“SHEIN at the clothing suppliers, has held part of the receiving pricing power.”
A fast fashion independent station seller to the “blue sea billion view net egainnews” feedback, he to the factory to get goods, basically refer to SHEIN’s take price, a certain percentage of upgrade, in order to get the goods.
SHEIN has been the wind vane of fast fashion DTC brands going abroad
Since its birth, SHEIN has been wrapped in a strong “killing spirit” that has allowed Chinese fast fashion independent station brands to see a clear path to the sea, while at the same time taking an absolute advantage over competitors to launch a relentless “crushing”.
(Photo: SHEIN independent site products)
To a certain extent, fast fashion independent sellers are currently being “led by the nose” by a group of head brands led by SHEIN, who get their goods from factories at a price that other small and medium-sized sellers can only add to.
SHEIN has this strength.
The latest data shows that SHEIN’s revenue in 2020 is nearly $10 billion (64.3 billion yuan), which is a great deal among a number of well-known cross-border e-commerce companies.
How large is the volume of apparel purchases that can support $10 billion in revenue? It is no exaggeration to say that if one becomes a supplier of SHEIN, the factory can still live a good life even if no one else purchases its clothes for the next year.
However, SHEIN’s low price and priority sourcing, almost “dominating” the supply side, has formed a “crushing trend” for peer clothing sellers.
But all business, competition between peers, in the final analysis, is the competition on resources.
There is competition in the supply of goods, a piece of clothing to save a dollar, 3 million pieces of clothing to save the cost of 3 million yuan. Hot products priority supply rights, a day earlier on the shelves, earn more money a day.
And the squeeze SHEIN causes on small and medium-sized sellers is also naked.
SHEIN’s “crushing” of sellers in terms of sourcing price
In this regard, Wendy, an independent seller of fast fashion in Shenzhen, has a right to speak.
The company’s products are in the same selection pool as SHEIN’s, and Wendy’s feedback is that SHEIN is on average 5 yuan cheaper per piece of clothing than her company when it comes to sourcing from factories.
That $5 may not seem like much, but it actually adds up to a lot when it comes to the cost of a garment. Not to mention that fast fashion products are known for their low prices, so even a dollar cheaper, not to mention a $5 cheaper cost, can create a huge advantage in terms of cost.
Not to mention the huge volume of SHEIN, and how much cost advantage will be obtained in the logistics end.
(Photo: seller finds SHEIN clothing samples on the floor)
In fact, being in the same selection pool as SHEIN is not a lucky thing for many sellers. Guangzhou independent station seller Tinner said bluntly, just like eating the leftovers of others, there is a natural gap in the status of the two suppliers.
Tinner’s selection pool overlaps not only with SHEIN, but also with several big fast fashion brands such as Zaful, which is owned by Cross Border. The factory usually receives orders from SHEIN and other head big companies first and then produces an additional part according to each other’s orders.
After the bulk orders are delivered to SHEIN, the rest of the “soup and water” will be selected by Tinner. Naturally, the price is not competitive, after all, the volume is not as large as that of large enterprises, and the bargaining power is too low.
The “crushing” of the price
The cost advantage from the supply side will be most directly reflected in the price advantage. shein compared to the general independent station sellers can get 5 yuan of product advantages, then in sales, must be reflected in the price.
SHEIN relies on its fame, one of its greatest characteristics, is that it is cheap. On its independent site, products priced at a few dollars can be found everywhere.
(Photo: Low-priced goods can be found everywhere on SHEIN)
One consumer confessed that he recently bought a $7 bag and a $1.50 hairpin at SHEIN, and that recent consumption has degraded to the point of no return.
According to the head of a domestic private equity, a $3 T-shirt on SHEIN looks exactly the same as a $30 T-shirt on Zara.
Americans are not as rich as we think, especially young Gen Zers.
When Americans turn 18, tuition and living expenses, they have to support themselves by working part-time or taking out loans or grants. These young people who work part-time are big supporters of SHEIN’s low-cost goods.
Currently, the daily expenses of American teenagers have reached an all-time low of $2,150, compared to $3,000 in 2006.
(Data source: Piper Sandler)
In such a situation, who would consumers choose? It’s clear to see.
In this case, SHEIN beat ZARA, H&M and “crushed” their new rivals, including Boohoo.com, ASOS and Missguided.
The essence of price war is to use the cost advantage to fight against the opponent.
Obviously, SHEIN has the strength to fight the price war, but more cross-border e-commerce independent station sellers do not have the ability to start a price war with SHEIN.
