New global fashion force: SHEIN helps the rise and innovation of China's apparel industry
2024-08-26
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1. SHEIN’s global rise and Chinese apparel going global
SHEIN was founded in 2012. From obscurity, it has become the "big brother" of China's cross-border e-commerce industry and has developed into a world-leading online retailer of fashion and lifestyle. Since its inception, SHEIN has maintained a high-speed development trend. According to Wandian Finance, SHEIN's sales in 2023 reached 45 billion US dollars, an increase of 55% over the previous year. In addition, SHEIN's net profit doubled to more than 2 billion US dollars.
These achievements are due to its unique business model, which enables SHEIN to sweep the wardrobes of Generation Z at an astonishing speed. Currently, SHEIN directly serves consumers in more than 150 countries and regions around the world, with a cumulative number of fans on social platforms exceeding 250 million, becoming the top 5 unicorn companies in the world and ranking first in the global shopping app downloads in 2023.
In 2022, SHEIN has surpassed internationally renowned brands such as Nike and Adidas to become the most searched clothing brand on Google, and for the first time replaced ZARA as the world's most popular fashion brand in 2022. At the same time, SHEIN is also Ad Age's most popular brand in the United States in 2022. Previously, SHEIN also won the 2021 Instagram Top 1 Fashion Brand, 2021 Piper Sandler American Young People's Most Popular Brand, 2019 Twitter's Most Influential Brand Award, etc.
In 2023, SHEIN was ranked 70th on the Brandz Top 100 Most Valuable Global Brands list, along with Apple, Gucci, and Mercedes-Benz. Today, SHEIN has become one of the world's top four fashion brands, on par with ZARA, Uniqlo, and H&M. In 2023, SHEIN became one of the top ten fastest-growing brands in the United States, on par with ChartGpt, OpenAI, and Coca-Cola, and is the only fashion brand in the world to be selected.
Recently, Statista, a global data and business intelligence platform, cited the latest data from the ECDB website, showing that SHEIN ranks third among the largest online fashion retailers in the United States, after Amazon and Walmart, and ahead of traditional retail giants Macy's and Nike. SHEIN has also become the only Chinese company among the top five online fashion retailers in the United States.
Offline, the SHEIN brand has also attracted a large number of fans. SHEIN has opened brand pop-up stores in many countries including the United Kingdom, France, Germany, Spain, Italy, Ireland, Belgium, Portugal, the Netherlands, Sweden, South Africa, etc., which have caused consumers to line up in long queues at the brand pop-up stores.
SHEIN's rapid rise around the world is a successful case in the context of modern e-commerce and economic globalization. SHEIN's rise is not accidental, it is the result of the successful combination of digital technology, supply chain innovation and keen market insight to keep up with changes in consumer demand. In the future, it will continue to lead the development trend of the global fashion industry.
Different from the major e-commerce platforms, SHEIN started as an independent clothing brand and has gradually formed a unique dual-engine development model of "independent brand + platform". In terms of independent brands, SHEIN has broken the barriers between production and consumption by building a system covering design, production, sales and distribution. Through fast and timely analysis of popular trends and consumer feedback, SHEIN can quickly transform these trends into products, which not only quickly opens up the market, but also builds a bridge for Chinese small and medium-sized clothing companies to deeply participate in the overseas fashion market. At the same time, as SHEIN's platform strategy deepens, consumers can find many brands and products on the SHEIN platform, forming a huge fashion ecosystem and greatly improving consumers' shopping experience.
It is not enough to simply regard SHEIN's success as an achievement of itself and its founding team. From employment, entrepreneurship and exports, SHEIN's contribution to the local society is obvious. Its continued growth has not only promoted a large number of jobs and the vitality of the local industrial economy, but also provided a lot of opportunities for many young people to engage in cross-border e-commerce entrepreneurship. As SHEIN continues to expand its overseas markets, its economic contribution is expected to further increase.
