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Having flooded Europe and the United States with its ultra-cheap clothing, the Chinese platform is now looking to go public.
On social media, Shein has become a household name. Videos of influencers unboxing parcels full of the brand’s clothes and accessories are proliferating and racking up billions of views, particularly on TikTok. This massive presence illustrates the spectacular rise of the Chinese company, which has become one of the symbols of ultra-fast fashion.
Behind Shein is Xu Yangtian, also known as Chris Xu. An online marketing specialist, he launched his business in the late 2000s. The company really took off in the early 2010s by shifting its focus to clothing and accessories and taking the concept of constantly updating its collections to a whole new level.
Shein now offers a vast number of new items, with several thousand new designs added online every day. This abundance is accompanied by extremely low prices: some T-shirts are priced at around 5 euros and dresses at around 10 euros. Once produced and packed, the items are shipped to a wide range of countries.
Within a few years, the company had thus established itself in the United States and Europe. Founded in China, it very quickly turned its attention to international markets rather than seeking to conquer the Chinese market as a priority. This strategy enabled it to tailor its product range more effectively to the expectations of Western consumers.
Shein’s financial growth is equally impressive. According to estimates cited in the article, its profits are said to have risen sharply in 2023, reaching around $2 billion. However, the company remains very tight-lipped about its financial results, which fuels speculation about its financial situation.
This success is fuelling discussions about a possible initial public offering. Having established its headquarters in Singapore, Shein has considered several financial centres. Wall Street has been mentioned in particular, but tensions between the United States and China make this prospect more complicated. London also appears to be a serious possibility. The company’s valuation could reach tens of billions of dollars.
A fully digital strategy
Shein has grown without relying on a traditional network of permanent shops. The brand focuses on digital channels, although it does occasionally open pop-up shops. Its business model is based, in particular, on highly aggressive marketing techniques and a very detailed understanding of its customers’ behaviour.
Social media plays a key role in this strategy. Many accounts and influencers post content designed to encourage purchases, whilst the platform uses various promotional mechanisms to encourage users to return regularly.
TikTok, in particular, has proved to be a powerful catalyst. Shein has developed a strategy on the platform centred on numerous small and medium-sized influencers, who are able to showcase its products to a young audience. The company therefore spends considerable sums on digital advertising and is one of the major advertisers on Meta’s platforms.
Data-driven production
One of Shein’s main strengths lies in its ability to identify new trends extremely quickly. The company relies heavily on data and automation to identify what consumers are interested in and adapt its product range accordingly.
Its business model therefore differs from that of a traditional fashion brand. Rather than designing large collections well in advance, Shein is able to create and test thousands of products every day.
The garments are initially produced in very small quantities, with batches sometimes limited to around 150 or 200 items. When a design proves popular, production is quickly scaled up. This approach enables the company to move away from a predictive model towards a much more responsive one, in which trends observed almost in real time determine production.
Speed is therefore a key element of the system: the time between the design of a garment and its release onto the market can be extremely short. This way of organising things also enables Shein to keep stock levels relatively low and make significant savings.
An extensive network of suppliers
Behind this efficiency lies a vast Chinese industrial network. Shein works with several thousand companies and workshops, particularly in the Guangzhou area in southern China.
However, this organisation has faced criticism regarding working conditions at some of its subcontractors. The article refers in particular to workers putting in long weeks and being paid partly on a piecework basis. Shein, for its part, states that it carries out audits at its suppliers’ premises, takes action when breaches are identified and imposes rules on its partners.
The company is also facing allegations of plagiarism. Designers and various brands have accused Shein of copying some of their designs. In light of the numerous complaints, the group is setting aside financial provisions to cover any potential legal disputes.
A model facing environmental criticism
The environmental impact of ultra-fast fashion is another major issue. Shein defends its small-batch production system, explaining that it helps to minimise unsold stock. Its critics, however, believe that the main problem lies in the huge volumes of clothing brought onto the market.
In France, billions of items are sold every year, and the proliferation of new styles is helping to fuel ever-increasing consumption. Environmental organisations also criticise the short lifespan of many garments and the carbon footprint associated with their transport, particularly when orders are shipped by air.
The pressure is also becoming political. In France, the authorities have taken up the issue of fast fashion, and proposals aimed at limiting its impact have been examined. Among the measures discussed are, in particular, environmental incentive schemes and restrictions on advertising.
At the same time, Shein is seeking to defend its image and interests with politicians. In particular, the company is engaging in lobbying activities, at a time when its business model is coming under increasing scrutiny.
Despite these controversies, Shein is continuing to expand and is seeking new sources of growth. In particular, the group is trialling a marketplace model in several countries, enabling third-party sellers to sell their products on its platform.
This diversification comes at a time when Shein is still planning for its financial future and considering an initial public offering. However, between allegations of plagiarism, questions about manufacturing conditions, environmental criticism and the potential for tighter regulation, its business model remains under pressure.
The company nevertheless retains considerable commercial clout and the ability to adapt quickly. It remains to be seen whether regulatory and political obstacles will actually succeed in slowing its expansion, whilst other Chinese e-commerce platforms, notably Temu, are in turn experiencing spectacular growth.