SidThacker: Are you talking about a rejoiner essentially. I mean we’re acquiring all of our customers, whether it’s a new customer, rejoining customer, essentially on a very similar set of promotions. So it’s affecting the entirety of the subscriber acquisition that we have.
Unidentified Analyst: Okay. That makes sense. Thanks so much.
Operator: Thank you. Next question today is coming from Dana Telsey from Telsey Advisory Group. Your line is now live.
Dana Telsey: Hi. Good morning, everyone. Given the in-stock position and the improvement that’s expected in the back half of the year, particularly in the fourth quarter, what are you seeing from your existing customers, the cohort of your best customers? And how are they impacted by this? And have you seen any update on churn? And lastly, as you think about the categories, what categories are performing? And is the in-stock shortage across all categories? Thank you.
Jennifer Hyman: Yes. So we continue to see strong loyalty rates amongst our more tenured subscribers. We – across the Board, don’t think the depths were high enough in any category. And we’re being really, I think, smart about how we increase our depth strategy where it’s not a one-size-fits-all strategy. We do think across the Board, we should have less breadth and more depth, but we’re also taking into account the most important brands that provide the most value to our customers, the most important categories that provide the most value to our customers and we’re going even deeper there. So in terms of something that we are excited about in terms of the category, we’re seeing an increase in return to work. Workwear was – is now currently as strong as it was in 2019, which is a great thing for our business because it’s obviously something that people do five days a week.
Dana Telsey: And then just following up with the in-stock position, why – was it more a macro situation with the brand? Was it more your planning? What led to the shortage of the in-stock position?
Jennifer Hyman: I think that 2022 was the full year – was the first year that we had these fixed swap programs in ”a more normalized environment”, where people were leaving their homes, right? And that’s when we started to kind of really have a new set of inventory metrics that we were using to evaluate our business and in stock became very important. That’s why we set inventory availability as one of our most important strategic pillars for this year. So we had already implemented an in-stock strategy at the end of ’22. But given the six-month fashion buying cycle, it wasn’t going to take effect until the buys that we’re now receiving in Q3 and Q4. So we knew that in stock was critically important. We increased depth 1.7x in the second half of the year versus the first half.
We made those decisions in 2022 to do that. So we knew that it was going to be really important to get that in-stock rate out based on all of the work and all the analysis that we had done in 2022. What we learned in Q2 was that we should have gone even further. And we could go even further. And that’s what we’re doing for 2024. So we think that we’re going to see even more, we’re going to start to see positive impact as it relates to the end of Q3 and Q4, but we’re going to see the lion’s share of that positive impact into 2024.
Dana Telsey: Thank you.
Operator: Thank you. Next question is coming from Eric Sheridan from Goldman Sachs. Your line is now live.
Eric Sheridan: Thanks. Maybe just one. As you move from this inventory strategy from breadth to depth, how should we think about product segmentation or product messaging to make sure that the idea of inventory depth results in the subscriber acquisition, you’re looking for the other side of the inventory issue. So sort of incoming users understand that maybe the inventory level is lined up with expectations coming in. Could that result in new product iteration, product segmentation? Or is it really just an element of executing on the inventory depth and then turning on the subscriber acquisition dynamic again and then getting back to more normalized levels of growth? Thanks so much.
Jennifer Hyman: So the – having styles that are more in-depth really the biggest impact is on whether customers in early terms stay with you as opposed to whether they come in the first place. So why? When you’re a prospect to run around what you’re signing up the subscription, you’re looking at the full catalog of everything that we have in inventory. Then you sign up for a subscription and you’re seeing what is available today. And you don’t understand that, that availability is changing on a day-to-day basis. So the higher our depths are the more likely you’re going to be to see those styles that you fell in love with when you were a prospect to see that they’re available today after you’ve signed up. So we have data that shows that it’s going to have a quite positive impact on our early term subscribers, and that’s what we believe.
And we’re being, I think, prudent around when it’s going to start to take effect based on when we’re receiving the inventory and when it’s going to be more felt in our inventory base. So it’s not related to acquisition, it’s something that is related to retention.
SidThacker: And I think ultimately, what we’ve always said and what we always know about our business is that 80% of customers come organically, 60% of customers come because somebody else that is a current customer tells them about us. So I think the single most important thing we can do to improve and turn on effectively the acquisition side is to focus very clearly on providing those customers with a great experience because then they will go out and become our best advocates and bring new customers in. So I think improving the experience has just always been very fundamental to how we grow. And yes, I mean, of course, we also are doing in addition to buying additional debts and so on between consolidating low debt items between reorders, merchandising package.
There a lot of other things that we’re doing to improve in stock. But I think clearly, the results of that in stock will itself drive what we think will be significant awareness of the better experience that we’re providing on the acquisition side.
Eric Sheridan: Thank you.
Operator: Thank you. We reach the end of our question-and-answer session. I’d like to turn the floor back over for any further or closing comments.
Jennifer Hyman: Thanks for joining us today and looking forward to chatting more in the weeks to come.
Sid Thacker: Thank you.
Operator: Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
