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Why Shares of Stitch Fix Fell Wednesday

What happened

Shares of Stitch Fix (NASDAQ: SFIX), a company that delivers personalized online apparel directly to its customers, fell on Wednesday. The stock declined as much as 13.3%, but shares closed the trading day down about 6.7%.

The stock's decline follows Amazon.com's (NASDAQ: AMZN) launch of a new shopping service that recommends items based on consumers' preferences. Though the service is very different from Stitch Fix's personalized apparel service, it's close enough to worry some investors.

So what

Amazon's new service simply asks shoppers to give a thumbs up or thumbs down on products in a particular category, responding with products that the e-commerce giant's machine learning technology believes are close to what the customer is looking for.

Scout doesn't include clothing yet, but the website says the category is coming soon.

For now, Scout is just a test for Amazon, according to CNBC.

A full-fledged personalized shopping experience from Amazon could compete directly with Stitch Fix.

Now what

For now, the overlap between Scout and Stitch Fix seems very minimal. Stitch Fix uses both data science and human judgement to deliver one-to-one personalization to its customers -- a very different value proposition from Scout's offering.

Stitch Fix is seeing strong growth, with 30% year-over-year growth in active clients in its most recent quarter. But this sharp growth is bound to attract more competition.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Stitch Fix. The Motley Fool has a disclosure policy.