However, SHEIN's greatest contribution is to bring profound changes to China's clothing industry, showing its unique value. In terms of performance, SHEIN's success represents the success of many small and medium-sized Chinese clothing companies, marking a brilliant turn in the transformation and upgrading of China's clothing industry. However, from a deeper perspective, driven by the SHEIN platform economy, China's clothing industry belts and brands have accelerated their overseas expansion, sales models have become more flexible and diverse, and the supply chain has also undergone a digital revolution. These changes have injected new vitality into the development of China's clothing industry.
2. SHEIN leads Chinese apparel brands to go global
As we all know, China is a clothing powerhouse, and the clothing industry is China's earliest strategic category for foreign trade exports. Chinese clothing has long been deeply integrated into the development of the world. At present, my country produces more than 70 billion pieces of clothing annually, accounting for more than half of the world's total. The domestic market size is 4.5 trillion yuan, accounting for 40% of global sales; in 2023, clothing exports will reach 159.14 billion US dollars. Relying on supporting and innovation capabilities, scale and system advantages, Made in China has become a guarantee of global clothing quality and quantity.
However, in the context of the unprecedented changes in the past century, China's small and medium-sized clothing companies are also facing multiple shocks and challenges. With the gradual disappearance of China's labor dividend and the increasingly complex international political and economic environment, industrial transfer is a major issue that cannot be ignored for China's clothing industry. At the same time, the transformation and upgrading of China's clothing industry is also imminent.
Especially in the past two years, with the upgrading of "new retail", China's clothing industry is quietly changing. The post-95s and post-00s have become the main force of new consumption. They have grown up in a favorable environment and have been influenced by avant-garde programs. They have undergone fundamental changes in their clothing consumption concepts, awareness and methods. Consumers' demand for quality, price and personalization is growing, requiring companies to have stronger design and innovation capabilities. The rapidly changing fashion trends require companies to respond quickly to market changes. Consumers' demand for quality, price and personalization is growing, requiring companies to have stronger design and innovation capabilities. Therefore, new market demands are also changing, and China's clothing industry is constantly making new breakthroughs.
At this critical juncture, SHEIN has fully and deeply participated in all aspects of the transformation and upgrading of China's apparel industry and made special contributions.
First, the SHEIN brand has changed the sales model of the traditional industry. Due to overcapacity, there is fierce market competition and serious internal circulation. Although the Chinese clothing industry has a large market size, there are a large number of small and medium-sized enterprises and the industry concentration is relatively low. This has led to fierce market competition and a lack of cooperation and synergy between enterprises. The rise of emerging brands and fast fashion retailers has increased the complexity of competition. The traditional business model of small and medium-sized clothing enterprises is unsustainable.
SHEIN has completely overturned the traditional clothing retail mode through its unique online on-demand flexible sales model. Unlike traditional store sales, SHEIN adopts a strategy of solving inventory problems or even "no inventory" from the source, relying on rapid response to market demand and agile response of digital supply chain. At the same time, SHEIN takes "technology-driven" as its core strategy, accurately capturing consumption trends and customer preferences in each market. This enables it to quickly adjust design and production, implement a "quick response" model, and improve efficiency from design to shelf. This flexible supply chain management has greatly enhanced its market competitiveness.
In addition, SHEIN has also increased its brand exposure through social media and digital marketing, using independent websites, apps, Instagram, TikTok and other platforms for marketing, and has established a deep emotional connection with millennials and Generation Z consumers. This new sales model has not only improved the brand's market performance, but also profoundly influenced the marketing strategies of other brands, making digitalization and socialization the new normal in apparel retail.
Secondly, SHEIN has led China in building international brands. Although there are many Chinese clothing companies, there are few brands with international influence. Many companies put too much energy on production and sales, while neglecting original design, brand building and maintenance. SHEIN has played a key role in promoting Chinese clothing companies to enter overseas markets and establish global influence.
SHEIN has achieved the ability to respond quickly to market demand by establishing a strong design team and supply chain system, from front-end consumer demand and fashion trend insights to product design, style positioning, as well as production and manufacturing, and quality management standards. The company continues to introduce young designers and creative teams, constantly enrich original designs, and launch products that meet popular trends. This not only enhances the brand's market competitiveness, but also promotes the improvement of the design capabilities of the entire industry. At the same time, based on the influence of the SHEIN brand, more than 220 top IPs in the world, such as Superman, Batman, Avril, and luxury brand MONSE, have successively cooperated with the SHEIN brand in product co-branding and marketing. These IP co-brandings, on the one hand, further enhance the diversification of SHEIN's fashion products and designs, and on the other hand, SHEIN can also help these IPs expand their influence among young consumer groups.
