Stitch Fix is a data-driven mail subscription service that combines e-commerce with the human touch of a personal stylist. / Credit: StitchFix.com

When Katrina Lake applied to Harvard's MBA program, she wrote her application essay about an entrepreneurial aspiration she had: to create a business that applied data and recommendation algorithms to the retail shopping experience. During her second year of business school in late 2010, Lake began testing that idea by having friends fill out style-preference surveys and picking out clothes for them based on their answers. This one-person, low-budget operation would go on to become Stitch Fix, the mail subscription service that combines high-tech analytics and personal stylists to send women clothes they'll love.

For all the complicated algorithms the company uses, the way Stitch Fix works is actually quite simple. Women who sign up for the service are asked to fill out a style profile that includes their clothing sizes, favorite styles, fit preferences, price range and some aspects of their personal lifestyle. Each client is then assigned a personal stylist, who uses the self-reported data to add a "human touch" to the clothing-selection process. When a client receives her "fix" (five pieces of apparel and accessories) in the mail, she has three days to try on each of the items and decide what she wants to keep and what she wants to send back. When she checks out, the client rates each item and can tell her stylist why she liked or didn't like it. The result is a data-driven service that combines the best aspects of traditional retail shopping and e-commerce into a highly personalized fashion experience.

Sample of Stitch Fix profile questions Credit: StitchFix.com

"The dynamics for women have really changed," said Lake, who serves as Stitch Fix's CEO. "More and more, they're primary income earners and expected to have a job, take care of the kids and look cute while doing it. Stitch Fix is the marriage of the convenience of shopping online with the elements of brick-and-mortar shopping that people enjoy."

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Stitch Fix has come a long way since the days when Lake was running around purchasing and returning clothes from retail stores and boutiques. Over the last two years, her startup has shipped more than 100,000 fixes and has expanded from 16 employees in August 2012 to 145 today, one of whom is the former vice president of data science and engineering for Netflix. The San Francisco-based company is even on track to become the fastest-growing e-commerce company of 2013. But like many startups, Stitch Fix had a few growing pains in the beginning.

"The first year was just about proving that this works," Lake told BusinessNewsDaily. "Are women OK with things showing up at their door that they didn't pick out? Do the economics work? Will we make money? We were very focused on collecting the right data and feedback, and we stayed true to everything we needed to do to grow and scale the business."

And scale it, they did. Since last summer, Lake and her team have increased the number of monthly fixes they send out by more than tenfold, with nearly 65 percent sent to repeat clients (including this writer). The data collected helps to improve each subsequent fix for both subscribers, who receive more of the clothes they want, and clothing vendors, who can learn what they're doing wrong or right thanks to direct insights from customers.

For much of Stitch Fix's existence thus far, traditional marketing hasn't been a part of its strategy, Lake said. Although the company was featured on "The Wendy Williams Show" earlier this year and has begun to incorporate email marketing and public relations campaigns, word of mouth has been the biggest help in raising awareness about Stitch Fix.

"We're featured on dozens of blogs a week," Lake said. "The PR campaigns and exposure have helped because people have already heard of us."

Lake has found that her startup's success has been due, in large part, to her team, and advises fellow entrepreneurs to hire people who can grow with the company.

"Investing in good people is unbelievably critical," she said. "No matter how amazing of an idea you have, you can't do everything yourself. You need a team early on that can grow at a pace that you need them to grow."