In May 2021 and again in January 2022, downloads of the Shein app surpassed those of international e-commerce giant Amazon, according to Chinese daily BJ News. While, Reuters reports estimated that the company could have generated around 100 billion Chinese yuan renminbi ($15.7 billion) in revenue in 2021 as the Covid-19 pandemic shifted global consumption online.
In December 2021, Shein’s secret founder Xu Yangtian (also known as Chris Yu) visited Brazil to inspect the Brazilian clothing supply chain to speed up the localization process in the fifth most populous country. in the world and the world’s fifth-largest cotton producer, said Chinese online news service 36kr.
Understanding the Shein Business Model
Not all of this news is confirmed by Shein, but the company’s hugely successful business model has been thoroughly researched, with observers such as Mark Greeven, professor of innovation and strategy at the business school. IMD of Lausanne, Switzerland, and the co-author of the just-published book ‘The Future of Global Retail: Learning from China’s Retail Revolution‘, noting that around 1,000 new items are listed on the Shein platform every day. The book also explains that Shein’s delivery time is usually less than eight days. The company starts selling a line by placing very small orders (usually 100 to 200 pieces), and immediately comes back with new orders if the sales trend is good or suspends production if the sales figures do not meet the expectations.
To engage consumers with its apparel, Shein deploys a comprehensive marketing strategy that combines social media, user-generated content, search engine optimization, short videos, and live streaming. On Instagram, YouTube, Facebook and other platforms, influencers and key customers in Europe, the United States and elsewhere flaunt Shein’s swimwear, skirts, trinkets and casual wear, getting these products for free by as compensation.
Shein’s prices are very low with the retailer’s official website listing t-shirts, pants and dresses for $3, $7 and $13 respectively, which is often 50% or less than the cost of similar products from Shein. ‘other big fast fashion brands like Inditex. Zara.
To maintain its attractive fashion proposition, Shein has launched several projects in 2021 that aim to attract young designers, such as “SHEIN X Designers”. program. According to Shein, nearly 1,500 designers and artists participated in “SHEIN X” in 2021. One example involves eight students from Santa Ana College (SAC), California, participating in a fashion illustration class on how to draw clothes in Adobe Illustrator. A final project required a four-piece collection with the option to submit work to SHEIN X and connect students with Shein’s product development team to participate in a sample approval process and finally see their creations become products that consumers could buy online.
From Trump tariffs to mobile ordering: Shein’s secrets to success
Shein hadn’t responded to Just Style before this article was published, but apparel industry experts outside the company were happy to share their thoughts on the secrets to his success, including the fact that he has an innovative supply chain model that escapes the tariffs introduced by Donald. Trump and mobile ordering.
“One of the keys to Shein’s success is that she has been able to seize the opportunities presented by the trade war between the United States and China. The increased tariffs have significantly affected China’s bulk apparel exports to the benefit of Shein’s business model of using express delivery to ship products from its warehouse in China directly to US consumers,” explained Fan Di, a professor at Institute of Textiles, Hong Kong Polytechnic University. and Clothing.
“These packages are tax-free if they are worth less than $800, allowing Shein to keep prices low when competitors faced higher operating costs due to the trade war,” a- he added.
The other strength of Shein is that it has a revolutionary supplier management system which results in providing a wide range of product assortments at rapid speed. The company’s speed of execution is due to the hundreds of suppliers it uses in the Pearl River Delta region of China’s Guangdong province.
The scale looks set to increase further, as the Guangzhou Municipal Development and Reform Commission indicated in February when it released a “Guangzhou 2020 Key Project Plan”. review which included a Shein Bay area supply chain headquarters project with a total investment of 15 billion yuan ($2.36 billion) and a total construction area of about 3.3 million square meters.
“These suppliers are skillful because they have been supplying foreign brands for a long time, so they are able to turn designs into products quickly,” Fan explained.
“In addition, the manufacturing infrastructure in this area is complete: fabrics and accessories can be easily purchased in the region, while the well-developed transportation network can reduce the transit time of goods,” he said. he adds.
Fan pointed out that since Shein’s suppliers are usually small, they might not have an enterprise resource planning (ERP) system that Shein could connect to for automated mutual order processing. To overcome the resulting communication and coordination complexities, Shein has developed a range of web/mobile systems for these vendors to manage inventory, process orders and payments.
“A manufacturer who wishes to become a Shein supplier can apply through a website called zhaoshang.sheincorp.cn. Shein creates an account for the supplier and trains them to use the system, then suppliers who finish production early are rewarded, which speeds up overall product delivery,” Fan said.
“It is not easy to replicate Shein’s business model as it requires a strong supply base and superior supplier management technique, but every fashion company can learn from its operations in terms of managing global business risks. and supplier integration to build competitive advantage,” he added.
What’s next for Shein?
Meanwhile, Greeven predicted Shein’s future moves. He noted that from the company’s initial focus on women’s apparel, Shein has expanded into men’s and children’s apparel as well as footwear, accessories, bags, home furnishings and beauty products. . The company paves the way for many top internet companies, including Amazon, China’s JD.com and Meituan, all of which have expanded their respective product lines over time.
“Usually answering the question ‘what happens next?’ and ‘where will the growth come from’, they can either dig deeper into fashion, expand into other markets, or branch out into a more horizontal e-commerce model,” Greeven told Just Style.
One issue that could be a future goal for Shein, he suggested, is to focus on its reputation and ESG (environment, social and governance) efforts: connection to its supply chain network, but those capabilities technology help it better manage its talent and staff and should it do more in terms of recycling and upcycling? he asked, noting, “After all, that’s what an ever-widening consumer base expects.”
This article originally appeared in Just Style.
