out of the equation entirely. There’s no longer a conversation or explanation needed around buying clothes site unseen.

Consumers will be able to see what’s going to come in the mail just like they do with the other 99% of ecommerce services they use.

It’s also important to keep in mind newly acquired customers may value previews more highly than the existing base of users given the types of consumers that were most likely attracted to version 1.0 of the service.

The combination of directbuy + fix preview in the U.S. could materially change the consumer value proposition for new and existing Stitch Fix customers for the better which in turn could potentially bend a # of KPIs currently tracked by those in the investment community.

Simply put: I believe there is a very good chance that fix version 2.0 is going to be materially better than version 1.0. If you're properly analyzing 1.0 but not thinking about how 2.0 may behave in the hands of consumers then it’s possible you don’t have the full picture.

Stitch Fix is a battleground name for sure - the difference between two opinions equals opportunity - and I understand why the model is viewed skeptically by many.

I do think the path to success is narrow and not very clear at the current moment to outside observers. That being said I believe this management team and board is fully capable of delivering on the vision.

(eom)