Why China's Shein is beating ASOS, H&M and Zara at fast fashion

Summary

The fashion industry underwent a major transformation in the 1990s with the rise of fast fashion brands like Zara, H&M, and Topshop. This evolved further with online-only brands like Asos and Boohoo, leading to the ultra-fast fashion era. Today, Shein, a Chinese company, dominates real-time retail by launching thousands of new products daily and leveraging big data. Despite its success, Shein faces controversies over alleged design theft and labor practices. Its ability to quickly adapt to market trends and its mysterious operations have kept it ahead in the global fashion market.

Takeaways

• 👗 The 1990s marked a significant shift in the fashion industry with the rise of fast fashion brands like Zara, H&M, and Topshop, which mass-produced catwalk-inspired clothes in just three weeks.
• 📈 The turn of the century saw the emergence of ultra-fast fashion with online-only brands like Asos and Boohoo, which reduced production times to a week.
• 🌐 Real-time retail is the latest era in fashion, with companies like Shein producing clothes in as little as three days, disrupting the industry status quo.
• 💰 Shein's rapid growth is attributed to its ability to launch thousands of new products daily at low prices, ranging from $2 to $30 USD.
• 🏆 In April 2022, Shein was reportedly valued at $100 billion, making it more valuable than H&M and Zara combined.
• 🤫 Shein is a secretive company with a mysterious CEO, Chris Xu, who has a background in digital marketing and SEO.
• 📈 Shein's origins trace back to 2008 with the founding of Dianwei, an e-commerce business that laid the groundwork for Shein's success.
• 📲 The rise of smartphones in China, especially between 2009 and 2012, played a significant role in Shein's growth, as it capitalized on the mobile-first market.
• 📊 Shein's data-driven approach allowed it to develop algorithms that identified fashion trends early, giving it a competitive edge.
• 👚 Shein's supply chain operations in Guangzhou, close to factories, enabled faster communication and production, supporting its lean model of small orders and quick responses.
• 🌍 The pandemic benefited Shein, with sales reaching an estimated $9.8 billion in 2020 and $15.7 billion in 2021, and it became the most downloaded shopping app in the U.S. in 2021.
• 🚫 Controversies surround Shein, including allegations of design theft from smaller designers and lawsuits from brands like Doc Martens and Levi Strauss for copyright infringement.
• 🛠️ Questions about working conditions in Shein's production lines have been raised, although the company claims to have a strict supplier code of conduct.

Q & A

How did fast fashion change the fashion industry in the 1990s?

Fast fashion, led by brands like Zara, H&M, and Topshop, revolutionized the industry by quickly mass-producing trendy clothes from the catwalk at affordable prices, making fashion more accessible and inexpensive than ever before.

What distinguishes ultra fast fashion from traditional fast fashion?

Ultra fast fashion, exemplified by online-only giants like Asos and Boohoo, shortened production times to as little as a week, further accelerating the fashion cycle compared to traditional fast fashion.

Who is the leader in the new era of real-time retail, and what is unique about their production process?

Shein is the leader in real-time retail, known for producing clothes in as little as three days and launching around three to four thousand new female apparel products daily at very low prices.

What role did smartphones play in Shein's rise to success?

The widespread adoption of smartphones, especially in China, facilitated the growth of e-commerce platforms like Shein. The smartphone revolution allowed Shein to reach a large audience and collect significant user data, which they used to drive their business model.

How does Shein use data to gain a competitive advantage?

Shein collects extensive data through its shopping app and uses sophisticated algorithms to analyze fashion trends from various sources like Etsy, Instagram, and Google. This early identification of trends allows Shein to react quickly and stay ahead of the competition.

What is the 'small order, quick response' model, and how does it benefit Shein?

The 'small order, quick response' model involves placing smaller initial orders (100-500 items) and quickly adjusting based on market performance. This approach allows Shein to react rapidly to sales trends and avoid the risks associated with large inventory orders.

How did the COVID-19 pandemic impact Shein's business?

The pandemic positively impacted Shein's business, with its sales increasing significantly. In 2020, Shein generated an estimated $9.8 billion, and in 2021, $15.7 billion. Shein also became the most downloaded shopping app in the U.S. in 2021.

What controversies has Shein faced regarding its business practices?

Shein has been accused of copying designs from smaller designers and established brands like Doc Martens and Levi Strauss. Additionally, there are concerns about the working conditions in its production lines and a lack of transparency in its manufacturing process.

What measures has Shein taken in response to copyright infringement allegations?

Shein has reportedly removed some of the allegedly offending designs from sale and paid settlements to certain designers in relation to copyright infringement claims. The company claims to take copyright infringement seriously.

Why is transparency important for Shein's future growth and investment?

Transparency is crucial for Shein to gain investor confidence and ensure ethical business practices. Potential investors and the public need assurance about Shein's operations and adherence to ethical standards, particularly concerning working conditions and intellectual property rights.