A selection of men’s clothing packaged by the Trunk Club, which closed earlier this year after Nordstrom bought the stylist service in 2014.
Source: Trunk Club
After receiving his master’s degree a decade ago, David Hale wanted to improve his personal style and sign up for the Trunk Club, which promised to mail boxes of tailored clothing as often as he liked.
Hill would visit the company’s showroom in Chicago to meet the fashion designer and choose clothes he could wear to the office or for special occasions. The designer helped him design a custom suit and sent handwritten notes to check how much he liked his clothes, turning Hill into a loyal customer.
then covid-19 pandemic He hits.
“At first, they were trying to tell me to buy sweatpants and track pants,” he said.
But Hill, 41, no longer needed new clothes because he was working from home and barely went out, and he canceled his subscription.
Not too long ago, major retailers were scrambling to get into the subscription frenzy sweeping the apparel industry. But then the pandemic upended daily routines and made shopping behaviors less predictable. Now, some analysts and investors are skeptical about the attractiveness of these types of companies and their ability to hold onto clients, who often sign up during a major life change but eventually lose interest.
After acquiring Trunk Club in 2014, Nordstrom It announced in May that it was quitting work and focusing on in-house personal design services. The Rockets of Awesome game, which specializes in children’s clothing boxes, has begun Falling in financing early this year She was also looking for a buyer. stitch repairOne of the most popular services in the space, it was gaining traction in the years before the pandemic but is now losing money and subscribers.
The subscription business model has been attractive to apparel companies because it provides a predictable revenue stream based on regular membership fees. But companies realize that taking profits out of the rules of the game is more difficult than they thought.
fading interest
Stitch Fix’s difficulty making profits during the Covid-19 pandemic underscores how difficult it can be to run a subscription-based business, especially when consumer tastes are a moving target.
The company charges a design fee of $20 when a customer begins the design process with boxes of clothing called “fixes” they might like. The funds can later be applied to items that customers decide to keep out of the box, which can be delivered every two weeks, every month, every two months, or every three months.
People often sign up for subscription services when they’re excited about a big change, like starting a new job, losing a lot of weight or becoming pregnant, said Edward Yerma, managing director and senior research analyst covering the retail industry at Paper Sandler. But he said the excitement often wears off, making it difficult for companies to hold on to customers.
According to analytics firm M Science, new customers account for a dominant share of sales at Stitch Fix, but their spending generally declines over time. The company found that nearly 40% of Stitch Fix’s revenue has been generated by new customers since the first quarter of fiscal 2020.
“It definitely appears to be box fatigue,” Yerma said.
Over time, he notes, companies are also realizing the flaws of the subscription business model, “People give back a lot of things with these funds, and you can’t make enough profit from that.”
David Bellinger, CEO at MKM Partners, said he believes Stitch Fix’s number of active customers peaked in the August-October quarter, when the company reported a record 4.18 million active customers.
“This puts into question the possibility of long-term membership,” Bellinger said, noting that inflation and other macroeconomic challenges could lead to more cancellations.
In the company’s last quarter ended April 30, Stitch Fix said it lost 200,000 active customers, bringing its total to 3.9 million. And its net loss ballooned to $78 million, from $18.8 million a year earlier. The company announced the layoff of 15% of its paid workers, or about 330 people.
To Attract New Clients, Stitch Fix It expanded its “Freestyle” option last fall It allows shoppers to purchase individual items from their website without signing up for a plan or paying a design fee. But the company is still trying to make sure people know the option exists.
“We are in the midst of a transformation and we don’t know that every day or every moment is going to be easy,” said Elizabeth Spaulding, CEO of Stitch Fix, who He took over from founder Katrina Lake in August 2021wrote in it Note to employees in June.
A spokeswoman for Stitch Fix said it avoids describing itself as a subscription company because it allows customers to set the rhythm in which they receive boxes of clothes.
in November 2017 When it went public, Stitch Fix had a market valuation of more than $1.6 billion. Its market value is now less than $800 million.
The company’s push for profit comes as consumers say they are trying to cut back on their spending on subscription plans in general, According to a survey by KearneyConsulting firm.
The company found earlier this year that 40% of consumers think they have too many subscriptions. People reported spending the most on streaming plans, followed by music and video subscriptions, games, food memberships, and drink boxes. Shopping subscriptions, which include fashion, followed those categories.
variable consumer
Sonia Labinski, managing director of AlixPartners’ retail practice, said the subscription business model needs a major reset after the pandemic. She said companies also need to better keep up with evolving shopping behaviours.
“Not only are they different than they were in the pre-pandemic period, they are changing all the time,” she said of consumers.
Tara Novelis, a teacher who lives in Orange County, California, is among loyal Stitch Fix clients who have since dropped the service. Feeling pressured by time, Novelich signed up for the service in 2012 and said she had purchased at least one item from her monthly “Fixes” fund for about 18 months.
But then she said the quality of clothing and service had begun to “regress” and that shipments were too frequent.
“I’m not excited anymore,” said Novelich, now 46.
Recently, she’s been enjoying her FabFitFun subscription, which sends customers a selection of seasonal beauty items, jewelry, and accessories. Novelich gets shipments four times a year.
In other cases, subscriptions may seem like overkill.
The 35-year-old advertising manager, who asked not to use her name to protect her job, became a part-time designer and client for Stitch Fix in 2016. But during the pandemic, she quit working at Stitch Fix to focus on a full-time job and started shopping from Trunk Club, which She said it offers better quality. In the end, that became too expensive.
“I can never afford most of it because it would be $600 to $1,000 a month,” she said.
Now, she mostly works from home and buys most of her clothes Amazon, which offers a “try now, buy later” option. She also recently shopped the “Freestyle” section of Stitch Fix.
Hill, a marketing director who now lives in New Jersey, has not gone back to shopping via a subscription plan and instead picks out his own clothes at nearby Nordstrom. He remembers the days he was visiting one of the physical locations of the Trunk Club, and the time he and his wife were greeted with champagne.
“Obviously, this model was not sustainable,” Hill said.
“Unapologetic reader. Social media maven. Beer lover. Food fanatic. Zombie advocate. Bacon aficionado. Web practitioner.”
More Stories
Why did you ignore the oil markets when Iran and Israel appeared on the brink of war?
Volkswagen workers in Tennessee vote to join the UAW in a historic win for the union
Netflix stock falls on disappointing revenue forecasts, move to scrap membership metrics