The topic we’re talking about today is SHEIN. Does this brand count as China’s first global fashion brand? Let me start with a brief introduction to SHEIN’s background. Some of the data I have on my memory may not be so accurate, and you are welcome to point them out.
The company was founded in 2008, but its booming period is in the last four or five years. The company made wedding dresses in the early days and was not called SHEIN in the early days. After changing their name to SHEIN, they began to focus on cross-border women’s clothing e-commerce. They are now said to have sold to 200 countries and regions around the world, with seven logistics centers around the world, logistics centers in China, and design centers in China.
Other basic data such as every day with 1,500 new products, a development capability that is far greater than that of other brands I’ve heard of today. I learned earlier that Handu’s clothes and clothing houses are about 30,000. ZARA is about 20,000 models per year. SHEIN prices range from $5 to $15.
How Do You Feel About Hearing These Data?
Since the reform and opening up, we have a lot of Chinese fashion brands to go to the world as their own development goals, then can we call SHEIN Is China’s first global fashion brand?
When I was live streaming, some compared SHEIN to ZARA. Frankly, whether it’s development, operations, sales, supply chain, they’re almost comparable.
ZARA should be the best company in the traditional apparel business that is digitally transforming. Even so, they’re only paying about $20,000 a year. The development of new products mainly depends on designers to see shows, run the street to see shops, or museums and art galleries around the world to collect new design elements.
Companies like SHEIN are more data-driven than traditional companies, which rely more on manual research and information gathering. Data collection, for example, relies on the data retained by end-users while they are visiting the platform to decide what to do with the design. Decision-making by people is not the same as decision-making by data, and their corresponding supply chain systems are different.
At least half of ZARA’s supply chain systems belong to their supply chain systems, such as tailoring centers and logistics centers, plus the integration of external small and medium-sized factories. Zara, of course, is the best in traditional companies in terms of supply chain integration.
SHEIN’s supply chain systems are technically powerful, but their supplier plants are not smart factories or highly digital factories themselves, and the plants themselves rely primarily on “manpower and time investment” to meet SHEIN’s high requirements. However, industry reviews say they pay suppliers well, plus the size of their orders, so it is understandable that many suppliers are willing to work with them. But I’ve also recently heard about their increasingly demanding suppliers, and I’m not sure about the reliability of the news.
So they are not the same as digital companies in terms of specific operating models, and they operate online and offline in a different way. So its previous model, the speed of the previous model, the frequency of the previous model, and the width of the SKU is much larger than ZARA. From a publicity point of view, most people know ZARA for fast fashion, so comparing the two is inertia, but they are two models, in my opinion, there is not much comparability.
IS SHEIN A CHINESE BRAND?
Back to today’s topic about whether SHEIN is the first Chinese global market brand. Here are a few additional backgrounds. First, it is now cross-border e-commerce, it has little market influence in China. The second factor is that although its overall operational headquarters are in China, it does not deliberately emphasize its Chinese brand in terms of publicity orientation, or even deliberately downplay its national identity in some ways. Of course, there is a reason, because in the face of such a large national market, if you deliberately emphasize national identity, the political factors to face are likely to turn it into a crisis. So as a businessman, he has a point in doing so. But I do not know in these two premises, you will define it as a Chinese brand?
I don’t think SHEIN is a global Chinese fashion brand, it doesn’t depend on our definition. Depending on whose definition? It’s up to the consumer.
If the consumer defines you as a Chinese fashion brand, you are the Chinese fashion brand. But as far as I know, today’s consumers are not very concerned, even if they may not know where SHEIN comes from. So whether it can be defined as a Chinese fashion brand is a question mark. From this point of view, we can’t define it as a global Chinese fashion brand. But objectively speaking, it has become a worldwide clothing platform company from China. From this point of view, it is also remarkable.
Is SHEIN a Brand?
Let me move on to the next topic, will people define a company like SHEIN as a “brand”? I’ll add my definition of “brand”. I think a brand is called a brand, must-have brand value and brand added value. If you don’t have this part of the brand added value, you can only be called a trademarked product at best, not a brand.
There was talk of the designer’s original ability during the live broadcast. Because some think that if a brand does not design original ability, it is not called “brand”.
