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List and Address the problem p 14-19 Copyright, quality, environmental impact etc I think this was it…Strengths/Weaknesses of the said problems
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YUK FAI FONG
ZHIXI WAN
MINYI HUANG
SHEIN: AN ULTRA-FAST-FASHION RETAILER’S
DIGITAL STRATEGIES
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.
– Jennifer Cobo, 20-year-old living in Ashburn, USA1
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?
1 Eva Xiao, “How Shein became the Chinese Apparel Maker American Teens Love,” Wall Street Journal, 2 August 2021.
2 Miriam Gottfried and Charity Scott, “Shein valued at $100bn in funding round,” Private Equity News, 6 April 2022.
Dr. Minyi Huang prepared this case under the supervision of Professor Yuk Fai Fong and Professor Zhixi Wan for class discussion.
This case is not intended to show effective or ineffective handling of decision or business processes. The authors might have
disguised certain information to protect confidentiality. Cases are written in the past tense, this is not meant to imply that all
practices, organizations, people, places or fact mentioned in the case no longer occur, exist or apply.
© 2022 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be digitized, photocopied
or otherwise reproduced, posted or transmitted in any form or by any means without the permission of The University of Hong
Kong.
Ref. 21/719C
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Shein: An Ultra-Fast-Fashion Retailer’s Digital Strategies
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%
on average. 10
3 Packy McCormick, “Shein: The TikTok of Ecommerce” 24 June 2021, https://greenisthenewblack.com/shein-ultra-fast-
fashion-consumerism-tiktok-influencer/, accessed 28 August 2021.
4 R. Ciarniene and M. Vienazindiene, “Management of contemporary fashion industry: characteristics and challenges,” Procedia:
Social and Behavioral Sciences 156 (2014): 63–68.
5 Department of Economic and Social Affairs, “International Youth Date, 12 August 2019,” United Nations, 2019,
https://www.un.org/development/desa/youth/wp-content/uploads/sites/21/2019/08/WYP2019_10-KeyMessages_GZ_8AUG19.pdf, accessed 30 August 2021.
6 Businesswire, Global Fast Fashion Market Report 2021: COVID-19 Growth and Change to 2030, 24 May 2021.
7 Terry Nguyen, “Shein is the future of fast fashion. Is that a good thing?” Vox, 10 August 2021, https://www.vox.com/thegoods/22573682/shein-future-of-fast-fashion-explained, accessed 22 August 2021.
8 C. Moore and J. Fernie, “Retailing within an International Context,” in International Retail Marketing: A Case Study Approach,
M. Bruce, C. Moore, and G. Birtwistle, eds. (Oxford, UK: Elsevier Butterworth Heinemann, 2004), 3–37.
9 M. Christopher, R. Lowson, and H. Peck, “Creating agile supply chain in the fashion industry,” International Journal of Retail
and Distribution Management 32, no. 8 (2004): 367–376.
10 G. P. Cachon and M. Fisher, “Supply Chain Inventory Management and the Value of Shared Information,” Management
Science 46, no. 8 (2000): 1032–1048.
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Shein: An Ultra-Fast-Fashion Retailer’s Digital Strategies
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.
– Matthew Brennan, Specialist in Chinese mobile technology and innovation15
Shein featured attractive prices, various styles, and fast renewal. On its US website, customers
might find a top costing less than USD10 and a pair of jeans with a price tag of USD20. The
items on sale were given big discounts; for example, a pair of shorts originally priced at USD17
were sold for USD8. 16 [See Exhibit 1 for price comparison.] Moreover, Shein introduced new
items so often that its app had once introduced 7,423 new items in one day.17 In 2021, an average
of 2,000 SKUs18 of women’s clothing and accessories were launched every day.19 The number
11 J. Fernie and L. Sparks, “Retail logistics: changes and challenges,” in Logistics and Retail Management: Emerging Issues and
New Challenges in the Retail Supply Chain, 4th ed., J. Fernie and L. Sparks, eds. (London: Kogan Page, 2014).
