Shein, Secrets of Chinese Fast Fashion Brand’s Global Success 

Written By B. Ellie Jin

In the global fashion business world, it is typical that brands from economically advanced economies expand to less advanced countries leveraging their competitive advantages and country image. Many global fashion brands such as Gucci, Uniqlo and Zara are the examples. Opposite to this, a couple of brands from newly industrialized economies are making a success in the global marketplaces. Shein from China and Farm Rio from Brazil are such cases. In this article, Shein’s secrets to its meteoric rise are examined. Farm Rio will be discussed in the next article.

Shein is a Chinese fast fashion brand founded in 2012. The born digital brand sells in more than 150 countries mainly through its website shein.com. In merely a decade, its annual revenue soared making nearly $22.7 billion in 2022 (Mills, 2023) and is projected to be more than double to reach nearly $60 billion by 2025. This figure will be greater than the combined annual sales of H & M and Inditex (a company that owns Zara). The $22.7 billion annual sales itself is impressive given that the annual revenue of entire VF corporation that owns 12 brands was $11.8 billion in the same year.  Even more notable is that Shein achieved the number without owning any offline stores and in the midst of backlash toward fast fashion brands unsustainable to environment. Shein aims to launch an initial public offering (IPO) on the U.S. stock market in 2023. 

When a brand achieves that level of success, there should be reasons behind it. First of all, it offers the latest fashion at ultra-low prices, which strategy appears no different from existing fast fashion brands such as H & M and Zara. Yet, the price and number of styles Shein offers are incomparable. The cheapest dresses can be $3 and Shein adds more than 314, 877 styles to its website every day, compared to Zara’s 6,849, and H & M’s 4,144 (Lieber & Chen, 2022). Then you may wonder how that is possible.  The real secret is AI-driven supply chain. Shein’s design process is tech-driven  – AI algorithm analyzes target consumer’s taste – and production is done in Guangzhou, China. This means that when H & M sources globally scattered all around the globe and dispatches its goods to different countries, Shein produces in China and shipping to the global consumers right there, which saves time to market and cost. Shein is also actively utilizing social media as its biggest marketing tool with influencers. Shein recently opened its first offline store in November 2022 in Japan and two pop-up stores in New York and Dallas, which made a huge return. 

Shein is not without criticism. In October 2022, Shein was alleged for labor exploitation in two of its suppliers in China (Liu, 2022). Workers at two suppliers worked longer hours than permitted under local rules.

Nonetheless, what can we learn from this success? We will need to pay attention to three keywords – born-digital, AI-driven design, and social media marketing – the same traits that many successful U.S. startups have. On top of that, production in China allows Shein to be nimble and ultra-cheap. This all means that brands from developing countries, especially at the mass brands level, can achieve global success if they can effectively handle the three keywords and local production.  This new trend made possible by technological advancement (AI, online commerce, social media) will add more competition to incumbent global brands in the global marketplaces much faster than expected. It is time to act, rather than think and wait-and-see.

References

Lieber, C., & Chen, C. (2022, April 8). The $100 Billion Shein phenomenon, explained. Business of Fashion. https://www.businessoffashion.com/briefings/retail/the-100-billion-shein-phenomenon-explained/

Liu, J. (2022, December 6). Shein tells suppliers to end long working days at factories by end of the month. CNN Business. https://www.cnn.com/2022/12/06/business/china-shein-labor-conditions-investment-hnk-intl/index.html

Mills, C. (2023, February 20). Shein projects doubling of revenues by 2025. https://www.retail-week.com/fashion/shein-projects-doubling-of-revenues-by-2025/7043216.article?authent=1#:~:text=Shein%20reported%20annual%20revenue%20of,and%20Zara’s%20owner%20Inditex.