I don’t think the role of designers on this platform is that important. Because their designers are more by the data requirements to cater to the public, to meet the public approach does not need to think creatively, so basically certainly not original designers. They have to pay so much in a short time, but also to ensure that such a fast rate of payment, can only be industrial assembly line design, so its design value in such a platform is difficult to be reflected. If you’ve seen his product, you don’t see any element of Chinese originality, it’s designed for the local market, and there may be a lot of seemingly repetitive models.
Fast fashion positioning is often difficult to play the value of designers, so even if it becomes a brand out of China, its value must not be by design to win, but by its operation. It’s good at operations, not the product itself.
SHEIN defines it as a “branded platform”, in other words, it is not a product like our brand, but a branded platform.
But so far, SHEIN seems to me to be a selling platform, and it doesn’t run its brand. Of course, for a popular brand like it, if it succeeds in terms of market share, it will be successful. Now it’s a store for women’s cross-border e-commerce, which is completely different from ZARA in terms of brand value, and in 2019 ZARA’s brand value rankings are in the top 10. Although ZARA has been criticized for plagiarism, it does enable many ordinary people to afford luxury styles they could not afford, known as “fashion democratization”. But SHEIN has yet to establish its brand value.
The Future of SHEIN
After talking about SHEIN, let’s talk about its future development. SHEIN is now in more than 200 countries and is said to be earning almost $10 billion. How do you think SHEIN should develop if it wants to continue to expand its market?
Expand into the Chinese Market?
Now SHEIN’s model is to first spread the net, test out what styles each region or country probably needs, break down from those styles, hatch the corresponding brands and then develop. I think it’s a good path.
At the same time, because what it’s doing now is cross-border women’s wear, is it possible to make the Chinese market its next target market?
But they have little chance in the Chinese market. Because there are too many similar brands and e-commerce. They’re all fast.
Expand to the Full Range?
SHEIN is now involved in almost all product categories of lifestyle: men’s, women’s, children’s, beauty, accessories, and other body accessories. But at present, the most concentrated in clothing. In the future may be able to expand to more, such as furniture, porcelain, stationery, and other household items.
Expand into Offline Stores Abroad?
I think it depends on the specific market to do offline abroad. Especially now, the difficulty of doing offline is still very high, stores are particularly affected by local cultural policies and laws, and the cost of input is relatively high, so the probability of success of brick-and-mortar stores is relatively small.
Some think you can try the normalization of flash stores, this is a possibility. In addition, SHEIN offline store has its advantages, that is, data advantages. Before it entered the market, it had a lot of data on local consumers. It’s theoretically more accurate than those who don’t have the data to open offline stores.
Life Cycle and Future Risks?
The next time I also asked a new question, because our Internet company has grown very fast, but its life cycle is very short. Do people think that a platform like SHEIN is an explosive brand, or can it be a brand with a longer life cycle? Do you think it’s a platform of long-term value? What risks do you think it will face in the next development?
I think first of all this platform will face the problem of trade protection, I think this is why SHEIN is currently deliberately downplaying the national image, it does not deliberately promote it as China’s fashion brand. But it now has some influence, with app downloads in many countries also within Top10, and some even topping Top1, so I think sooner or later it may catch the attention of some governments. But what is good on this platform is clothing, not high-tech content of things, perhaps not so high trade risk.
In addition, how the platform catch users is also a big challenge. As SHEIN expands, so will its competitors. In overseas markets, how to capture the attention of young consumers in the Z-generation, which is easily diverted quickly, is a hidden risk issue.
There is also a legal and moral hazard. Because SHEIN has entered many mainstream markets in Europe and the United States, the laws and regulations of these markets are more robust, so it also means that they face a greater risk of legal action.
Such as the risk of plagiarism, the risk of user data privacy, legal risks, and the use of labor. These problems are likely to be big problems in both developed countries in Europe and the United States. Its products are cheap, and local consumers or some non-profits can question the labor treatment of the suppliers he uses, and the factory environment. Some European and American countries are very concerned about this kind of social equity. This corresponds to many issues related to social responsibility. If you are not careful, you may face prosecution. These increases in costs and are accompanied by risks.
Do you think the SHEIN platform is highly replaceable? In other words, does it have core competencies? Is its competitive barrier high or low? I know they’ve put a lot of effort into technology, too. I’ve also heard that its supply chain system is strong. But will there be a chance of replacement in the next 5-10 years?
I have no answers to these questions for the time being. However, you are welcome to give feedback in the comments section. During our sharing discussion this time, there are a few audiences involved, I also got a lot of information from our audiences’ feedback, thank you very much.