Is Chinese Online Fast Fashion Giant Shein Truly on Top?
In the world of “fast fashion,” where mass-market retailers produce clothing pretty quickly in response to current fashion trends, names such as Zara and H&M are somewhat ubiquitous. However, one online retailer has upended the global fast fashion market, and it is Shein. The Chinese company’s online sales have recently outstripped even the likes of Amazon and other e-commerce giants, according to recent research. It has done so thanks to a data-driven approach to supply chain management and its use of China’s massive and globally ubiquitous garments industry.
Chinese tech news website CN Beta cited a recent study by online payment analysts PYMNTS.com on how Shein managed to outdo other online apparel retailers such as Amazon and Walmart, based on their PYMNTS Provider Ranking of Shopping Apps. The report points out that the company, founded in Nanjing in 2008 by Chris Wu, succeeds by tapping into two of China’s major economic advantages: its manufacturing sector, which can turn around goods on the cheap, and its robust logistics industry that supports this sector.
But the real secret is how the company treats fashion the way social media sites "curate" posts. By analysing what fashion trends pop up on social media, Shein’s proprietary system immediately tells its network of 6,000 garment factories what garments to produce and puts up these garments online. This almost instantaneous feedback loop, combined with the low cost of production and logistics, allows the company to achieve what even the big fast fashion players could only dream about: affordable clothing that people will really want to buy now. The way Shein has achieved its success, especially among teens and twenty-somethings is the subject of a February 2022 podcast from American online magazine Slate.
A previous Earnest research report covering the first half of 2021 found that Shein was the top online fast fashion retailer, doubling its share of the market from the beginning of that year to the end of June. This came after the research company found that Shein was now the top downloaded e-commerce app, beating Amazon. At the end of 2021, Shein reported earnings of US$3.1 billion, capping what a Euromonitor report called a “meteoric rise”.
As of late 2021, this fast fashion retail giant is now calling Singapore home. Company filings revealed that the company’s main website is now owned by a Singapore-based holdings firm, Roadget Business Pte., where founder Xu and three other persons represent it. At the same time, the company’s Chinese holdings firm was de-registered. While the “mysterious” company has not announced reasons for this move, PYMNTS has earlier reported that Chinese restrictions on offshore initial public offerings might be behind this relocation.
A sobering note about Shein’s success is what Louise Matsakis of the tech news website Rest of World noted in her interview with Slate. The impact of fast fashion retailers like Shein on the environment is often criticized for promoting waste as people could often dispose of “out of date” clothing very quickly. Cheap retail prices also rely on low production costs, and one factor is the way labour is compensated, a longtime sticking point among critics of the global garments industry’s practices. This may be a cause for cynicism: people may not care about these things because they get their clothes for cheap. However, Matsakis points out that those posting about Shein purchases on TikTok are also ambivalent about their love of the retailer for these reasons. Whether this ambivalence will have an impact on Shein’s sales in the years to come will be something for us to watch.
Chinese online fast fashion retailer Shein is now the top apparel retailer, outranking such companies as Walmart and Amazon.
China’s massive manufacturing network and efficient supply chain system are cited as two factors affecting the company’s success, as is its instantaneous ability to respond to fast fashion trends.
As rumours swirl around a 2022 U.S. IPO, company filings found that Shein’s parent holdings company relocated to Singapore to avoid Chinese government restrictions.