Stitched Up By Its Own Poor Decisions
I don’t get Stich Fix (SFIX).
It’s not that they shouldn’t be a company - I’ve seen worse ideas cut up on the drawing board - but I don’t see how they will ever become successful.
They probably should have invested in Bitcoin before it blew up to $65,000 because that was the last savior before tech companies realized they couldn’t just roll over debt anymore.
SFX’s lack of competitive advantage is worrisome, and they haven’t done enough to differentiate themselves amongst competition.
For a company fighting for relevancy, they have made some boneheaded mistakes.
They recent hired a new CEO Elizabeth Spaulding with no apparel experience - she was only a consultant with Bain and has never run a company in her life.
For one, customers don’t receive a great sales price on the clothes. Unless keeping the entire box (5 items), they won't get a discount. They also won't find any coupons online for Stitch Fix.
For many tech companies that preach the freemium model, Stich Fix is asking customers to pay a premium for clothing upfront without proof of a brand premium, and I believe that is turning off a lot of potential customers.
A tech company with decelerating revenue for 6 straight quarters is a red flag.
If you are a bargain bin fanatic, the sight of SFIX’s service will turn you off.
Stitch Fix claims the average price of items is around $70, but that the items can cost anywhere between $20 and $400.
You can set price ranges for each category, but that doesn't mean your stylist will always follow those instructions.
Pigeonholing oneself as a luxury service but hoping to scale broadly and fast like a tech company is counterproductive.
Many Americans simply won’t pay up to $500 for a 5-piece set of clothing no matter who is styling it.
This sounds like a service for a computer programmer in San Francisco with a $200,000 annual salary--which isn’t a bad thing, but it will fail to scale.
Just as important, there is quite robust competition that undercuts SFIX such as Amazon (AMZN) Prime Wardrobe.
Amazon Prime Wardrobe is an exclusive program just for Prime members. This service gives users the chance to have chosen clothing items shipped to their home for them to try on before buying. The difference here is that the user selects the item which, for me at least, makes sense instead of SFIX blindly shipping clothes that aren’t ok’d. I just don’t think a “stylist” can get it right more than half the time. You only pay for what you keep and you have 7 days to make up your mind.
The biggest head scratcher is the $20 SFIX styling fee if you don't keep anything.
Seriously, what is that about?
If you hate their expert stylish decisions, you get blamed for it and pay $20 for nothing! Shouldn’t it be SFIX paying the user $20 for failed style sense?
And this is without even mentioning the pain of resending the clothes!
The inferior business model explains why the stock has gone from $120 fifteen months ago to under $3 per share today.
Don’t bet on a reversion to the mean trade as well, there are so many better stocks out there.
