The most successful e-commerce brands build for mainstream America, not Silicon Valley

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A venture-backed company not built for venture capitalists is on the verge of an IPO.

Stitch Fix Facebook page

One knock on venture-backed, e-commerce startups over the years is that they are sometimes built around the tastes of venture capitalists and big-city entrepreneurs, and not the vast majority of average Americans who live outside of U.S. technology hubs.

Call it the Silicon Valley blind spot.

In recent years, that blind spot has become a problem for companies like Fab, One Kings Lane and Juicero, each of which raised north of $100 million in investments only to find that their core customer base was much smaller than they had hoped. Not to mention all the on-demand dry-cleaning, car-valet and meal-delivery startups that have flopped.

But the biggest e-commerce IPOs and company sales of the last few years prove that you can succeed by going for mass appeal. And, in fact, that you probably should if you are going to be raising tens of millions of dollars or more at big valuations.

Companies like Dollar Shave ClubChewyZulily and Wayfair have had huge financial outcomes by going after what seems like an obvious customer base: Mainstream America.

Soon you can add Stitch Fix to that list. The online fashion retailer, which operates a personal styling service to hand-pick each customer’s order, has filed to go public on the Nasdaq stock exchange. It will likely command a valuation of $2 billion to $4 billion once it IPOs, on the back of torrid — and mostly profitable — revenue growth.

The San Francisco-based company uses a combination of stylists and data science to select five clothing and accessory items at a time for a customer to try on at home. Stitch Fix charges a $20 “styling fee” upfront, which might be a splurge for some people, but it is deducted from an order total should a customer choose to purchase any of the items in their box.

The clothing selection itself carries prices that are more middle class than 1 percent, though customers can request more or less expensive items as they desire. When the model is at its best, it acts as the personal stylist the average American never could have previously afforded.

Of course, building a business for a mass market customer base does not guarantee any success. Dollar Shave Club, for example, was exceptional at viral marketing; Chewy at customer service; and Stitch Fix at building a unique offering that garnered the kind of phenomenal word-of-mouth promotion that let it keep advertising expenses in check.

There are more in the pipeline: Wish has taken this idea to the next level by targeting value shoppers not only in the U.S. but across the globe. My educated guess is that the company could go public next year.

Other venture-backed companies like Ibotta, Hollar and Tophatter are not the sexiest, but have smartly focused on the mainstream America consumer.

If Stitch Fix’s IPO goes as planned, there will likely be many, many more that follow.

 

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