Problem
Shein was launched in 2008 by Chris, a search engine optimization marketing specialist, under the domain name SheInside.com. The online platform initially sold wedding dresses to western customers. Slowly, Shein began to expand its offerings and, alongside wedding dresses, began to sell women's wear. This, over a period of time, became the main staple of its business. Throughout the early 2010s, Shein launched overseas websites in Spain, France, Russia, Italy, and Germany. Back then, Shein was just an online platform and was not involved in any aspect of garment design or manufacturing. It did not have its own supply chain.
In June 2021, China-based online-only retailer Shein surpassed global giants Zara and H&M to become the largest fast fashion retailer in the US by sales, according to data analytics platform Earnest Research. As of June 16, 2021, Shein comprised 28% of US fast fashion sales, ahead of H&M (20%), Zara (11%), Forever 21 (10%), and Fashion Nova (8%). The platform attributed Shein's sharp growth to the brand's mobile-first strategy, which caught on with consumers in a big way during the COVID-19 pandemic that accelerated the adoption of mobile and other forms of digital shopping.
Experts attributed Shein's success to its aggressive, data-driven, real-time fast-fashion business model that cut the time from design of a new garment to mass production from 2-3 weeks to just 5-7 days. According to Matthew Brennan, a tech analyst, "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.
According to analysts, the COVID-19 pandemic boosted sales of online retailers, giving online-only players, such as Shein, an edge over fast fashion giants such as Zara and H&M that had big physical stores. The pandemic proved to be a huge boon for Shein as it spurred annual sales in 2020 to almost three times that of the previous year. Shein's sales rose 250% year-over-year to a staggering US$10 billion, up from US$4.5 billion in 2019. Reportedly, it generated about US$10 billion (RMB63.5 billion) in revenue in 2020, which was reportedly its eighth consecutive year of revenue growth over 100%.
Going forward, one of the biggest challenges for Shein would be to continue selling to a global audience without a physical presence in individual countries and an understanding of the local culture. Moreover, sustaining its position in a crowded fast fashion market where Zara, H&M, and ASOS had a strong presence would be a tough task for it, felt analysts. Also, emerging apparel retailers such as Fashion Nova and Boohoo had begun to target young female shoppers with affordable items, similar to Shein.
1. Describe Shein's business model and the factors that contributed to its success.
2. Examine the role of the COVID -19 pandemic on Shein's performance as a fashion giant.
3. Identify the main challenges faced by Shein.
4. Suggest possible competitive strategies that may have been adopted by Shein to establish its presence in the online fast fashion industry.