Stitch Fix CEO On The Company's Direct-To-Consumer Business Model For Apparel

Online fashion subscription company Stitch Fix Inc SFIX is on a mission to solve "the paradox of choice" by leveraging technology to figure out what is right for each customer, CEO Katrina Lake told CNBC's Jim Cramer.

Stitch Fix's Process 

Stitch Fix sends customers clothes on a monthly basis while attempting to eliminate a major headache of not only selecting clothes they like, but getting the size right, Lake said Wednesday in a "Mad Money" interview.

Stitch Fix uses data science to better understand each customer's unique preferences to better find clothes they love.

Stitch Fix also adds a human element to the process through stylists and fashion experts, the CEO said. Thousands of stylists use the technological tools available to emphasize a dynamic relationship. This powers the company's ability to know in advance what pair of jeans will work best for a customer.

Stitch Fix's direct-to-consumer business model in apparel implies revenue per customer would be a good metric for investors to look at, Lake said. The company has seen this metric expand over the past six quarters, she said. 

Stitch Fix Targets 'Paradox Of Choice' 

Stitch Fix has been profitable since 2014 and spent the past few years reinvesting profit back into the business, Lake said.

This allowed the company to expand its product offerings and enter new categories like "direct buy" for women's clothes, she said. 

Customers can view curated and personalized items to avoid this "paradox of choice," the CEO said.

Stitch Fix could be insulated from the competition, as major department stores and mall-based retailers are likely unable to copy Stitch Fix's business model, Lake said. 

The stock was 2.29% higher at $25.22 at the close Thursday. 

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Photo courtesy of Stitch Fix.