Stitch Fix Has a Brand Architecture Problem

Stitch Fix’ third quarter 2021 results did not inspire analysts and Wall Street, even though Stitch Fix beat analysts’ expectations. The confidence and stock slides appear to stem from the very cautious and somewhat vague forecast provided by the CEO as described in news reports.?

According to Barron’s and CNBC, the concerns are that Stitch Fix’ Stitch Fix Freestyle brand is not yet a proven viable alternative to online clothing shopping from department stores or branded clothing sites. And, analysts cannot yet see if Stitch Fix Freestyle is an attractive, profitable addition to Stitch Fix. Furthermore, there does not appear to be a coherent strategy for both the Stitch Fix brand and the Stitch Fix Freestyle brand. A Wall Street Journal article indicated that some analysts believe, in general, that the Stitch Fix brand proposition has peaked.

Stitch Fix began as an online, subscription, personal shopping service: anyone could have their own personal shopper to select and organize their wardrobe. A subscribed customer fills out a questionnaire, an algorithm kicks in and then a human “stylist” curates a personalized box of clothing. Once delivered to the customer, the customer can keep (buy) all or some of the clothing or send back what is not wanted. There is a $20 fee for this service. If the customer buys selected clothing items, the $20 fee is applied to the customer’s charge for the items bought.

Recently, Stitch Fix offered subscribers an alternative. Instead of having a “human” personal shopper curating clothing, customers could select their own clothing items from an array created by the algorithm. This is Stitch Fix Freestyle… there is no charge for this service. You pay for what you buy. Stitch Fix Freestyle allows a customer to view a “store” of personalized items and then choose items to buy directly.??

In fourth quarter 2021, Stitch Fix opened the Stitch Fix Freestyle brand to anyone, not just subscribers. Stitch Fix Freestyle is an opportunity for the brand to evolve, attracting new customers preferring to select their own items.

Reporting indicates that some analysts see Stitch Fix as spending more resources against Stitch Fix Freestyle than on its original Stitch Fix offering. This view sees Stitch Fix as veering away from the original subscription model, becoming more like a fashion department store. This alters Stitch Fix Freestyle’s competitive set. Apart from all of the branded clothing lines and department stores, Amazon has put resources behind its clothing and luxury clothing shopping.

(Some large retailers, such as Bloomingdale’s and soon at its sibling Macy’s, have instituted live video shopping hyping the personalization that original Stitch Fix offers.)

Stitch Fix’ earnings report cites problems such as supply chain issues and “learning” around customers’ appetite for the Stitch Fix Freestyle option. The Stitch Fix Freestyle brand has only been open to everyone (not just subscribers) for a short time.?

However, there is something else of concern. Stitch Fix seems to have a branding problem that should be addressed.

What is the Stitch Fix brand corporate brand architecture? Brand architecture is the brand identity approach used to define the relationship of one brand to another in a portfolio.

What is the vision for Stitch Fix? What type of brand is Stitch Fix Freestyle? What are the individual visions for the Stitch Fix and the Stitch Fix Freestyle brands? Or, is there a vision for a Stitch Fix family of brands?

This really matters.?

How you manage your brands is how you manage your business. Brand management is business management and vice versa. Brand architecture provides a framework for job descriptions and assignments, resource allocation, communications, market research, media, brand loyalty and brand power. Brand architecture also helps customers sort out if a particular brand is for them. When there is more than one brand, customers want to know the benefits to expect from each brand. For Stitch Fix, this means what are the benefits that I can expect to receive from Stitch Fix and Stitch Fix Freestyle? Customers do not care about the strategies; they just want to know about the expected experiences.

Stitch Fix needs to address these questions: Is Stitch Fix Freestyle a solo brand? Is Stitch Fix Freestyle a brand extension? Is Stitch Fix corporate creating a family of brands? Have Stitch Fix executives even thought about brand architecture? If Stitch Fix and Stitch Fix Freestyle have the same brand promise, then these are really not two separate brands. Analysts would need to worry about cannibalization.

Right now, based on the reporting, it is unclear as to what the intended, desired brand architecture is at Stitch Fix. The earnings reporting does not help in deciphering the brand enterprise’s brand architecture. Here are some possibilities.

Stitch Fix Freestyle as a Solo Brand

A solo brand approach means that Stitch Fix would have two different brands in the portfolio. Stitch Fix Freestyle would have its own product design and its own relevant differentiated set of benefits (functional, emotional and social). Stitch Fix Freestyle would have its own brand promise. It would function separately from Stitch Fix. Solo branding is an effective and focused brand architecture.?However, a solo brand approach costs more as the brands must be managed and communicated separately. Stitch Fix and Stitch Fix Freestyle would be relevantly differentiated from each other.?

Stitch Fix Freestyle as an Extended Brand

An extended brand has the same brand promise as the main brand. This means that Stitch Fix Freestyle would be a different way of experiencing Stitch Fix. Think about Tide detergent. There are various versions of Tide such as liquid, pods, powder, with bleach alternative, fabric care, with Downy Free fabric care and many more. All are various ways in which to experience the Tide brand experience. A brand extension approach is efficient, flexible and dynamic. A brand extension strengthens the conviction of the brand promise, in this case, the Stitch Fix brand promise. A brand extension also helps to increase customer share for the Stitch Fix brand. Stitch Fix Freestyle would share in the Stitch Fix brand promise. Stitch Fix Freestyle would just be a type of Stitch Fix.

Stitch Fix Freestyle as a brand in the Stitch Fix Family

A family brand architecture is multi-focused. The family approach is when a number of products or services belong to a larger branded group. The parent of the family – Stitch Fix corporate - communicates brand authority: quality, leadership, trust and the area of excellence of the brand family. The offspring brands – Stitch Fix and Stitch Fix Freestyle - distinguish among themselves based on relevant differentiation of their individual brand promises.

Specifically, the Stitch Fix corporate brand expresses the authority (quality, leadership, trust, expertise) of Stitch Fix as a personalized online shopping experience. Then, there is Stitch Fix and Stitch Fix Freestyle. They are offspring brands expressing their own relevance and differentiation. Stitch Fix and Stitch Fix Freestyle gain brand authority by being part of the Stitch Fix family.

It does not matter that the corporate brand has the same name as one of the offspring brands. Ford Motor Company is a good example. There is Ford corporate. There is the Ford brand. The Ford family also includes Lincoln. Lincoln and Ford are relevantly differentiated from each other, but they are both part of the Ford brand family. Electrolux is a corporate brand. There are also Electrolux branded offerings. And, the Electrolux family also includes brands Eureka and Frigidaire, for example.

A family brand approach would give Stitch Fix the opportunity to have Stitch Fix as the uber-parent with two off spring brands: Stitch Fix and Stitch Fix Freestyle.?

Both brands address different marketplaces: one subscription personalization and one direct buying of fashion. There may be different market segments of customers.

Brand architecture is significant because it dictates how resources are allocated. It also provides clarity of brand management. Brand architecture provides a strategic framework.?

Two things that drive negativity among analysts and within Wall Street are ambiguity and uncertainty. The statements about the Stitch Fix brands from the Stitch Fix CEO are unsettled and unsure to say the least. Analysts are worried about Stitch Fix’ forward strategy. Is the plan to focus on Stitch Fix? What will be the relationship between Stitch Fix and Stitch Fix Freestyle? What is the future of this pioneering brand?

Among the strategic plans that need to be articulated is this: Stitch Fix must adopt and manage against a desired brand architecture. Decide now what the brands will be in the future and how the brands will be managed. How you manage your brands is how you manage your business.

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