Like a hen leading chicks, SHEIN is clearly committed to the construction of independent brands in the Chinese apparel industry, actively expanding the brand's global influence, and changing overseas consumers' views on Chinese clothing. SHEIN has not only successfully shaped its own brand image and attracted the attention of a large number of consumers, but also set an example for domestic small and medium-sized clothing companies, encouraging them to increase their investment in independent brands and enhance their market position. Driven by SHEIN's demonstration, more and more small and medium-sized enterprises have realized the importance of overseas markets and have explored opportunities to go overseas. This trend will help enhance the awareness of independent brands in the Chinese apparel industry, promote it to move towards the high end of the global industrial chain, and inject new vitality into the entire industry.
3. SHEIN leads the digital revolution in China’s apparel industry
SHEIN is driven by digital technology and features flexible manufacturing to promote the digital transformation of the entire apparel industry. Industrial digitalization is one of the most important contributions SHEIN has made to China's apparel industry. At present, digitalization has become the main theme of the transformation and upgrading of China's apparel industry. The digitalization of China's apparel industry covers the entire industry chain, mainly including production digitalization, marketing digitalization and supply chain digitalization.
On the marketing side, SHEIN uses trend insights to gain an in-depth understanding of consumer preferences and trends, and in response to changes in consumer demand, such as seasonal trends and emerging fashion styles, it adjusts its product lines in a timely manner and launches new series that meet market demand. In addition, SHEIN provides users with a personalized shopping experience, improves shopping satisfaction and increases conversion rates; through the evaluation of the effectiveness of different marketing strategies, it continuously optimizes advertising and promotional activities to maximize the attraction of target consumers; and combines popular fashion topics with KOLs to conduct precise brand promotion.
On the production side, SHEIN's design team responds quickly to consumer feedback to achieve rapid product iteration. Compared with traditional fashion brands, SHEIN's large-scale production and rapid response capabilities enable it to bring new products to market within a few weeks. Through an innovative on-demand production model, SHEIN uses actual market demand to predict sales and control production, thereby reducing excess. Based on real-time analysis, this model allows each SKU to start with a small number of orders, and immediately return orders when sales trends are good, otherwise production will be suspended. This flexible production management model effectively reduces inventory waste.
In the field of supply chain, SHEIN's success is inseparable from its flexible and efficient digital supply chain management. The brand has built a fast-response supply chain ecosystem by using advanced technical means. In the face of rapidly changing market demands, SHEIN can transform designs into commodities and put them on the market in just a few weeks. Through automated production and accurate data analysis, product quality and delivery efficiency are maximized. This innovation not only enhances its own competitiveness, but also provides a new practice model for the entire industry, prompting more companies to realize the importance of intelligent supply chain.
BCG believes that agile supply chains bring three major benefits to companies: more potential revenue, higher capital utilization, and lower warehousing and discount costs or more competitive prices. Among them, the SHEIN brand is an excellent practitioner, using digital capabilities to build on-demand small-order quick-response supply chain solutions. In this model, digitalization runs through the entire supply chain, penetrating into all aspects from planning, production, channel demand to supply chain organization. Brands use digital ecology and tools to make decisions quickly and balance product supply and consumer demand in real time, thereby increasing the full-price sell-out rate, enhancing price competitiveness, and reducing losses and waste.
4. SHEIN continues to empower the entire industry chain and release new quality productivity
As SHEIN continues to build its flexible supply chain system, its all-round empowerment of suppliers is also continuing to deepen.
Chinese SMEs are usually small in scale, weak in strength, and suffer from price wars, which leads to poor profitability. Therefore, it is difficult for them to carry out large-scale equipment replacement, technological transformation and innovation. Insufficient technical level and technological innovation may lead to product homogeneity and affect competitiveness. At the same time, high costs and high energy consumption affect the profitability of enterprises. To this end, SHEIN actively explores process research and development and technological innovation, summarizes mature method rounds, and opens them to suppliers for free.
