Beyond Shein, the Chinese fast fashion phenomenon

Beyond Shein, the Chinese fast fashion phenomenon

BeijingOffers lure us from TikTok, Instagram or any other social network, the purchase is made online, the prices are very cheap and the product arrives at our door. It has no stores or factories, and in fact it doesn't even have any direct production facilities. But it was a commercial success that enabled it to be sold in more than 150 countries, and its value was estimated at $66 billion by 2023.

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Shen is a company of contrasts and, above all, a company of opacity: it was born in China, but is now based in Singapore and, despite its global success, has never been sold in China. The company is an e-commerce platform that sells clothing and accessories primarily to a young Gen Z audience.

This retail giant champions its successful business model, which is made-to-order production. He is proud that his philosophy is to put the customer at the center of the business and give them what they want. This formula gave him results and within a few years he became one of the major players in the fashion world, in direct competition with Zara, H&M and Uniqlo.

Although it does not officially announce its accounts, it is estimated that it generated revenues of about $23 billion in 2022, according to analytics firm Coresight. This is rapid growth from just over $3 billion in revenue in 2019.

The company's growth skyrocketed during the pandemic years, because isolation led to an increase in online shopping. It has gone from a valuation of $5 billion in 2019 to a valuation of $100 billion in 2022. It has become the third start The most valuable in the world. 2023 was not a good year and its value dropped to $66 billion. Accusations of plagiarism, poor business practices and competition from other companies, such as China's Temu as well, have slowed Shen's growth.

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Its website claims it has 11,000 employees worldwide, more than 5,000 external suppliers and more than 4,600 designers. The most important fact is that it has more than 250 million followers on social media, its sales tool, and more than 88 million active buyers around the world.

The multinational company has chosen to sell to order: it initially produces a small quantity of the product, between 100 and 200 pieces, and then evaluates its acceptability. The technology makes it possible to get real-time information about customers, interact with the app, and identify trends. Its production system is able to provide very fast response to demand. It has its supplier network accepting small sample orders that are scaled up based on sales. It is shipped directly to the consumer within two weeks, and the company confirms that it is done by air. It is a system that avoids paying customs duties in some markets due to the low cost of the product.

Shane explains that he is constantly searching the web for trends and inspiration using AI to deliver what will appeal to his clients. Critics say that, instead of inspiring, he is stealing designs.

Although Zara and H&M also base their success on rotation of clothing items, their model seeks to anticipate trends and produce large quantities of items to reduce costs.

Shein system allows you to get more updates. According to US market data for 2022, while H&M introduced 40,000 new products to the market and Zara 23,000, the Chinese company put 1.5 million products into circulation. It is estimated that Shein adds 2,000 new items to its catalog every day.

Despite the company's official explanations of its profitability, some investigations, such as that of British television Channel 4, have revealed illegal garment manufacturing workshops and excessive labor exploitation.

Despite this, Shein claims that it has no inventory or stores and has been able to optimize production and logistics to reduce costs. Because they sell on demand, they do not generate inventories. Selling directly via the Internet eliminates the fixed expenses of stores. Shein only does promotional actions by opening pop-up stores for a few days. It also reduced advertising costs by focusing on digital marketing and social media. Mainly used Influencers To sell their products to the target audience.

success story

Shen was born in 2008 in Nanjing and was founded by Chris Xu, an entrepreneur specializing in search engine optimization.

At first it was just an online platform offering for sale clothes she bought from fashion wholesalers in Guangdong, the southern province where a large portion of China's textile factories are located.

Legend has it that he bought the surplus from factories and sold them online at very low prices. Over time, he built supplier loyalty by paying them on time, in a sector where late payments were very common. For a while I specialized in wedding dresses.

In 2012, the company took a big step and transformed into a clothing retailer with its own chain of suppliers and designers.

Ten years later, Shen moved its headquarters to Singapore to support international expansion and avoid sanctions and tariff problems for being Chinese.

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Last year, it announced that in addition to selling its own products, it would also market other brands. It has developed into a multi-brand platform in the same line as Aliexpress and Amazon. He also announced the opening of production factories in Türkiye, Brazil and Mexico.

2024 is pending for the start of trading on the New York Stock Exchange. This data shows exactly the company's contradictions. Although it is legally Chinese and does not sell its shares in the country, the IPO is comprehensively supervised by the Beijing government. The Asian giant is concerned about the processing and protection of the data of partners, suppliers and workers, and Shein has the majority of production in China. Beijing wants to control what data the company must disclose to the US regulator.

Overall, Shein hopes to achieve a $90 billion valuation in the IPO (Inditex, the world's biggest monster in the sector, is valued at more than €120 billion).

The dark side

Price, variety and immediacy are the pillars of Shein's success. But the company has also been criticized and accused of violating labor laws, using forced labor and copying designs. The Japanese company Uniqlo was the last to report him, last December, for allegedly stealing a bag. And it's not just big brands, young designers who sell online are also exposed. In the United States, it has chosen to reach agreements with those who dare to denounce it and include it in its catalogue.

The company, which limits contact with the press and does not answer questions, defends itself by stressing that it conducts “regular internal audits” to ensure its suppliers comply with labor legislation and tries to filter out copied designs.

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