I would say 90% of my clothes come from Shein. I started shopping on the app in 2018, and now I spend an average of US$250 every month on the app. My parents buy as much as I do.
Shein, an ultra-fast-fashion brand, was the most downloaded shopping app on the iOS and Android platforms in the United States, beating Amazon. With an increase of its value from USD15bn in 2020 to USD100bn in 2022,² Shein caught the attention of the fashion industry as its huge range of low-priced and ever-changing fashion appealed to young consumers in their teens and twenties.
Headquartered in China, Shein’s success in the ultra-fast-fashion industry was built on its proprietary supply chain management system and China’s garment production ecosystem to target overseas markets outside China. Shein mainly relied on digital marketing, collaborating with celebrities and influencers to market its products on social media platforms such as Instagram and TikTok.
Despite keeping a low profile, Shein found itself at the center of a series of controversies. Among others, Shein had been accused of low quality, copyright infringement, lack of supply chain transparency, encouraging a culture of excessive consumption, and indifference to environmental costs. People questioned whether Shein was just a fad and unsustainable or heralded a major shift in the fashion industry, as Zara’s business model had in the 1990s. Could Shein lead a new wave of real-time fashion business model innovations? Or, on the contrary, would Shein fall and even struggle to survive like some of its predecessors in the fast-fashion industry?
Fast-Fashion Industry
“[Traditional fast fashion] scans the globe for fashion trends, designs clothing with lower-priced materials based on those trends, and gets pieces from drawing board to store floor in three weeks… a newer breed of companies like Fashion Nova, Boohoo, and ASOS largely cut out physical retail and middlemen in an evolution called ultra-fast fashion.”
Packy McCormick, founder of Not Boring ³ Compared with ordinary clothing that was seasonal and affected by the weather, fashion was more stylish and short-lived. Since fashion depended on personal tastes and lifestyles, customer demands were complicated, difficult to predict, and highly volatile. A movie, an influencer, or a fashion show could have an immediate impact on demand, and impulse buying was also very common.⁴
The fast-fashion market was driven by 16- to 25-year-olds who preferred unique, affordable, and trendy clothes. The United Nations estimated that the global youth population would grow from 1.2 billion in 2019 to 1.3 billion in 2030.⁵ The value of the global fast-fashion industry was expected to grow at a compound annual growth rate (CAGR) of 7%, from USD30.58bn in 2021 to USD39.84bn in 2025.⁶
Speed was critical in the fashion industry, as a company could get a sustainable competitive advantage over its competitors if it had the ability to quickly recognize fashion trends. In the 1990s, Zara pioneered the fast-fashion business model by cutting the traditional one-year production cycle in the fashion industry to just a few weeks. Companies such as H&M and Forever 21 copied this model.
In the late 2010s, a number of ultra-fast-fashion brands including ASOS, Fashion Nova, and Shein started to emerge. They relied on search traffic and customer data to predict demand and used social media rather than retail shops to reach consumers.⁷ Using advanced technologies to provide accurate and timely data about various activities along the supply chain, they could rapidly identify and respond to the latest fashion trends by introducing new products quickly to satisfy demand while at its peak⁸ and maximize profits.
In the fashion industry, there were three critical lead times: the time from recognizing a fashion trend to bringing the final product to market, the time from receiving a customer order to delivering the product to the customer, and the time from recognizing the fashion trend to making production adjustments.⁹ Cutting the lead times by half could reduce the costs by 21%.
Cost cutting could also be achieved by keeping low levels of inventory, shortening transportation distances, and taking advantage of lower labor costs and tax savings in other countries.¹¹ By moving labor-intensive tasks overseas, many Western fashion companies traded longer lead times for considerable labor cost savings. But by moving production overseas, the industry exposed itself to import and export costs. These costs often carried significant political risks. For example, in the US-China trade war, the US imposed an additional 25% punitive tariff on Chinese imports, including apparel and footwear, worth USD250bn.¹²
The COVID-19 pandemic affected corporate performance, changed consumer behavior, and increased the demand for digital channels. Compared to 2019, the global fashion industry witnessed a 93% drop in economic profits in 2020.¹³ Social distancing measures forced people to work from home and limited social gatherings, reducing demand for fashion. Consumers in many countries were reluctant to go out and shop in crowded environments. In just a few months, consumers and businesses had moved forward five years in adopting digital technologies.¹⁴ Traditional brick-and-mortar retailing was challenged by omni-channel retailing, allowing consumers to shop in different ways, including social media and mobile. The popularity of social media also raised consumers’ fashion awareness, leading to faster-than-ever changes in the fashion preferences of consumers. Fashion brands found it even more difficult to predict fashion trends and future demand.
Company Background
“Real-time fashion refers to the model that Shein’s developed whereby you’re in the Shein app, and you put something in your cart. When they upload a new item, they can actually update the systems that they have in the back end, whereby the action that you take can immediately have an effect on the factory floor.”