12 Fibre2Fashion, “US China Trade Tariff Impacts on Textiles & Apparel Industry,” February 2021,
https://www.fibre2fashion.com/industry-article/8924/us-china-trade-tariff-impacts-on-textiles-apparel-industry, accessed 31
August 2021.
13 I. Amed, A. Balchandani, J.E. Jesen, A. Berg, S. Hedrich, and F. Rölkens, “The State of Fashion 2021: In search of promise in
perilous times,” McKinsey, 1 December 2020, https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion,
accessed 29 August 2021.
14 Ibid.
15 Kai Ryssdal and Minju Park, “Is fast fashion catching up to real time?” Marketplace, 22 July 2021,
https://www.marketplace.org/2021/07/22/is-fast-fashion-catching-up-to-real-time/, accessed 4 November 2021.
16 Shein, company US website, https://us.shein.com, accessed 2 September 2021.
17 Yiqin Fu, “Shein: A story of online segregation and data as business intuition,” 29 August 2021,
https://yiqinfu.github.io/posts/shein/, accessed 29 Nov 2021.
18 SKU stands for stock-keeping unit. Each product item is assigned with a unique code, making it easier to track inventory.
19 M. Faithfull, “Is China’s mysterious $15 billion fast fashion retailer ready for stores?” Forbes, 10 February 2021,
https://www.forbes.com/sites/markfaithfull/2021/02/10/shein-is-chinas-mysterious-15-billion-fast-fashion-retailer-ready-forstores/?sh=77dcf3e96df5, accessed 26 April 2022.
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Shein: An Ultra-Fast-Fashion Retailer’s Digital Strategies
of new items launched by Zara for the whole year was about the same as the number of new
items launched by Shein every two months.20
Headquartered in Nanjing, China, the company was founded by Chris Yangtian Xu in October
2008 as SheInside, a B2C website selling wedding dresses and women’s fashion targeted at US
and English-speaking customers. After graduating from Qingdao Science and Technology
University in 2007, Chris had worked in search engine optimization (SEO) and brand marketing
for an online marketing company dealing with foreign trade in Nanjing, Jiangsu Province. Chris
was good at logical and engineering thinking and pursuing algorithm optimization. He had
always kept a low profile and rarely delivered public speeches. 21
Before 2014, the company only sourced from the wholesale clothing market in Guangzhou and
sold directly to overseas customers. In 2014, the company encountered a bottleneck for further
growth due to its inability to handle the massive orders, which resulted in dissatisfied customers.
The company decided to develop an in-house design team and have its own integrated supply
chain. The company acquired ROMWE, its Chinese rival with similar overseas businesses, in
2014 and purchased MAKEMECHIC,22 a US competitor, in 2015. By working closely with
Xiangqing Ren, the person in charge of its Guangzhou subsidiary, SheInside supported its own
OEM and grassroots suppliers in Guangzhou and built and upgraded the company’s back-end
supply chain ecosystem. 23
In 2015, the company also renamed itself Shein, an easily recognized and memorized name,
using the slogan “She In Shine Out” along with a large-scale promotion. The new brand also
fit the corporate culture of “She wants to be in your heart rather than just to be by your side.”24
Shein became a trademark of Zoetop Business Co. Ltd., a Hong Kong–registered company
established in 2015.
In response to customer complaints about quality issues and to improve its quality, in April
2016, Shein announced it would cease working with “suppliers of mediocre quality products or
misleading product images.” After that, Shein used its own team of models for all the products
advertised on its website, with more details on the sizes of the models who tried on the clothes
and their try-on experience.25
During the COVID-19 pandemic, Shein saw its business boom. In the US, its largest market,
Shein’s fast-fashion market share jumped from 7% in January to nearly 30% in June 2020.26
[See Exhibit 2.] Shein’s revenue in 2018 and 2019 was about USD1.2bn and USD2.4bn,
20 Jeffrey.W, “An incomplete business story about Shein,” 18 February 2021, https://pandayoo.com/2021/02/18/an-incomplete-
business-story-about-shein/, accessed 2 September 2021.
