Explaining the meteoric rise of fast fashion giant Shein – Pandaily
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Shein, a China-based apparel company founded in 2008, has taken the global fast fashion industry by storm in recent years, having recently completed a funding round that earned it a whopping $100 billion valuation. . It is now worth more than industry heavyweights Zara and H&M combined, as well as one of the world’s most valuable private companies.
The fast-growing company has been the focus of much attention so far this year, after it reportedly relaunched plans to go public in New York this year – those intentions were later scrapped when the Russia’s invasion of Ukraine spooked global financial markets. It was also reported that it was moving major operations to Singapore as part of wider international expansion efforts. The company has also become a hot topic this week, after it was accused of stealing Zara’s designs.
Nanjing-based Shein has had tremendous success with its business-to-consumer (B2C) model that focuses on smart digital marketing to Gen Z consumers, low prices and rapid new product design. Shein has now grown to oversee a massive global operation, with the United States representing its biggest market.
James Liang, founding partner of Skyline Ventures and former employee of investor Shein Sequoia China, argued in a recent Pandaily article that Shein’s main competitive advantage in the global fast fashion e-commerce “lies in its ability to of digitization rather than in its labor costs”.
“The main reason for Shein’s success is that, relying on the advantages of China’s apparel supply chain, it seized the traffic dividend at a stage a few years ago where the cost of overseas traffic- mer was not high, while sacrificing gross profit and performing quality control,” Liang said in further comments to Pandaily.
Bloomberg reported (paywall) that the surge in international sales made by Shein in recent years is largely due to the ripple effects of the trade war unleashed against China by former US President Donald Trump. Under these conditions, the company would avoid paying export and import taxes in the case of the United States. This makes it one of many Chinese retailers to have benefited indirectly from the growing economic pressure between the two countries.
Shein has become very adept at researching the latest fashion trends in various local markets around the world, using algorithms to scour social media feeds and content posted by internet influencers.
The low cost of its products – most women’s shirts retail for between $5 and $15 – makes the brand particularly appealing to young consumers, who tend to buy several items of clothing at once. Every week, Shein uploads hundreds of new products, encouraging its dedicated customers to return to the site frequently.
Although Shein is a clothing company, its success is a product of the internet age. The company’s founder and CEO, Chris Xu, has infused the company with the drive and ambition of a tech startup, harnessing digital tools to give it an edge over its competitors. Its history resembles that of Genki Forest, a Chinese beverage company that pursued a consumer-driven digital strategy to become an industry giant.
Xu, who specializes in digital marketing and search engine optimization (SEO), helped the company perfect its products for an increasingly online-savvy consumer base.
Much of the company’s marketing is done for free by young social media users. The #sheinhaul hashtag on TikTok, which has garnered over 5 billion views on the platform, has been used by young influencers to show off their latest fashion purchases to their followers, helping explain why the company has been so successful in various international markets over the past few years.
SEE MORE: SHEIN seeks $10 billion in funding for $100 billion valuation
Fast fashion had become a controversial industry long before Shein came onto the scene, and the company received its fair share of criticism, including allegations of excessive extra working conditions at warehouses in the southern province of Guangdong in China.
Original product design has been a key factor in Shein’s success, as it enables the company to consistently produce countless new and fashionable products. But it has also been a source of consternation, as independent designers have frequently called out Shein for copying their products and selling them at low prices.
Despite these concerns, investors and market analysts remain optimistic about the future prospects of this growing private company. “The global layout of its supply chains and markets gives Shein the opportunity to become a truly global company,” Liang said. “Personally, I’m still very optimistic about Shein – there’s still room.”