The Fast-Fashion Juggernaut Born from Guangzhou's Web of Factories

Shein, a fast-fashion company based in Guangzhou, has risen to prominence by leveraging China's vast army of factory workers and the internet. The company initially faced rejection from suppliers due to smaller order quantities and lower profit margins. Shein's success lies in its agile supply chain, large user base, and consistent payment to suppliers.

Credit: Iris Deng

Hidden in the town of Nancun, within Guangzhou's Panyu district, lies Shein's sourcing center. This labyrinth of residential buildings and small factory compounds is where the magic happens. Recruitment ads plastered on walls and walkways in the nearby Dexing Industrial Park seek workers to fulfill the flood of orders pouring in for Shein.

Shein's success lies in its agile supply chain and large existing user base, according to Yao Kaifei, CEO and founder of BrandAI. However, it wasn't always smooth sailing for Shein. In its early days, the company faced rejection from suppliers due to its smaller order quantities and lower profit margins compared to traditional exporters. But by consistently paying suppliers on time, Shein built trust and gained an edge over its competitors.

To manage its complex network of suppliers, Shein developed an in-house digital system and provides training to new partners through its supply chain management department. This system, called Geiwohuo, allows sellers on Shein to access crucial data and automatically reorder products from factories when inventory runs low. This efficient process enables Shein to restock in just seven days, compared to 14 days for Spanish fashion giant Zara.

The rise of Shein and other Chinese apps, such as PDD Holdings' Temu, ByteDance's TikTok Shop, and Alibaba Group Holding's AliExpress, has transformed China's export landscape. However, their rapid expansion has drawn scrutiny abroad, with the US and the EU considering import duties on cheap products bought from online sites. Shein also faces growing competition from rivals like Amazon.com, which recently launched a budget storefront featuring low-priced clothing.

To stay competitive, Shein is striving to attract a diverse array of merchants onto its platform, expanding its range of goods to include beauty and skincare products, pet supplies, home decor, toys, and small appliances. This move aims to target mainly female consumers and capture a larger market share.

As Shein prepares for an initial public offering (IPO), the company will need to be more transparent about its operations. While it remains a private company, Shein confidentially filed papers with the British market regulator in June, signaling its intention to go public. The company's ability to deliver consistent sales and differentiate itself will be crucial in convincing investors of its growth potential.

In Guangzhou's web of factories, Shein has emerged as a fast-fashion juggernaut, disrupting the industry with its agile supply chain and vast user base. As it continues to expand and face new challenges, Shein's ability to adapt and maintain profitability will determine its future success.

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• Shein, a fast-fashion company based in Guangzhou, has risen to prominence by leveraging China's vast army of factory workers and the internet.

• The company initially faced rejection from suppliers due to smaller order quantities and lower profit margins.

• Shein's success lies in its agile supply chain, large user base, and consistent payment to suppliers.

Source: YAHOO