21 Sun Wenxuan, “Shein’s Fortune Code: Chinese Styled Recommendation + Made in China,” Beijing News, 9 June 2021,
http://www.xinhuanet.com/fashion/2021-06/09/c_1127544503.htm, accessed 31 August 2021.
MakeMeChic.com was an e-commerce platform selling women’s apparel and accessories. Its headquarters was located in
California, US. It is also selling via Amazon.
23 Shan Huang, “Kill Zara: The mystery of the supply chain of Shein, China’s multi-billion-dollar cross-border e-commerce,” 1
September 2020, https://mp.weixin.qq.com/s/yU-A5-dcjGHyNlEFX_hSAg, accessed 3 September 2021.
24 Shein Group, “She In Shine Out: Sheinside Changes Brand Name to Shein,” PRNewswire, 8 June 2015,
https://www.prnewswire.com/news-releases/she-in-shine-out-sheinside-changes-brand-name-to-shein-300095504.html,
accessed 1 September 2021.
25 Shein, “Shein.com cuts out mediocre suppliers,” PR Newswire, 29 April 2016, https://www.prnewswire.com/newsreleases/sheincom-cuts-out-mediocre-suppliers-300259248.html, accessed 5 September 2021.
26 Victoria Waldersee, “Chinese retailer Shein lacks disclosures, made false statements about factories,” Reuters, 6 August 2021.
22
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Shein: An Ultra-Fast-Fashion Retailer’s Digital Strategies
respectively.27 Having grown over 100% per year between 2013 and 2020, Shein’s revenue
reached USD9.8bn in 2020. 28 In 2021, Shein’s revenue increased further to USD15.7bn.29
In 2020, Shein was already valued over USD15bn after securing five rounds of funding.
Investors included JAFCO Asia, IDG Capital, Jinglin Investment, Shunwei Capital, Sequoia
Capital, and Tiger Global Management.30 The company was planning for a stock listing on the
New York Stock Exchange in 2024.31
In 2021 Shein’s overseas offices covered all its major markets, including Europe, America,
Australia, and the Middle East. Sold to more than 220 countries and regions in the world [see
Exhibit 3], Shein’s main products included women’s wear and other fashionable products
including men’s wear, children’s clothes, bags, shoes, and accessories.
Made-in-China has a solid accumulation in the field of apparel production,
and the domestic digital transformation has been in full swing in the past two
years, which provides a good soil for Chinese companies to respond quickly to
overseas demand. Considering the fierce competition in the domestic market,
the key to Shein’s success in taking the overseas route is worthy of other
Chinese companies’ consideration and reference.
– Prof. Cui Lili, Shanghai University of Finance and Economics32
The company set up five customer services management centers globally with over 200 staff to
assist customers with the purchase process and solve after-sales problems. 33 While Shein
targeted overseas markets, many fast-fashion companies such as Uniqlo, Zara, and H&M had
been expanding into China since the first decade of 21st century. By 2015, China became
Uniqlo and Zara’s second largest market in the world and one of the top five markets for H&M.
At the same time, as the rise of local fast-fashion brands and the prosperity of the e-commerce
industry forced some European and American brands, including New Look, ASOS, Topshop,
Forever 21, Gap, and Superdry, to move out of China. 34
Supply Chain Management
Ultra-fast-fashion industry required the support of strong supply chain management. Styles and
designs were constantly changing. The same design might differ in size and color, which
increased the number of SKUs and the burden of garment production and inventory
management. Shein first built the supply chain system and then developed subsystems for
different supply chain functions.35 Shein controlled each step throughout its supply chain. All
the steps were highly digitized and integrated with one another, which enabled the company to
27 Drizzie, “After Shein became popular,” 25 December 2020, https://mp.weixin.qq.com/s/fbdzMt2cjsehlsPbzStzcw, accessed 2
September 2021.
28 Wenxuan Sun, “Shein’s Fortune Code: Chinese Styled Recommendation + Made in China,” Beijing News, 9 June 2021,
http://www.xinhuanet.com/fashion/2021-06/09/c_1127544503.htm, accessed 31 August 2021.