According to Quanzhou fast fashion independent station seller Anne feedback, the same a T-shirt, they need to sell to $ 20 to ensure that not to lose money, but in SHEIN is as low as $ 7, a huge price gap, Anne simply dare not have the courage to “challenge SHEIN”. Only behind the powerful SHEIN to pick up the leakage, fishing for a small market SHEIN they do not see.
“It’s a cycle, a positive virtuous cycle for SHEIN, but a vicious cycle for us.” Anne says SHEIN leverages its large purchasing volume to depress purchase prices, then uses low costs to lower selling prices and increase market competitiveness.
After the market competitiveness increased, the volume of consumer spending naturally went up, which in turn created a larger purchase volume of SHEIN, further lowering the purchase price.
For small and medium-sized sellers, it’s one step slow, one step slow, and they will be squeezed out of the fast fashion DTC brand market if they are not careful.
The “crushing” of priority supply rights
Compared with the cost suppression, which leads to the price advantage, what makes ordinary DTC fast fashion brands desperate is the priority supply right.
Guangzhou women’s independent station Lily feedback, SHEIN’s order volume is very large, domestic factories efficient and large capacity, can not meet its needs, a large number of factories are included in its supply system.
Lily previously looking for factories to get the goods, usually 5 days time to get. But after overlapping with SHEIN’s selection pool, everything has changed. The factory gave Lily a schedule of 29 days after the order was placed before production started.
To cope with this situation, Lily had to order in advance, for example, March for April. But then, the problem is obvious: fast-fashion women’s products are updated very quickly, and Lily’s product style overlaps with SHEIN’s, so its response speed often cannot keep up.
SHEIN has been selling styles for a month, and they just got the goods. By the time they started selling, consumers’ enthusiasm for the products had already dropped.
To deal with this situation, Lily had to sell virtual inventory beforehand. By selling virtual inventory, I mean that the product pictures are put up on the website for sale before the product is available, and consumers can place their orders in advance. Wait until the product arrives, then ship it.
This can meet the consumers in the first time to buy the latest products, but the price is also very heavy, that is, the consumer experience is very poor, after a month of order, the product will be shipped, consumers are bound to endless waiting in the wear out all the patience.
Now, Lily is looking for factories outside of SHEIN’s supply chain system, trying to bypass SHEIN and avoid such a situation.
Lily’s situation is not an isolated one, as the above-mentioned Wendy also encountered a similar situation where SHEIN placed a full order to a factory in China, which happened to be one of Wendy’s suppliers. This led to the factory’s schedule for Wendy being extended to 15-20 days later.
Wendy had no choice but to sell false inventory, but met with an unexpected and unpredictable waterloo. After consumers placed their orders, return orders came in due to the long delay in delivery.
As a result, Wendy had to cancel an order worth $1 million with the factory, which directly led to the factory refusing to cooperate with Wendy again.
Shein was able to leave behind a large number of fast fashion competitors just by its sourcing advantage in the supply side, not to mention the fact that the horse-trading effect was reflected in Shein in such a situation.
The Speed of New Arrivals
In addition, SHEIN’s “lightning” speed of new arrivals has crushed a large number of apparel peers.
Once upon a time, ZARA’s 3-4 week production speed crushed traditional retailers who needed 6-9 weeks. However, the subsequent rise of Boohoo, ASOS and Missguided “crushed” ZARA with a speed of 1-2 weeks.
Now, SHEIN “crushes” ZARA’s new rivals again with a 3-day “design and production” speed.
Three days may be extreme, but one of SHEIN’s top suppliers said that it takes only 5 days from receiving orders and fabrics to delivering the garments to SHEIN’s warehouse: 1 day for fabric production, 3 days for cutting, sewing and finishing, and 1 day for secondary processes, such as embroidery and printing.
Perhaps SHEIN’s production cycle for each garment cannot crush its rivals, but at least it can be said that most of the garment production cycle and the speed of new release have surpassed its peers.
In this case, SHEIN’s new arrivals are very fast. Its official website says that it can add 1,000 new products in a single day. In contrast, those British “super fast fashion brands” that “crush” ZARA have become super slow, with only 1,000 new pieces a week.
Only on February 7 and 8 of this year, SHEIN respectively on 1636 and 2462 pieces of new products, the speed is like a hurricane wildly rolling surface, many clothing counterparts, no power to fight, not to mention the power to fight back.
In such a rapid update, the choice is so rich and the price is so low in front of the clothing, overseas young people as fascinated, in SHEIN website to linger, crazy orders.
This contributed a huge amount of traffic to SHEIN.
▌Where does SHEIN’s off-site traffic come from?