For example, using the developed glove template, the intelligent template machine can be started with one button, and the needle will automatically sew along the palm contour of the template. After simple training, novices can quickly produce a pair of gloves with smooth seams. The application of templates simplifies complex processes, reduces technical difficulty, and improves production efficiency and product quality. The use of auxiliary tools such as presser feet and pull tubes also allows clothing craftsmanship to achieve the effect of small investment and great improvement.
For the complex sewing of "beaded fabrics", the conventional practice is to manually destroy the beads at the sewing part with a hammer or pliers. With the help of innovative tools, SHEIN R&D personnel installed a presser foot accessory that extends like a bird's beak and has round beads at the front end on the sewing flatbed. With the downward pressure applied during sewing, the presser foot will automatically push away the beads on the fabric and pass smoothly through the gaps between the beads, completing the sewing easily and completely protecting the beads on the fabric.
On the other hand, due to traditional extensive management, China's small and medium-sized clothing companies have many problems in key areas such as human resources and enterprise refined management, design and research and development, and marketing innovation. In 2023, SHEIN announced a five-year investment of 500 million yuan to continue to invest in supplier empowerment work in many aspects such as technological innovation, training support, factory expansion, and supplier community services. It also established the first clothing manufacturing innovation research center, combining its innovative practice of on-demand production with lean production for cutting-edge exploration, exploring the establishment of a "flexible supply chain standard", and continuously assisting the transformation and upgrading of the traditional clothing manufacturing industry. The above-mentioned more than 60 innovative flexible lean tools were carried out in the clothing manufacturing innovation research center.
In addition to empowering technological innovation, SHEIN focuses on comprehensive training for suppliers in various aspects such as business management, organizational structure, and process technology to enhance their overall competitiveness. In the nearly six months since 2024, SHEIN has held 230 supplier training sessions, and carried out national professional skill level certification at the same time to cultivate professional and outstanding technical and management talents for the entire industry. SHEIN has also established a skills training base for clothing industry personnel to supply rural revitalization industry technicians to the central and western regions.
In addition to these, SHEIN has also invested 100 million yuan to help suppliers' factories expand and upgrade. As of May 2024, SHEIN has helped nearly 200 cooperative supplier factories to upgrade 500,000 square meters of factory buildings, benefiting nearly 33,000 people.
In terms of improving the happiness of employees in the supplier community and public welfare, SHEIN has also invested funds to assist suppliers in the coverage and upgrading of supporting facilities such as leisure and entertainment multi-functional rooms, which currently cover 11,000 square meters and greatly improve the satisfaction of supplier employees. As of the first half of 2024, the "Starlight Project" to alleviate the temporary economic difficulties of supplier employees' families has cumulatively funded more than 540 families, of which more than 1,100 children are in the education stage; it has invested funds to help more than 30 suppliers build children's homes, providing free child care, learning and growth services for supplier employees, and has served a total of 28,000 people.
5. SHEIN promotes green and sustainable development of China’s fashion industry
As a world-renowned fashion brand, SHEIN has not only led a marketing revolution in the fashion industry, but also practiced the concept of sustainable development and corporate social responsibility around the three ESG strategies of equal empowerment, collective resilience and lean innovation, and shouldered the historical mission of promoting the transformation of traditional manufacturing and high-quality development of China's apparel industry in an era of great changes unseen in a century.
At present, the environmental protection pressure on the global clothing industry is increasing, and consumers and regulators have higher expectations for sustainable production methods. The industry needs to reduce its impact on the environment and adopt green materials and technologies. Therefore, the green and low-carbon transformation of the textile and clothing industry is imminent, and the sustainable development of "carbon neutral" clothing will become the mainstream in the future.
In fact, SHEIN's innovative on-demand production and flexible supply chain model has always been an important way to reduce waste from the source and promote sustainable development in the industry. At the same time, focusing on lean innovation and collective resilience, SHEIN promotes green environmental protection and sustainable strategies throughout the product life cycle and process. From product raw materials to production and manufacturing, product circulation and other product life cycles, SHEIN has been working with suppliers to actively and continuously promote green and sustainable development.