29 K. Wu, F. Potkin, and S. Murdoch, “Chinese fashion retailer SHEIN revives plan for New York listing in 2022,” Reuters, 25
January 2022, https://www.reuters.com/markets/europe/exclusive-chinese-fashion-retailer-shein-revives-plan-new-yorklisting-2022-2022-01-25/, accessed 26 April 2022.
30 Wenxuan Sun, 2021. The first round of USD5mln took place on 1 December 2013, then RMB0.3 on 12 July 2016, followed
by 3 July 2018, 1 December 2019, and 4 August 2020.
31 Bruce Enhorn and Daniela Wei, “Fast-fashion Behemoth Shein says it’s cleaning up its act. Will anyone buy it?” Bloomberg,
14 July 2022.
32 Wenxuan Sun, 2021.
33 Guangzhou Shein International Import and Export Ltd., “SHEIN Company Introduction,” 18 February 2020,
https://zhuanlan.zhihu.com/p/107650255, accessed 1 September 2021.
34 Song Qing, “Chinese brands go overseas: Shein enters Zara’s hometown,” 28 June 2020,
https://www.sohu.com/a/404459270_465282, accessed 3 September 2021.
35 Shan Huang, “Kill Zara.”
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Shein: An Ultra-Fast-Fashion Retailer’s Digital Strategies
develop and introduce up to 10,000 new products tailored to different regions and user tastes
every day.36
Compared to Zara’s normal production cycle of 14 days, the production cycle of Shein’s core
fashion products was normally 5 to 7 days, from a supplier’s response to the order to the
completion of the products ready for delivery. For an additional order of a popular design, its
suppliers could even deliver within 3 to 5 days.37 For a new design, it took roughly 14 days in
total from the design of the garment to the delivery of the garment directly from the factory to
the consumers or to a Shein warehouse.38
Design
Each new design is basically a bet because Shein can estimate how well a
product is going to do, but it doesn’t know for sure until it sells. Compared to
its fast-fashion competitors, Shein is able to take more bets, but at a lower risk.
It’s able to place very small initial orders with these factories, about 100 or
even smaller.
– Matthew Brennan, specialist in Chinese mobile technology and innovation 39
Shein was able to introduce up to 10,000 new products a day,40 because its minimum order size
for each product was much smaller than its competitors; for example, the minimum size of
Zara’s production order was 500.41 To come up with so many designs, Shein had a team of 200
in-house designers42 who either designed new clothes based on the results of big data analysis,
or expanded an existing series or developed a similar series based on elements that customers
definitely liked. 43 In January 2021, Shein launched SHEIN X Designer Incubator Program,
which enabled independent designers to use their original designs to create their own clothing
collections and allowed artists to have their work printed on Shein’s T-shirts. By the end of
January 2022, Shein had worked with 1,442 designers and artists from more than 20 countries,
and the number was expected to grow to over 3,000 by the end of 2022.44
As one of Google’s largest customers, Shein’s planning department algorithmically searched
the internet, using Google’s Trends Finder product to enable real-time fine-grained tracking of
clothing-related search terms in different countries and regions. Shein had correctly predicted
the lace fashion trend in the summer of 2018. 45 Shein also collected data by searching
competitors’ websites, mobile apps, and Shein’s massive global sales data. By analyzing big
data, the company was able to pull out the elements of fashion trends, such as silhouette, line,
color, and texture. Then, the company could plan and develop products based on these elements
and later pass the prototypes to the operational department for testing market reactions. After
testing, it would use the test data to decide on order size and promotion.
36 Dilys Williams, “Shein: the unacceptable face of throwaway fast fashion,” The Guardian, 10 April 2022.
37 Shan Huang, “Kill Zara.”
38 Guangzhou Shein International Import and Export Ltd., “SHEIN Company Introduction,” 18 February 2020,
https://zhuanlan.zhihu.com/p/107650255, accessed 1 September 2021.
39 Terry Nguyen, “Shein is the future of fast fashion.”
40 Dilys Williams, “Shein: the unacceptable face of throwaway fast fashion,” 10 April 2022,
https://www.theguardian.com/fashion/2022/apr/10/shein-the-unacceptable-face-of-throwaway-fast-fashion, accessed 26 April
2022.
