Snap Acquires Fit Analytics: Expanding into Fashion & E-commerce

Snap Inc. Expands into E-commerce with Fit Analytics Acquisition

Snap Inc. defines itself as a camera company on its official website. While the company has primarily focused on leveraging its camera technology for social sharing through its flagship application, Snapchat, it has now strategically expanded its reach through an acquisition aimed at bolstering its presence in the realm of fashion, e-commerce, and online shopping.

Acquisition of Fit Analytics

Snap has officially announced the acquisition of Fit Analytics, a Berlin-based startup specializing in technology designed to assist online shoppers in determining the correct size for apparel and footwear. The company also provides a suite of personalization tools and analytical capabilities to help retailers enhance their sales performance.

Existing Retail Partnerships

Fit Analytics currently collaborates with a significant number of prominent retailers. These include well-known brands such as North Face, Asos, Calvin Klein, Patagonia, and Puma, totaling over 18,000 retail partners.

Expanding Snap’s Technological Capabilities

This acquisition brings more than just a technology team to Snap. The 100 employees of Fit Analytics, located in Berlin, will report to Nima Khajehnouri, Snap’s VP of Engineering. It also incorporates a substantial e-commerce technology business into Snap’s overall portfolio.

Continued Operation of Fit Analytics

Fit Analytics will continue to operate its existing business while simultaneously contributing to the development of Snap’s shopping platform.

How Fit Analytics’ Technology Works

The core technology offered by Fit Analytics allows customers to input their personal measurements. This data is then processed using machine learning algorithms to identify the optimal fit for specific clothing items or shoes.

Image-Based Fitting Technology

Beyond size recommendations, Fit Analytics has also developed technology that utilizes customer-uploaded images to suggest clothing matches. This capability aligns with Snap’s emphasis on visual experiences, user-generated content, and augmented reality features like lenses, which allow users to virtually try on different looks.

Deal Terms and Funding

The financial details of the acquisition have not been publicly disclosed. According to PitchBook data, Fit Analytics, formerly known as UpCload (and initially launched in 2011 at a TC Disrupt event in Beijing), had previously raised less than $1 million in funding. However, its extensive client list suggests significant revenue generation.

Key Takeaway: This acquisition positions Snap to capitalize on the growing e-commerce market and enhance the shopping experience for its users.

The Strategic Implications of Snap’s Fit Analytics Acquisition

Snap’s recent acquisition of Fit Analytics represents a multifaceted strategic maneuver for the social media platform.

Primarily, this move allows Snap to broaden its revenue streams. Currently generating approximately $1 billion quarterly – with $911 million reported in Q4 earnings – the company largely relies on advertising revenue from Snapchat. Diversification is therefore a natural progression.

Regardless of whether Fit Analytics is directly integrated into Snapchat, or how evolving mobile platform monetization policies from Apple and Google impact app revenue, Fit Analytics already generates considerable income through its e-commerce solutions for retailers.

The shift towards online shopping accelerated by the Covid-19 pandemic likely increased demand for services like those offered by Fit Analytics, and these revenues will now contribute to Snap’s financial performance.

Existing Relationships with Fashion and Beauty Brands

Snap’s existing advertising performance demonstrates a strong connection with brands in the fashion and beauty sectors.

The Q4 earnings report highlighted augmented reality campaigns with both NYX Professional Makeup and Ralph Lauren. Furthermore, a partnership with Perfect Corp enabled 200 beauty brands to upload product catalogs to the Snap Camera for virtual try-on experiences.

Fit Analytics will serve to strengthen these relationships, providing Snap with an expanded suite of features to offer its clientele. Users might initially engage with an AR filter to visualize themselves in a Ralph Lauren sweater, then seamlessly proceed to purchase the item.

Targeting a Key Demographic

Beyond revenue diversification, the acquisition signals a broadening of the features Snap provides to its user base.

While Snap has not yet detailed its integration plans for Fit Analytics’ tools, it’s significant that Snapchat’s primary audience – teenagers and young adults – also represents a crucial demographic for fashion retailers.

Research from Piper Sandler indicates that clothing, fashion accessories, and footwear accounted for 33% of US teenagers’ spending in Fall 2020, exceeding expenditures on video games, music, and food.

Piper Sandler’s data further reveals that 40% of teen spending is allocated to “How I Look” – often referred to as the “Selfie Budget” – directly aligning with the capabilities that Fit Analytics provides.

Navigating the Competitive Landscape

It’s worth noting that Piper Sandler’s research identifies Amazon as the dominant fashion shopping destination for teenagers, highlighting the fragmented nature of the direct-to-consumer (D2C) market.

This presents a unique opportunity for Snap, through Snapchat, to establish itself as an alternative shopping channel for D2C brands, capitalizing on the momentum of Instagram’s growing influence in social commerce.

Addressing the “Missing Link” in Online Fashion

At its core, Fit Analytics’ technology addresses a key challenge in fashion e-commerce.

Online shopping offers numerous advantages, including 24/7 accessibility, a wider product selection, personalized experiences, and flexible delivery options.

However, the primary disadvantage has historically been the lack of physical interaction with products.

Specifically, the inability to try on clothing and shoes contributes to high return rates. Fit Analytics is among the companies developing solutions to bridge this gap, alongside those offering virtual visualizations of clothing on individuals.

Amazon has also invested heavily in this area, acquiring companies like Body Labs and launching services such as Prime Wardrobe, which facilitates try-on and return options. Technology is demonstrably aiding Amazon’s success in the fashion commerce sector.

Snap’s Acquisition Strategy and Future Outlook

To date, Snap has completed approximately 20 acquisitions, focusing on advertising technology, location-based services, AI and augmented reality development, and music-related ventures.

Fit Analytics marks Snap’s first acquisition specifically centered on shopping and e-commerce, with a particular emphasis on fashion. Should Snap’s interest in this domain continue to expand, further acquisitions in this area are likely.