For example, SHEIN has joined hands with Queen of Raw to innovate waste reduction by reproducing excess fabrics in the industry. SHEIN has established a partnership with Queen of Raw, an American sustainable fashion company, to purchase excess inventory fabrics from other clothing brands for reuse, reduce the use of raw materials and new fabric consumption, and strive to achieve a fully circular vision by 2050. In this cooperation, SHEIN uses the patented software Materia MX developed by Queen of Raw to find the backlog of inventory fabrics of other clothing brands as production raw materials to avoid them becoming textile waste and entering landfills.
Driven by this innovative model, SHEIN has traced back millions of yards of unused second-hand fabrics that meet procurement standards, making it possible to reduce the waste of raw materials in future production. According to Queen of Raw, about $120 billion worth of unused idle fabrics in the fashion industry are incinerated as industrial waste or buried every year. If more than 1 million yards of inventory fabrics can be used as a production source, SHEIN will become a global leader in the field of recycling.
SHEIN also launched the "evoluSHEIN by Design" sustainable clothing program. In order to promote environmental protection and sustainable development, SHEIN also launched the "evoluSHEIN by Design" program in the manufacturing process. By testing and applying more sustainable materials, technologies and production processes, a set of evoluSHEIN clothing materials and production standards have been established. According to the evoluSHEIN by Design standard, it is planned that by 2030, most SHEIN brand products will be purchased from responsible suppliers and the concept of sustainability will be promoted to fashion fans around the world.
To qualify as evoluSHEIN by Design, garments must be made from at least 30% preferred materials, such as recycled polyester, forest-safe viscose and recycled waste, and produced by suppliers that have been third-party audited and verified for high social and environmental compliance. All products are produced using SHEIN's small-batch, on-demand production model and shipped in packaging made from recyclable materials.
Caitrin Watson, Director of Sustainability at SHEIN, said evoluSHEIN by Design supports a more circular system that reduces textile waste and the consumption of new raw materials. "Our goal is to continue to reduce the environmental impact of our products while working with other industry leaders to drive a circular textile economy forward. Partnering with Anitta on this collection is an opportunity to promote the smart fashion choices available to us by engaging our customers in a way that allows them to be part of our evolutionary journey."
In manufacturing, warehousing, logistics and suppliers, SHEIN is accelerating the promotion of energy conservation, carbon reduction and green energy use in the supply chain. Both the supplier's rooftop photovoltaics and the Energy Efficiency Navigator Project are important measures for SHEIN to continuously practice and promote the sustainable development of the entire supply chain. In the second half of 2024, SHEIN will vigorously promote the construction of supplier rooftop photovoltaics while launching the Energy Efficiency Navigator Project, and provide financial support to encourage suppliers to deepen green practices.
Based on the calculation of a 3,000-square-meter garment processing factory, if the seven measures of SHEIN's Energy Efficiency Navigator Project are fully implemented, an annual energy saving benefit of more than 60,000 yuan can be achieved. In addition, suppliers who participate in the promotion and application can also receive cash incentives from SHEIN. By the end of 2023, SHEIN's suppliers have reduced carbon emissions by more than 12,000 tons through rooftop photovoltaics, and suppliers can further achieve energy conservation and cost reduction through the Energy Efficiency Navigator Project.
This is also based on SHEIN's continuous efforts to empower suppliers in the field of green energy conservation on the basis of four major empowerment plans for suppliers, including technological innovation, training support, factory expansion and community public welfare services, so as to comprehensively promote the sustainable development of suppliers with the "4+1" system.
For example, SHEIN uses digital thermal transfer to enable small-batch production and reduce water consumption. Since the application of this technology in 2018, SHEIN has used more than 65% of its products using digital thermal transfer technology. As of June 2024, the application of this technology has saved SHEIN 1.13 million tons of water. In the verification conducted by the international authority Bureau Veritas (hereinafter referred to as BV), the report confirmed that SHEIN's digital thermal transfer technology is a printing process with zero water consumption. In addition, SHEIN digital thermal transfer also uses environmentally friendly inks certified by Oeko-tex and does not contain harmful substances.