41 Jeffrey.W, 2021.
42 Lora Jones, “Shein: The secretive Chinese brand dressing Gen Z,” BBC News, 9 November 2021,
https://www.bbc.com/news/business-59163278, accessed 28 November 2021.
43 Wenxuan Sun, 2021.
44 Shein, “Shein celebrates one-year anniversary of SHEIN X Design Incubator Program,” 8 February 2022,
https://www.prnewswire.com/news-releases/shein-celebrates-one-year-anniversary-of-shein-x-design-incubator-program301477803.html, accessed 26 April 2022.
45 Packy McCormick, “Shein: The TikTok of Ecommerce” Green Is the New Black, 24 June 2021,
https://greenisthenewblack.com/shein-ultra-fast-fashion-consumerism-tiktok-influencer/, accessed 28 August 2021.
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Shein: An Ultra-Fast-Fashion Retailer’s Digital Strategies
In choosing clothes for advertising and testing the market, most companies used the most likely
best-selling clothes in their advertisements, did the testing, made improvements, and finally
spent on the best-performing advertisers. But Shein used quasi-explosive styles,46 instead of the
best-selling styles, as the image content of its ads. Though not all quasi-explosive styles would
become best-selling styles, Shein was able to act ahead of the competition.47
Manufacturing
Shein doesn’t work with very large factories but [with] small to mid-sized
workshops that pick up orders daily. It’s very much like an Uber system, where
new orders are coming into factory owners’ phones and they receive the order.
It’s very scrappy, but efficient.
– Matthew Brennan, specialist in Chinese mobile technology and innovation 48
The secret of Shein’s manufacturing efficiency was in its “small order fast return” model, which
featured small orders and high-frequency repeated orders. The whole production process was
driven by the orders generated on its e-commerce platform. Each order was divided into small
units given to small factories to complete. Though the overall sales figure was huge, Shein
divided it into many SKUs, and each design’s order quantity was very small. 49 Shein was able
to rely on small factories, instead of large ones, which shortened the production cycle, increased
flexibility, and lowered the costs.
To make the “small order fast return” model work, Shein relied on the following two factors.
First, Shein leveraged the garment production ecosystem that had developed over three decades
in Panyu, Guangzhou, in South China. From the beginning of the wholesale businesses in the
1990s to Taobao orders in the 2000s and now the international OEMs, Panyu’s garment
factories had always retained the traditional small-scale garment production model and
developed a fast garment production supply chain. Panyu and surrounding areas had everything
the suppliers needed for fast fashion, including textile and accessories suppliers, lathe factories,
and garment-washing factories.
Shein set a minimum-quality requirement for suppliers and then chose those suppliers that
offered the lowest price. If a customer returned goods due to quality problems, the company
also imposed fines on the corresponding supplier. 50 Shein had about 300 to 400 garment
factories as core suppliers,51 and these core suppliers were estimated to have over 5,000 thirdparty suppliers to serve Shein.52
The work the garment factories did for Shein was the same as the work they had been doing for
decades. They were only required to install and use Shein’s order management system. The
system used cloud-based supply chain management software. When a product was selling well,
the system automatically reordered in large volumes.53 To fulfill Shein’s order, factories did not
need to have high-tech manufacturing facilities. For example, Xiaowei, a seamstress in her
twenties, worked at a factory with a monthly output between 300,000 and 400,000 pieces in
46 Quasi-explosive styles refer to those fashion apparels that are almost or very likely to become the best-selling ones.
47 Baijingapp, “Pei Yang, general manager of Shein Mobile: How does Shein eat the ‘cake’ of the app market?” 20 September
2020, https://www.163.com/dy/article/C1E7BVHC051189EA.html, accessed 3 September 2021.
48 Terry Nguyen, “Shein is the future of fast fashion.”
49 Shan Huang, ”Kill Zara.”
50 Wenxuan Sun, 2021.
51 Ibid.
52 Eva Xiao, “How Shein became the Chinese Apparel Maker American Teens Love.”
53 Jonathan Eley and Eleanor Olcott, “Shein: the Chinese company storming the world of fast fashion,” Financial Times, 9
December 2021, https://www.ft.com/content/ed0c9a35-7616-4b02-ac59-aac0ac154324, accessed 7 February 2022.
