Stitch Fix vs. Blue Apron: A Masterclass in eCommerce, Subscription Businesses, the Gig Economy and more...

Assuming you are interested in digital and eCommerce, if you read nothing else this week, I want you to read this article: 'Unboxing Stitch Fix's S-1'.

For those of you unfamiliar with IPOs, an S-1 is the filing used by companies planning on going public to register their securities with the SEC.

Reading an S-1 is like getting a peek into the inner workings of a company.  You can read them to get benchmarks for your marketing spend, growth etc. and also to understand the levels of investment needed to successfully scale a start up.

Ezra's analysis was thorough and at the same time, I found myself wondering what the sentiments were on Blue Apron's S-1 filing. Blue Apron IPOed in June 2017 and its stock has been hammered since.  So, how do Stitch Fix and Blue Apron compare when it comes to the data in their S-1 filings?  The goods they sell are completely different. However, both are subscription businesses which rely on initial customer acquisition costs to be offset by a healthy Life Time Value (LTV) in order to grow.

In this post, I want to do a compare and contrast between the two companies.  The data referenced on each company is a combination of three sources: S-1 filings of both companies (here and here), Ezra's article and a nice analysis of Blue Apron done by Daniel McCarthy on LinkedIn (here).
  1. Unlike Blue Apron, Stitch Fix is extremely cash-efficient when it comes to marketing. In contrast to Blue Apron's 18% of net revenue, Stitch Fix spent only 7.5% of their net revenue on marketing.  I remember hearing about Stitch Fix when a friend of mine raved about it on Facebook and started passing along a code to get $20 off your first fix.  She was the reason I tried it.  I did not become a repeat customer but I know a lot of women who did and the word-of-mouth tactic has worked brilliantly for them. 

  2. Data science advancements can provide a huge tailwind for Stitch Fix to become even more profitable.  As I mentioned, I was one of the earliest customers of Stitch Fix.  My "fix" was just wrong in so many ways.  They sent me a sun dress in the dead of winter, the pricing and styles were off etc.  But I fully expect using data science to predict fits and styles can dramatically improve the customer experience and lower the return rates. And the beauty of this is, once built, the marginal cost associated with doing this for each customer / fix is negligible.

    On the other hand, David estimates 70% of Blue Apron's customers leave before the company has recouped it's CAC. In order to sustain themselves, Blue Apron will need to figure out how to make their marketing dollars work harder, invest in making operational improvements and reduce customer churn - not trivial / inexpensive problems to solve given the low attention span of today's customers.

  3. Last but not the least, let's not lose sight of the big A.  Fueled by the cash influx from its cloud business, Amazon continues to be a threat as it enters any and every market it can get its hands on. Blue Apron felt this first hand.  I am certain Stitch Fix will feel it too.

So, what do we know now? I like a company that is run efficiently and I love that Stitch Fix has built massive scale using very little outside funding.  But, the only thing we know for sure is we don't know how this will go :)


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