I have followed closely with Shein in the last few years due to their unique go-to-market strategy. However, I’m surprised with their approach to IPOs having in mind China’s government actions to de-list and de-risk its main companies from the NYSE. LINK
That being said, let’s see what makes Shein so unique:
- Ultra-fast supply chain. Shein’s supply chain is incredibly fast, allowing for rapid production and distribution of new styles, faster than competitors like Zara and H&M.( = 14 days from design to production)
- Data-driven design. Shein relies heavily on data analytics to predict trends and consumer preferences, which helps in creating highly demanded products. They order batches of 50-100 items based on search behavior. In comparison, Zara and H&M order batches of 100k items.
- Vast product range (ie. SKUs) – around 5-10k new SKUs per month vs. year at Zara and H&M
- Agile manufacturing network. The company works with a network of agile with 400k manufacturers in a way that their ERP systems are interconnected and Shein knows in real time if a plant can make the order or not. On top of that, if the manufacturer loses these bids from Shein (on price) it gets lower classified and afterward expelled from the bidding process.
- Cost-Effectiveness. Each SKU costs between 1-5 Yuan to produce, forced due to slave labor in Xinjiang.
- Targeting younger demographics. Shein has a strong focus on younger consumers, tailoring its marketing and product designs to appeal to Gen Z and younger millennials. It’s already Top of mind in the USA.
- Strong online presence. Unlike Zara and H&M which also rely on physical stores, Shein is primarily an online retailer, which reduces overhead costs and allocates all this money to ads (ie. customer acquisition costs)
- Effective use of Social Media. Shein excels in leveraging social media for marketing, using platforms like Instagram and TikTok effectively. Actually, their app is now copying TikTok in many regards.
- Responsive to fashion trends. The brand is quick to respond to global fashion trends, often introducing new styles faster than Zara and H&M. They use vocational educators to conduct online and on-the-phone research/interviews instead of sending the designers to Milano/Paris Fashion Week. This is a big deal because it shortens the production time.
- Catering to niche markets. Shein offers products for niche markets and specific fashion subcultures, which are not always addressed by Zara and H&M
