Shein, a rising Chinese fast-fashion Decacorn (a company valued at over $10 billion), offers discounted woman’s clothing online, targeting the Generation Z. Shein is a privately owned company founded in 2008, by Chris Xu, an American-born Chinese.
Shein’s business model is reflecting the ever-changing clothing styles of the generation Z. New trends are emerging faster than ever before, and to keep up with the latest trends and ensure efficient supply chain, Shein has developed four R&D facilities in Nanjing, Shenzhen, Guangzhou, and Hangzhou. In order to stay innovative and keep up their production efficiency, Shein has six logistics centers in Foshan, Nansha, Belgium, India, and on the East and West Coasts of the U.S. To handle customer service, over 10 000 people are employed in customer service centers around the globe.
Shein’s rapid growth mainly comes from female teens. Amazon is still a clear number one in the US market, but Shein is growing its market share every day. Here is a graph showing the favorite shopping websites of upper-income US teens:
Female teenagers are flocking to buy from the Chinese ecommerce company, which few people even have heard of. The US is Shein’s biggest market, ranking as the second most popular app in the market, and rapidly increasing its share.
Key success factors in Shein’s business model:
- Production and factory based in Guangdong province in South of China, where products are made and sent internationally
- Solely focus on online sales, do not have physical retail shops which keeps the cost at a minimum
- USA is Shein’s largest market, but also ships to 220 countries around the world
- Focus on affordable (woman’s) clothing with a fast cycle – acts on hot trends and searches by rapidly producing new clothing based of predictions in different countries (fabrics, colours and styles)
- Aggressive social media marketing – Leveraging social media channels to follow trends, promote products and use influencers to connect with Gen Z
- Releasing thousands of daily new items (2000 SKUs on average) to keep the teens enticed and eager to buy
Shein is looking to expand internationally. Their main target audience is female teens, but they also offer clothing for men and kids. It will be interesting to see how the future development takes shape, especially outside their core audience.
An efficient supply chain is a key in order to respond to the predictions of emerging trends. The ability to add thousands of new items daily proves the importance of having an agile and dynamic supply chain. Additionally, social media is essential in order to promote and communicate with the target audience. There is no doubt that other fast fashion retailers need to step up in order to compete against Shein. Communicating, listening and adapting to the end customer are common success factors. However, it is acting on this feedback which separates the good from the great.