Behind SHEIN’s 300 billion valuation: 6 million assembly line workers and a netroots economy replicated overseas

Welcome to the era of “real-time retail”.

Behind SHEIN's 300 billion valuation: 6 million assembly line workers and a netroots economy replicated overseas

When many people first heard of SHEIN, the mysterious Chinese apparel giant was already valued at over 300 billion yuan.

With its superb supply chain integration capabilities, SHEIN has taken the “fast fashion” and “direct-to-consumer” model a step further, creating what it calls the “real-time retail model”. It takes only one week for a garment to go from the production line in China to the foreign buyer.

In terms of marketing, SHEIN has replicated the core experience of China’s Netflix economy to the vast global market, which has been a huge success. 2020 results show that SHEIN’s annual revenue is nearly $10 billion, with over 100% growth for the eighth consecutive year.

It can be said that behind SHEIN’s rapid rise is the full combination of two major features of China’s economy: a strong manufacturing (especially apparel industry) base and a developed mobile Internet marketing ecosystem.

1 “One third of the garment production capacity is given to SHEIN”
According to China Customs and the National Bureau of Statistics, the country’s 13,300 apparel enterprises above the scale will achieve a cumulative revenue of 1,370 billion yuan in 2020. china’s cumulative exports of apparel and clothing accessories will be $137 billion (about RMB 870 billion) in 2020.

According to a research report by BOCI Securities in 2019, the number of people employed in the textile and apparel industry at the beginning of the year was around 6 million.

According to an article by the self-publisher Hugo Crossing, industry insiders jokingly said that “roughly one-third of the domestic garment production capacity went to SHEIN”. And this situation will not change in the near future.

It is these dedicated garment workers and factories, large and small, that allow SHEIN to achieve hundreds of thousands of SKUs (Stock Keeping Units, a measure of product variety) per year at a superb price/performance ratio.

In these scattered garment factories in China’s coastal provinces, workers produce the latest products that first enter nearby SHEIN warehouses, then are sent to satellite warehouses in Foshan, and then sold overseas through SHEIN’s independent stations.

Before SHEIN came along, consumers had an image of fast fashion as affordable and cheap, with lots of styles and quick updates. But SHEIN takes these characteristics to an unprecedented level.

SHEIN’s pioneering real-time retail model has reduced the time from design to production of a garment from an industry average of 3 weeks to a minimum of 3 days.

Upstream in the supply chain, SHEIN’s production partners – representatives of the Chinese apparel industry – have the ability to design, pattern, produce and manufacture quickly, not only to produce new models quickly, but to ship small orders of a few hundred pieces within a week.

Browse SHEIN’s website and you can find that from tops, pants, dresses to shoes, hats and accessories, the average price of its products is only a dozen dollars, and there are even many below $10.

Not only that, SHEIN clothing style of the rich degree is also amazing. Last year, SHEIN’s new SKU’s were 260,000. Compare with the same fast fashion ZARA, whose clothing prices are mostly in the 30 to 40 U.S. dollars, but SKU is less than one-third of SHEIN.

The low price and the diverse clothing that follows the trend make SHEIN popular among young people. In October last year, a survey by Piper Sandler, a Wall Street investment bank, showed that SHEIN was the second favorite e-commerce brand of American teenagers after Amazon.

How does SHEIN manage to sell its products at such extremely low prices and still guarantee a certain profit?

According to SHEIN’s official website, the brand can sell 800,000 pieces of clothes a day, which translates to nearly 300 million pieces of sales a year. As a comparison, the domestic clothing “one brother” Hailan House 2019 sales of various types of clothing totaled only 160 million pieces.

Backed by huge sales volume, SHEIN has a strong voice in the supply side and greatly compresses product unit costs through large volume orders.

Despite the fact that the low prices put considerable production pressure on the factories, the factories still chose to rely on volume profitability. Coupled with the fact that SHEIN keeps the pressure of inventory to itself and never defaults on payments to suppliers, many traditional foreign trade factories still seek cooperation with SHEIN as a recipe for business transformation.

In addition, SHEIN has also taken on some of the roles that traditionally belong to factories. For example, for “proofing”, which is an expensive but necessary step in the garment making process, SHEIN subsidizes factories and bears the cost of proofing, so that factories are willing to undertake small orders of 100 pieces of proofing, transforming a large number of fragmented supplier capacity into the ability to return small orders quickly and respond quickly.

At the same time, different combinations of patterns, colors and designs are constantly taken to the front end of the market for testing and eventually polished into explosive models.

In order to cope with the rising labor cost in the textile and garment industry in recent years, SHEIN has adopted the model of “daily cash + more pay for more work”. Workers are paid daily on a piece-rate basis, scan a QR code to record their daily work progress, and receive their wages through SHEIN’s supply chain management software.

“The emergence of SHEIN actually gives us small manufacturers the opportunity to transform, and this year many factories here in Shantou have also switched to OEM for them. Compared to international brands, SHEIN’s requirements for manufacturing, packaging and other processes are much lower, and the main fight is capacity and speed.” A small supplier of SHEIN responsible for the self media “Hugo cross-border” said.

But skeptics believe that SHEIN model may be an “overdraft” of this industry chain resources. Under the strategy of receiving orders at low prices and speed, workers in the core area of Guangzhou’s garment industry generally receive a monthly salary of only 2,000-4,000 yuan.

In a report on a visit to a garment factory in Guangzhou, the self-publisher “Tailor” mentioned that workers reported that the unit price of piecework production mostly ranged from a few cents to a few cents. “If I want to get a monthly salary of 7,000 to 8,000, I have to work about 15 hours a day. You also have to be relatively quick with your hands. Cervical spine problems and rotten buttocks are the problem for everyone.”