Digital heat transfer also reduces fabric waste by improving quality. The technology detects any flaws and imperfections in complex designs or when creating patterns and removes them before transferring the pattern to the fabric. As a result, print quality is improved, increasing the proportion of high-quality garments, reducing overproduction and resource waste at the source.
In addition, the environmentally friendly denim fabrics developed and produced by the "Cool Transfer Denim" jointly developed by SHEIN have also obtained BV certification. Compared with traditional denim fabric production methods, this cold transfer denim process technology can save up to 70.5% of water. Since the gradual adoption of cold transfer denim technology in 2021, SHEIN has saved nearly 9,000 tons of water in the production of denim fabrics, equivalent to about 18 million bottles of bottled water.
The technical solution for cold transfer denim process is to achieve the denim effect that originally relied on multiple washings through digital printing technology. After the computer completes the drawing, the digital printer will print the active ink into the yarn through pressure, directly forming the denim pattern and effect on the fabric, minimizing the consumption of water resources while achieving better color reproduction and color fastness. The ink used in this process technology is also an environmentally friendly ink independently developed by SHEIN with patents, which has the characteristics of high color fixation rate and high color fastness. Compared with ordinary ink, this environmentally friendly active ink can effectively reduce the use of additives, reduce the use of water, electricity and gas, and reduce sewage discharge.
SHEIN also continues to promote the development of green, low-carbon and circular economy in the fashion industry. Following its successful launch in the United States, SHEIN recently officially announced that it will launch the SHEIN Exchange second-hand trading platform in Europe for consumers to trade SHEIN second-hand goods.
6. Be brave to take responsibility, innovate the ecology and create greater glory!
At present, some platforms are overly pursuing traffic monetization, closely linking traffic with bidding, resulting in rising traffic costs and eventually being monopolized by a few players; some platforms have lowered prices and thinned suppliers' profits, making sellers miserable. In contrast, SHEIN has been deeply involved in the Chinese apparel industry, and has continuously promoted the transformation of the development model of the Chinese apparel industry from multiple aspects, including apparel brand building, industry digitalization, empowerment of small and medium-sized enterprises, and green and sustainable development - from relying on low-cost price wars to focusing on brand value and diversified market demand. This transformation will bring profound changes to the entire Chinese apparel industry.
Through the deep integration of intelligent manufacturing and industrial Internet, SHEIN has led these companies to make quick decisions in a complex market environment, enhanced their resilience and vitality in the fierce international competition, and achieved a gorgeous transformation from a clothing power to a clothing power, becoming an important part of the new quality productivity of China's manufacturing in the new era. The improvement of this new quality productivity will effectively respond to the strategic goal of "Made in China 2025", create an efficient, intelligent and green modern clothing manufacturing system, and establish a new global layout of the modern clothing industry centered on China and Asia-Pacific.
In the course of globalization, SHEIN is like an "aircraft carrier" with strong combat capability and agile maneuverability, promoting the entire industry to form a new trade innovation ecosystem. In this ecosystem, design, production, sales and logistics are seamlessly connected, and many small and medium-sized clothing companies have achieved deep coordination and cooperation in the entire industry chain, enabling small and medium-sized enterprises to respond quickly to market changes. On this basis, SHEIN focuses on the difficulties and pain points of core clothing companies, concentrates on technological innovation, production innovation, management innovation, and marketing innovation, and fully empowers China's small and medium-sized clothing companies.
Driven by this new trade innovation ecosystem, the future Chinese apparel industry will pay more attention to brand building and global layout, and ultimately achieve the transformation and upgrading of the industry as a whole. Small and medium-sized enterprises will regain their vitality and become a new force in promoting the development of China's apparel industry. In the future journey, SHEIN will lead more and more small and medium-sized enterprises, like a brave aircraft carrier group, bravely exploring the broader global business sea, and China's apparel industry will surely usher in a more brilliant tomorrow.
(Author: Lin Zhiyong, Director of Silk Road E-commerce Think Tank)
