Online fashion seller Stitch Fix is concerned about Amazon as it marches towards an IPO. But not because of Amazon’s e-commerce dominance.
Stitch Fix, which sends personalized boxes of apparel — or Fixes — to its customers, outsources much of its technology infrastructure to Amazon Web Services. When there’s an outage or slowdown, Stitch Fix’s business and financial results can suffer.
That’s not a hypothetical scenario. In its IPO prospectus filed on Thursday, Stitch Fix said an AWS outage in February caused “disruptions in applications that support our warehouse operations and order fulfillment that caused a temporary slowdown in the number of Fix shipments we were able to make.”
It’s a familiar conundrum across the retail space. Retailers view Amazon as both their greatest existential threat and one of their biggest technology suppliers, with the most sophisticated cloud infrastructure on the planet. Brands that use AWS include Brooks Brothers, Nordstrom, Nike, Under Armour and Lululemon. CNBC reported in August that Target is moving away from AWS amid growing competition with Amazon’s core retail operation.
Stitch Fix doesn’t name Amazon or any other company as a competitor. Rather, the company says generically in the filing that it competes with “department stores, specialty retailers, discount chains, independent retail stores, the online offerings of these traditional retail competitors and eCommerce companies.”
A lot of venture money has poured into e-commerce start-ups in recent years, but those companies rarely go public. The best outcomes have been through acquisition, such as Wal-Mart’s purchase of Jet.com and Unilever’s purchase of Dollar Shave Club.
Stitch Fix is unique in that it’s big and profitable. Net revenue climbed 34 percent in fiscal 2017 to $977.1 million, and the company recorded an operating income of $31.6 million.
Stitch Fix touts its data science and ability to use algorithms to determine what customers will like based on their measurements, past preferences and what’s popular with others they resemble.
Still, any company that’s shipping clothing has to fend off Amazon.
For Stitch Fix, that’s increasingly the case. In June, Amazon announced launched Prime Wardrobe, which lets customers order a box of clothes and jewelry and return what they don’t want to keep. That means the company has at least two reasons to worry about Amazon.