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Shein: An Ultra-Fast-Fashion Retailer’s Digital Strategies
Panyu’s Nan Village. Using a sewing machine to make clothes according to the designed
pattern, she was able to complete over 1,000 basic garments, or 300 to 400 more-complicated
garments every day. At most, she manufactured eight different designs of clothing in one day.
54
Hua was a more experienced worker with more than 10 years’ experience. She was
responsible for sewing buttons, zippers, and trimming excess threads. She considered Shein’s
order easy to fulfill and was able to complete more than 300 pieces a day. Remuneration of
garment factory workers including Xiaowei and Hua was calculated using a piece rate. Workers
normally worked between 10 and 12 hours a day, with two short breaks, six days a week.55
Second, while Western brands simply outsourced the work, Shein spent years developing close
relationships with local suppliers to form a garment production ecosystem. Suppliers competed
for Shein’s business. If a supplier risked losing money for an 80-item order, then Shein would
order 100 items and bear the financial costs and risks of overstocking on its own. Shein also
ensured a healthy cash flow so that it never defaulted on payment to its suppliers. The company
paid its suppliers very fast and punctually, usually within 30 to 45 days,56 compared to the
industry average of 60 days in China. 57 Shein also required its suppliers to pay upstream
manufacturers on time to ensure factory workers were paid promptly. Otherwise, Shein
terminated the relationship immediately. Besides its punctual payments, Shein’s large number
of orders also made the company popular among its suppliers. Even though the supplier earned
less than USD1 for each garment, the large number of garments ordered by Shein each month
generated a lot of revenue for suppliers and enabled them to expand their businesses. 58
As a result, the collaboration between Shein and suppliers was like a spiraling closed loop:
Suppliers tried to work with Shein’s production management requirements, which enabled
Shein to grow. In return, Shein supported manufacturers to grow and develop by lending them
money to buy equipment and factories. 59
China’s not the cheapest place to manufacture anymore. You can go to markets
like India or Bangladesh; the labor costs are definitely lower in those markets.
But China still has an overall advantage in terms of the speed and flexibility,
and the overall package of infrastructure is still best in class.
– Matthew Brennan, specialist in Chinese mobile technology and innovation60
Unlike the large factories expanding their business to Southeast Asia and South Asia, Shein’s
suppliers that were small factories in Panyu often chose to expand to inland China. They did
not have the financial capabilities to invest overseas. Large companies with large-scale and
intelligent production, such as Hong Kong–based Esquel group and Ningbo-based Shenzhou
International Holding Ltd., were able to set up supply chains and provided training to new
workers. Moreover, as many migrant workers in these small factories were encouraged to return
to develop their hometowns in inland China, the factory owners preferred to follow the national
labor movement trend and take advantage of skilled labor and their hardworking attitude. 61
54 Shan Huang, “Kill Zara.”
55 Ibid.
56 Shan Huang, “Kill Zara.”
57 Shi Mao Tong, “Typical cases,” http://www.shimaotong.com/platform/index/1/HZ909087483f39f10148444b5de52874.html,
in Chinese, accessed 6 August 2022.
58 Eva Xiao, “How Shein became the Chinese Apparel Maker American Teens Love,”.
59 Shan Huang, ”Kill Zara.”
60 Kai Ryssdal and Minju Park, “Is fast fashion catching up to real time?” Marketplace, 22 July 2021,
https://www.marketplace.org/2021/07/22/is-fast-fashion-catching-up-to-real-time/, accessed 4 November 2021.
61 The Fashion Law, “Shein is falling short of modern slavery reporting rules, according to new report,” 6 August 2021,
https://www.thefashionlaw.com/shein-is-falling-short-of-modern-slavery-reporting-rules-according-to-new-report/, accessed
25 August 2021.
8
This document is authorized for use only by Amire Poole in MKT 459 Fall 2023 taught by Robert Kim, California State University – Northridge from Aug 20
