Artificial Intelligence: Stitch Fix - A Blue Ocean Retailer in the AI World

Retail had always fascinated Katrina Lake, the youngest woman CEO to ever lead a US initial public offering. But she couldn’t help noticing that the age-old industry never changed. Brick-and-mortar retailers still competed on variety and touch-and-feel, while online competitors sought to differentiate through low prices and fast shipping. She realized that artificial intelligence and human beings -- in particular, stylists -- could be creatively leveraged to change the retail value proposition, create a fundamentally different and significantly superior buyer experience, and a differentiated and low-cost offering. The case describes how Lake turned a Harvard Business School class project into a $1.5 billion company, Stitch Fix. Stitch Fix provides a personal styling service, sending individually selected clothing and accessories based on customer preferences and constraints. Buyers receive the knowledge, creativity and style expertise of human stylists, combined with the benefits a top-tier AI provides. These are blended into a service previously reserved for the wealthy (personal styling), delivered directly to customers’ homes, at a price point that fits their budget. Lake’s Stitch Fix is founded and led by women, and has one of the largest female management and workforces in the AI space, if not almost all industries. As of 2019, Stitch Fix employs more than 6,600 employees, of which 86% are women. The case works especially well for teaching about women in business. It also looks at recent attempts by Amazon to jump into the blue ocean Stitch Fix created. This leads to an interesting discussion about the likely impact of Amazon’s Personal Shopper service, inviting student input on how to counter Amazon’s attack.

In this case students learn: • How Lake overcame extreme investor reluctance to raise funds from early-stage investors and venture capitalists who didn’t buy into her concept, with an open discussion on how she might have more effectively worked through these issues and the role gender might have played in her very difficult journey to raise funds. • How Lake unlocked a differentiated and low-cost offering leveraging both the latest artificial intelligence and the brilliance and creativity of human beings, namely stylists, to open new market space in retail. This case is among the first to explore how an organization can successfully leverage both AI and human personal interaction to create a fundamentally new offering. • How to think beyond the boundaries of an existing industry, break out of bloody competition, and create a new market space.