For fast fashion DTC brands, the independent site traffic source is a high-cost unsolvable problem. But this is an exception for SHEIN, which carries a natural traffic aura on social media and is almost self-sufficient.
In 2020, Youtube posts with titles like “Is SHEIN a scam?” and “Is SHEIN real?” generated a lot of interest from young people, garnering numerous likes and bringing SHEIN to the attention of tens of millions of young Americans.
According to the latest data, SHEIN reached 19 million mobile app downloads in the U.S. in 2020, ranking No. 7 on the list. (The latest report from market research agency Apptopia)
And according to a survey by investment bank Piper Sandler, SHEIN became the second favorite e-commerce site for teens in the U.S., behind only Amazon. Among other things, SHEIN ranked first in the list of brands that high-income young women would most like to try.
Currently, SHEIN has 22 million fans, based on data from Facebook, the social media that independent sites rely on most. Zaful, which is also a big DTC fast fashion brand out of the sea, currently has just 9.8 million followers.
And on the Facebook ads, SHEIN also spared no effort to push the product hard.
Judging from these ad pages, SHEIN has put a lot of effort into its ads, and the ad material is of very high quality.
SHEIN has also accumulated 1.6 million followers on the short video social media TikTok.
In terms of traffic, very few DTC brands can do what SHEIN does.
According to the feedback from Shenzhen fast fashion independent station seller Qingfeng, their advertising cost currently accounts for more than 40%, but SHEIN’s advertising cost is only 10%, self-contained flow SHEIN has thrown them too far away from Qingfeng in terms of cost.
“Advertising costs account for 40%, logistics costs 20%, procurement costs 20%, this is our normal ratio. Independent station every month turnover, we look profitable, but after deducting labor costs, site costs, etc., is actually not profitable, so we can only rely on Amazon sales to feed the independent station.”
Behind the sky-high advertising costs, reflecting the fact that the independent station sellers are facing a common dilemma – despite the independent station claim to allow sellers to get rid of platform constraints, more freedom. But in reality, most independent sellers do not really have “relative freedom”, just in the traffic of this important point, sellers have to spend a lot of money to buy.
For SHEIN, this situation obviously does not exist.
As a result, while the average DTC fast fashion brand seller is still paying for traffic, SHEIN has been able to break free and get more traffic at a lower price.
In fact, this is also SHEIN in the supply chain “one step faster” to produce a long-lasting accumulation.
Nancy, an independent seller of women’s clothing in Guangzhou, said that if you browse through SHEIN’s TikTok, Facebook and other social media accounts, you will know roughly what the main features of its independent traffic are.
One is ultra-low prices, attracting consumers with low prices unattainable by others.
The other is the latest and fastest dressing tutorial video. In terms of video creativity and technology, most fast fashion videos have a certain style tendency, much the same, and what can play an important influential role is the product style and collocation.
In these two points, the rapid advantage of the supply chain end, giving SHEIN a large number of output advertising material, video material to provide a convenient.
According to its official information, in 2020 SHEIN can achieve the level of 1,000 pieces of new products per day, and in 1-2 months, it will be able to surpass the number of SKUs of Zara for the whole year.
If SHEIN’s publicity team can keep up with the new speed, it means that SHEIN can produce at least thousands of sets of advertising materials and videos on average every day, once all these materials are put out on social media, what kind of traffic effect will be generated?
Once the quantity reaches a certain level, it will produce a qualitative change. And sometimes just being “one step faster” may be able to surpass others by countless.
“SHEIN’s traffic method is so high-end that there is hardly any independent website that can learn it. This is a combination of multiple factors to produce the aggregated effect, not to take one or two points can be achieved.” Independent station seller Mr. Wang said.
The extreme speed of uploading new products, the huge traffic and consumer groups have allowed SHEIN to accumulate a huge database, according to which SHEIN is able to understand the most popular elements that young people like, and these popular elements will be presented in its new products.
These new products, in turn, will make more young consumers become SHEIN’s fans in the form of advertisements, videos and wearing tutorials.
Although, SHEIN has also found fatal flaws in the fast fashion track, at this moment, SHEIN is unstoppably becoming the banner benchmark of Chinese DTC fast fashion brands going abroad, and has become the object of study for many DTC brands.
Of course, it has also become a behemoth that many small and medium-sized sellers cannot reach and dare not confront, crushing the living space of small and medium-sized sellers. But the giant wheel has begun to roll, and how many people are recklessly jumping into the fast fashion DTC brands?
How far can SHEIN go under such circumstances? We’ll see.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/exclusive-supply-chain-stepping-on-the-giant-wheel-to-crush-clothing-peers-1-million-orders-canceled/
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