The story of SHEIN
Updated: May 7
Shein is an online fashion store established from Panyu, China.
SHEIN is the most mysterious billion dollar company in China, and its goal, according to general manager Pei Yang in 2016, is "to take Zara out".
Shein is not just talking big. In 2021, it is reaching astronomical heights in the fashion world. In May, the company surpassed Amazon as the most popular app in the shopping category, ahead of Nike, Zara, H&M, and Uniqlo, on iPhone and Android.
Shein raked in close to $10 billion in 2020, which was reportedly its eighth consecutive year of revenue growth over 100 percent. The retailer is also one of the most talked-about brands on TikTok and YouTube, and the most visited fashion and apparel site in the world.
Clever, low cost, cheap fashion
There are tens of thousands of styles on the retailer’s site, and each day, about 1,000 -5,000 more are added (depending on the source of report). It takes full advantage of TikTok digital media and China factory power - two unfair advantage that western companies do not catch easily.
Shein does not use Chinese factory. Shein IS Chinese factory.
A skilled Shein shopper can theoretically buy an entire outfit, accessories and shoes included, for $30 or less. In fact, there are entire sections on the site that help customers clinch the cheapest deals: A shopper can browse for tops under $5.99, dresses under $9.99, and clearance items under $5.
The start at the right time
If you have noticed SHEIN in 2021, you should know it started in 2008. The world order started to change after the financial crisis. Originally a wedding brand called ZZKKO and later came under the domain SheInside, as a site that sold wedding dresses and women’s fashion geared toward US and English-language shoppers.
Mind you, many hundreds of thousands websites, stores and companies started around the same time. SHEIN is the eventual result of all the upstarts and most people started to notice it in 2020.
The retailer was started in Nanjing, a province in China, by entrepreneur Chris Xu, who specialized in search engine optimization marketing. Xu has yet to publicly express any interest in women’s fashion or clothing design (granted, it doesn’t seem like he has done many interviews in English); his expertise lies in SEO and brand marketing, key factors that have contributed to Shein’s online popularity.
Throughout the early 2010s, Shein launched overseas sites in Spain, France, Russia, Italy, and Germany, and began selling cosmetics, shoes, bags, and jewelry, in addition to women's wear. According to a translated article from the Chinese tech site LatePost, by 2016, Xu had assembled a team of 800 designers and prototypers, dedicated to rapidly producing Shein-branded clothes. Shein also began honing its supply chain, cutting out suppliers that produced “mediocre-quality products or images,” according to a 2016 press release.
By 2017, the present-day iteration of Shein had begun to take shape. The brand advertised on daytime television shows in the US, and fashion influencers showcased Shein products and hauls alongside other retailers, like Fashion Nova and Zaful. It was, however, the retailer’s early use of TikTok and ability to market viral products that skyrocketed Shein’s popularity.
SHEIN developed a fashion blogger program, a free trial center, and a bonus points program to popularize and strengthen Shein's reach. He crafted deals that quickly caught the attention of buyers.
Moreover, SHEIN recruited designers from various parts of the world to conjure a vibrant product catalog. And Shein continues to partner with upcoming designers who offer design ideas and drafts. If their designs are chosen, the designers receive 30% commission from the design's sales and a long-term collaboration contract. The team at Shein refers to this approach as C2B business model, a setup wherein the designers beome a part of Shein's community. They are then known as 'Sheinside designers'.
The manufacturing speed
Shein has also managed to take advantage of China's manufacturing prowess, allowing it to cut down on lead times significantly. Researchers estimate its production schedule is as short as three to seven days, compared to the average span of three weeks disclosed by players like Zara.
After its latest funding round, last week, a Chinese tech blog reported (in Chinese) the company’s worth to be around 300 billion yuan ($47 billion) — roughly the valuation of Twitter — and posited IPO plans.
Shein wants to be online Zara.
SHEIN has global presence and design power - it used latest consumer information and blend in its own design and use its factories in China and Spain to make new fashions quickly, cheaply.
Shein sales. Divide the vertical axis number by 10 you get the sales in billion Chinese yuan. Further divide by 7 you get the sales in billion US dollars. By 2020 it has reached 10 billion dollars in sales.
Before 2014, SHEIN does not have its own supply chain. It takes out goods from Guangzhou local wholesaler markets. After 2014, Shein starts to build its own supply chain. It used Google Trends Finder to find the latest trends and make 30 varieties of items in small quantities (100-1000). They then find which item have potential for viral reaction, and increase production of said items quickly.
The Guangzhou 13 Factories District has been the place for foreigners to buy cheap Chinese goods for hundreds of years. It still is. Shein now gets its own supply chain.
By 2020 SHEIN has raised E round of 15 billion US dollars. It is not eager to go IPO, which carries calculated risks.
The ingenious and experienced founder
Chris Xu, or Xu Yangtian was born in 1984 and educated at a trade school in Qingdao, China. Though China has many excellent entrepreneurs, he is keeping a low profile to the extent that most Chinese do not know about him. In China, entrepreneurs are not safe. Just look at the trouble of Alibaba (Jack Ma) and China Evergrande, you will understand.
The good news? Xu knows SEO. He can make him appear, or hide his presence on the internet. He is a master of using Google to his advantage. Even his biography online is full of mis-directs. There is no doubt he wants to himself hidden.
The founder of Shein is Xu Yangtian ( Chris Xu), born in 1984 in Shandong Province, China. In 2007, he graduated from Qingdao University of Science and Technology. Shortly after graduation, he came to work in an online marketing company in Nanjing for a job related to SEO. SEO (Search Engine Optimization) is an “ancient” Internet technology that focuses on how to put your site higher in search results. In this job, he seems to realize the commercial value of selling Chinese goods to overseas markets through the Internet.
Successful business often have to do several things right. In SHEIN's case, there are at least four combinations:
The fact the founder has an SEO background is very useful;
SHEIN decided to use fast design with fast prototyping;
SHEIN used tiktok during overseas expansion in the hardest time to expand overseas (the Trump administration and COVID pandemic);
SHEIN managed to keep shipping cost low and produces addictive shopping experience for the intended customers.
SHEIN selected the right category - clothing, to specialize, and tried to create its own brand awareness rather than just being a platform mall.
Chris Xu is a remardable businessman who knows how to use timing and global market to his advantage. In this regard, he is not a typically corner cutting Chinese businessman with short sights.
SHEIN targes Gen Z customers globally through the use of TikTok.
SHEIN's controversy and risks
Is Shein's products priced too low?
Shein's website and mobile application host a wide range of products. From accessories to clothes, items are available at such reasonable prices that people speculated Shein to be a scam. There was a time when several individuals tweeted about the low prices of products on Shein and doubted the authenticity of the company. However, not every tweet was meant to be tweeted in a negative light. Some people were genuinely curious about Shein's business model.
The Corporate Social Responsibility page on Shein's website asserts that the company focused on those initiatives which enabled ethical and eco-friendly products. The outcome was excellent products at dirt-cheap prices. Shein ensures its operations meet the highest industry standards.
The low price large volume model will eventually be challenged, by the shipping costs of global goods, by contenders with better names, and by copy cats. Let's hope for the best for SHEIN. If nothing, Amazon does need a competitor. It brings out the fighting spirit in everyone.
In October 2020, global container shipping came to a halt as the shipping costs increased (10x) and the speed slows. Los Angeles port is famously clogged with many boats waiting to weeks to unload.
The increased shipping cost and labor cost will undoubtedly challenge further rise of Shein.