Another SHEIN supplier interviewed by “Hugo cross-border” also pointed out that, in order to save costs, SHEIN uses low-end grade fabrics and accessories. Since SHEIN’s own factory has been overloaded, it has been working almost without rest in the face of massive orders.

2 Replicating the Netflix economy overseas
In addition to having the advantage of the Chinese supply chain, SHEIN’s success is also dependent on maximizing the use of global social media trends.

In an interview with business media outlet Jing Daily, Emily Trenouth, head of influencer marketing at MediaCom, said SHEIN’s social media strategy is gaining traction through its “Redditor Affiliate Program. “They’ve built very solid partnerships with big weblebrities, while maintaining close collaboration with a large group of smaller weblebrities.”

In other words, while today’s DTC (Direct To Consume) brand newcomers are talking about reaching out to consumers and partnering with KOLs (Key Opinion Leaders) and KOCs (Key Opinion Consumers), SHEIN has taken the “celebrity economy” out of the equation.

Malcolm Yam, Managing Director of SHEIN India, has revealed that SHEIN has worked with around 2,000 influencers in 2018, its first year in India, and the company is in touch with potential partners almost daily.

In fact, since 2010, SHEIN has been looking for online celebrities on overseas platforms Instagram, Youtube, and Facebook to exchange free clothes or commercial partnerships for promotional traffic and sales conversions.

This sensitivity may be related to the experience of SHEIN founder Xu Yangtian. Public information shows that after graduating from Qingdao University of Science and Technology in 2007, he was in charge of SEO (Search Engine Optimization) in a foreign trade online marketing company. The concern for the overseas traffic situation and the emphasis on the efficiency of marketing placement made him choose to build a connection with consumers with the help of online celebrities.

Just recently, SHEIN has also partnered with Addison Rae, a top-streaming internet celebrity on TikTok with 79 million followers, to post relevant short video content. On TikTok, videos with the hashtag #SHEIN have been viewed 6.5 billion times as of April 2021.

By clicking on these hashtags, you can see TikTok experts with tens of millions of followers trying on SHEIN clothes, and small netizens with only a few thousand followers showing the excitement of unpacking SHEIN packages. These short videos with dynamic music and interesting clips are teasing the viewers’ desire to buy.

Domestic consumers are no strangers to this kind of “grassroots” content. Before SHEIN, the Netflix economy incubated by social media + e-commerce platforms was developing in China in spurts.

On platforms such as ShakeYin, Raptor, B Station and Xiaohongshu, new national brands such as Perfect Diary and Hua Xizi rose rapidly by virtue of this model. Among them, Huaxizi has achieved a sudden surge in sales by binding the phenomenal live-streaming with the anchor Li Jiaqi.

Previously, the rise of a number of domestic brands founded by net stars has verified the feasibility of the model.

In 2014, Zhang Dayi opened her own Taobao store for women’s clothing, “My Huanxi’s Closet”. At this time, she had already attracted more than 250,000 fans on Weibo with her unique style of dressing herself.

Netflix’s fan base is a huge potential consumer, and the trust between netflix and consumers can greatly reduce promotion costs.

During the initial launch of “My Joyful Closet”, a record of 5,000 pieces of clothing were sold out in two seconds.

The first time the company was launched, it had a record of 5,000 pieces of clothing sold out in two seconds. The following year, Zhang Dayi’s Taobao store made 300 million in revenue for the year ……

It can be said that the stimulation of the development of e-commerce in China has given birth to more mature and diverse paths to cash. In English, the term “net popularity economy” is often expressed in Chinese pinyin “wanghong”, which shows the overseas attention to the development of net popularity economy in China.

After the rise of the new generation of short video platforms, such as Racer and Jitterbug, the “net popularity economy” has been pushed to a new level again. In the era of short videos, the threshold of content creation has been greatly lowered, and the rise of a new generation of net celebrities has accelerated.

At the end of last year, Charli D’Amelio, a 16-year-old girl from the United States, gained 100 million followers in TikTok in just one year.

At the same time, with the algorithm mechanism and the length of time, short videos can reach users more precisely and further shorten the path from seeding to consumption.

And that’s why, outside of Instagram and Youtube, SHEIN is increasing its investment in TikTok.

“As we start swiping short videos on TikTok and Reels without having to watch a full 15 to 20 minute YouTube video, brands and influencers can showcase more looks in less time and ultimately attract more leads.” says Emily Trenouth, head of influencer marketing at MediaCom.

At this stage, SHEIN is even trying to replicate the hot live-streaming bandwagon model at home to overseas. According to media reports, SHEIN has gone live with its own separate app.

For example, SHEIN has invited a number of foreign KOLs to conduct online link-ups and round-table discussions at the same time during some live-streaming events.

The emergence of SHEIN can be largely seen as a transformation and upgrade of Chinese manufacturing. The company has got rid of the past image of Chinese enterprises as “OEM” and created a new global brand, taking all the added value of the whole industrial chain. This means the evolution from “Made in China” to “Created in China”.

However, the labor cost advantage of China’s manufacturing industry is gradually fading, and SHEIN’s social media marketing strategy is being imitated by more and more successors.

In the long run, SHEIN, with its mysterious color fading, may have a long way to go.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/behind-sheins-300-billion-valuation-6-million-assembly-line-workers-and-a-netroots-economy-replicated-overseas/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2021-05-30 22:28
Next 2021-05-30 22:33

Related articles