Fast fashion pioneers left behind
How Shein makes Zara and H&M look pale
December 17, 2023, 1:42 p.m
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Manufacturers of fast fashion all have the same goal: produce looks that are as cheap as possible and get them to customers as quickly as possible. The Chinese online retailer Shein has perfected the principle with a new supply chain strategy.
Shirts for 5 euros, jeans for 15 euros, winter jackets for 25 euros: With such prices, the Chinese online textile retailer Shein is competing with fast fashion pioneers such as the Swedish H&M group and the Spanish Zara parent Inditex. The Chinese rival, which wants to go public, has now become a real challenge for European fashion chains.
According to a study by the analysis company Coresight, the Chinese group now has a market share of almost a fifth in the affordable and always current fashion business, putting it ahead of H&M and the Spanish Inditex with its brands Zara, Pull&Bear and Bershka. Behind them are Primark, Asos and Boohoo. According to Coresight, Shein had global sales of $23 billion in 2022.
The three textile companies have one thing in common: They copy the looks from the catwalks and bring them to customers very quickly for little money, hence the term “fast fashion”. They are often accused of stealing ideas. In a July lawsuit, Shein was accused of violating intellectual property rights by using artificial intelligence and a special algorithm to scour the Internet for design ideas.
Fast faster the fastest
However, according to analysts and investors, Shein’s most important strategy is the network of mostly Chinese suppliers who – contrary to the usual approach – first accept small initial orders, which are then increased depending on demand. “The real strength of Shein is that they admit not knowing what you want to wear,” says Rui Ma of the Tech Buzz China newsletter. “But they are confident that they can ramp up production very quickly.”
This extremely flexible supply chain made it possible for Shein to implement a completely different business model than other fast fashion providers such as Zara and H&M. They try to predict what will be particularly trendy and align their production accordingly in advance. “Zara or H&M still anticipate fashion trends, order the product three to 12 months in advance of sale and commit to fairly large order quantities,” says Simon Irwin, a former Credit Suisse analyst.
A 2022 study showed that Shein receives ordered goods within five to seven days and can then send them directly to customers via air freight. However, delivery can take up to two weeks, depending on the product and the customer’s location.
Shein’s direct sales are another advantage over brick-and-mortar retailers, who sell the goods through their stores and have to keep them in stock, says Sheng Lu, a professor at the University of Delaware. Lu analyzed the so-called Stock Keeping Units (SKU), i.e. the products that are in stock, including all sizes and colors of an item. According to its data, Zara and H&M introduced 40,000 and 23,000 new items to the US market from November 2022 to November 2023. Shein sold 1.5 million products during the same period.
Another difference: While Shein mainly has its sewing done in China, H&M and Inditex also have a lot of their sewing done in other countries. 98 percent of Inditex production was manufactured in twelve countries in 2022, including Portugal, Morocco, Turkey and Spain. According to a spokesman, H&M has most of its items sewn in Bangladesh and China. Shein declined to comment on his supplier network. However, recent import data shows that virtually all of the products Shein imported into the U.S. came from China.