Stitch Fix’s UK ambitions coincide with growing market for alternative shopping models

Stitch Fix, the personal styling service, is expanding into the U.K., bringing its brand of customizable boxes of fashion and lifestyle products to a whole new market.

Alternative shopping models, like rentals and, particularly, subscription services, have been gaining steam in the U.K. over the last few years, though there is less saturation than in the U.S. Despite this, the market for subscription boxes alone in the U.K. has skyrocketed in the past four years. The increased appetite for these types of services in the U.K. has presented a golden opportunity for Stitch Fix, which needs the boost after it reported slowed growth in the U.S., according to its latest earnings report, released on Monday. In the fourth quarter of fiscal year 2019, Stitch Fix saw its active user base grow to 2.7 million, falling slightly but notably short of analyst predictions of 2.8 million.

“The retail landscape in the UK is favorable for a new model like ours,” said Mike Smith, Stitch Fix’s COO. “We believe the ability to create a unique, fun and highly curated shopping experience for everyone is something that will resonate with consumers and brands alike. There is no other model like ours in the UK today.”

The first question for Stitch Fix is whether its business model will prove as popular in the U.K. as it has in the U.S.  The brand offers a unique model of personal styling where customers can receive a box full of clothing in the mail curated for them by a stylist, keep the things they like and return the ones they do not. The box can be purchased on a one-time basis, or users can opt to receive recurring boxes at chosen intervals. While successful so far — the company  saw $1 billion in sales in 2017 — this type of model is one that is primarily popular in the U.S.

“Subscription businesses were originally a U.S. phenomenon,” said Courtney Simons, senior brand director at MeUndies, which operates a subscription service in the U.S. “The market is more saturated here than it is in the U.K. and in other global markets. There’s a lot more competition here.”

Some of the popular American subscription services, such as Trunk Club, do not ship outside the U.S. The same holds true for brands like Rent the Runway. The lack of subscription brand saturation outside the U.S. is a double-edged sword for Stitch Fix as it seeks to expand to the U.K. Fewer brands means less competition, but it also means less familiarity with the business model for U.K consumers. This difference has been noted by some of fashion’s top investors.

“I’m fascinated by Stitch Fix,” said Frederic Court, the founder of investment firm Felix Capital and investor in fashion brands like Farfetch and Highsnobiety, in a prior Glossy interview. “It’s very impressive the way they’ve been growing. There are a lot of different, exciting, relevant ways to get product in front of customers today, and younger generations are definitely less interested in owning. Rent the Runway is fascinating, too, though it’s more of an American thing — it’s not as prevalent in Europe.”

But the U.K. is slowly catching up to the U.S. in subscription usage. Stitch Fix’s efforts across the pond can be seen as a validation of what recent research, such as a uOpen survey from earlier this year, has shown: U.K. consumers are growing to love subscriptions. In 2014, less than 1 percent of U.K. consumers were signed up for a subscription box. Now, that number is closer to 19 percent, an astonishing growth rate in just four years.

“U.K. consumers are spending over £2 billion (or $2.6 billion) annually on direct-to-consumer subscription services, and this trend shows no sign of slowing down,” said Jim Fosina, CEO of Fosina Marketing Group. “These consumers are looking for services to save time and money — very consistent with their U.S. counterparts.”

Fashion brands with alternative business models have been popping up across the U.K. over the last few years. Glitzbox, the country’s first jewelry subscription service, launched last year, while Front Row, the U.K.’s answer to Rent the Runway, was founded in 2016. Companies like Thread and Intellistyle offer similar services to Stitch Fix and will present stiff competition.

As these models build up steam, Stitch Fix faces another hurdle: How can the San Francisco brand compete with homegrown personal styling and subscription services? One of the main hurdles, according to Fosina, will be localizing its efforts to appeal to a U.K. audience, from both creative and logistical ends, which Stitch Fix will be addressing by building a U.K.-specific team to lead the efforts there.

“A localized backend warehouse and fulfillment engine is critical to this model,” Fosina said. “A customer service infrastructure that will be staffed and managed by U.K. employees is also key to the overall level of customer service that has made the brand a hallmark.”

Stitch Fix is confident it can navigate these issues.

“Shoppers in the UK are tech-savvy, educated and informed shoppers, who have demonstrated they’re open to trying new ways of shopping,” Smith said. “We plan to invest locally in UK brands clients already know and love to appeal to traditional shoppers.”

Stitch Fix is taking a risk by entering the U.K. market. Local consumers are clearly open to alternative methods of shopping for fashion, particularly when that involves getting pieces delivered directly to their home. Stitch Fix’s latest earnings showed that audience growth was beginning to stagnate in the U.S., making the U.K. even more appealing. The brand will have to be meticulous about the move across the Atlantic and rely on its proven business model, while ensuring that the service is catered to U.K.-specific concerns.

“When you enter a new market, you have to understand what it is that you are solving for the consumer,” Simons said. “Find out what you can solve for that customer, tap into that need and build a solution to it.”

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