Hi everybody, Mukesh Ambani is beginning a fashion Revolution with the most powerful brand in the world and this brand goes by the name Shein. I must tell you that this entry of Shein is so threatening that it is going to put zudio, Zara and H&M all in deep deep trouble now if you remember in 2020, the Indian government banned Chinese apps over data privacy and there were two big giants who got kicked out of India one was Tik-Tok which was the fastest growing social media platform in the world and the other was a legendary fashion brand that we all know today as Shein and if you think Shein is just another fashion brand look at this Zara and H&M are the most successful fast fashion brands in the world in 2024 while Zara with 2,200 Stores generated a revenue of $29.1 billion H&M with 4,300 stores at $22 billion where Shein alone generated a revenue of $48 billion.
So, if you see Shein generates almost the same Revenue as H&M and Zara combined and that two with zero stores in the world yes Sheen has absolutely no stores in the world and yet it is almost equivalent to both Zara and H&M combined and now Sheen is back in India to wage a fast fashioned war against the most formidable Brands like Zara H&M studio and snitch and it’s not just Shein the mammoth but Shein the mammoth with the Godfather of Indian business who goes by the name Mukesh Dirubhai Ambani, so the question is how on Earth does the world of fast fashion work how did Shein become the Godfather of fast fashion in the world and with Shein and Reliance both in India together what exactly is going to happen in the Indian fashion Market.
How did Chris Xu start Shein?
The story of Shein begins in 2008 China while the Western world was grappling with the worst economic crisis of the decade but while the West Was grappling with the recession a Chinese entrepreneur named Chris Xu found a business opportunity that almost seemed like a gold mine now from the look of it if I tell you that Xu built the biggest fashion brand in the world what could be his background most people would guess that he would be a fashion genius or a tech genius or at least a retail genius but you know what he specialized in he specialized in none of these skills as it turns out he specialized in something called search engine optimization so he basically knew how to rank his website when you search things on Google so the question is How did an SEO specialist beat a 49 year-old brand like Zara and a 77 year- old brand like H&M well it all started when he spotted a golden opportunity in China’s manufacturing sector so he noticed that one product category that was exploding in e-commerce in both the US and Europe was this category of wedding dresses at the time just like a lehenga in India sells for 3 lakh and 30 lakh even though its making cost is barely 30,000 rupes a bridal gown could cost over $1,000 to $3,000 in the west and by the way guys even if the lehenga cost you 30,000 rupees they don’t cost more than 3,000 rupes to manufacture if they sell at 30,000 rupes and when Sue understood this magical equation something hit him he did the math and he understood that if he used the Chinese suppliers they could produce the same gowns at one-third the cost so Xu launched a website in 2008 called she inside to sell wedding dresses from Chinese manufacturers directly to Global consumers and he did it with zero inventory yes zero inventory.
How did Shein start Drop Shipping?
How, Well Shein was essentially A Drop Shipping Venture as in it was a digital middleman with no inventory of its own so Xu would post photos of dresses and apparels from gonga sprawling wholesale markets when a customer placed an order only then would she inside purchase the item from the supplier and then ship it out this model meant Zero inventory risk and extremely low operating cost and when she inside offered crazy discounts on the Gown the consumers in the west were willing to tolerate longer delivery times in exchange for rock bottom prices then by 2010 Xu expanded the catalog to broader women’s fashion while still relying on third party wholesalers for merchandise and he did exactly the same thing his company spotted trending Styles at unheard of prices used SEO to draw International traffic to its website and made a ton of money with zero inventory risk but the question over here is Drop Shipping is not enough to be Zara and H&M.
How did Shein becoming the Godfather of fast fashion
How did Shein go from Drop Shipping to becoming the Godfather of fast fashion well this is where the fast fashioned supply chain comes in now people here’s what you need to understand about the fast fashion supply chain and where exactly does the gold mine lie look at this the fast fashion supply chain starts with transporting then goes to designing then to manufacturing then to shipping store presentation and feedback and then it comes back to Trend Sporting.
How Shein Spot trend
Data Analysis as in how efficiently can a brand detect and analyze emerging Trends from global fashion scenes so Shein deployed some Cutting Edge AI predictions and data analysis over here Sheen’s process starts not on the designer Sketchbook but with data every day Sheen analyzes mountains of customer Behavior data to identify emerging fashion trends in real time this intense data scraping includes app searches browsing patterns social media trends and purchasing history so through this data they predict which Styles which colors and which patterns are heating up and in which location for example if there’s a sudden spike in searches for oversized street wear or a particular dress style is going viral on Tik Tok Shein transporting AI will flag it these insights feed directly to Shein design teams. who can create new product samples in a matter of days and and they quickly pass it on to the manufacturer.
How Shein Manage Design
which is speed as in how quickly can the insights from transporting be communicated to the design and production teams here Shein built a smart supply chain centered in guango this smart supply chain connected more than 6,000 small garment factories through a common information system so it’s almost like thousands of restaurants in India being connected by swiggy and then they have their own proprietary system known as LATR or large scale automated testing and reordering system this system tracks the performance of every new product launched on the website and places the orders to the factory instantly for example if they notice that old money sweatshirts are frequently appearing in searches and posts in regions like North America and Europe within days Sheen’s design team sketches and develops a few variations for these old money sweatshirts and they quickly create digital and physical samples to see how they look in reality once the designs are approved the details are then sent to factories and now in Sheen’s smart chain as soon as the factories get this data they quickly produce about 50 to 100 units per design to test the market response and as soon as these sweatshirts are available on Shein website the company monitors sales data very very closely and here’s where the large scale automated testing and reordering system tracks how well each sweatshirt is selling so if these old money sweatshirts sell out quickly and continue to generate High search volumes the LATR system automatically places orders for larger quantities and conversely if these sweatshirts don’t perform well the production is halted immediately which minimizes their inventory waste and financial loss and then the same factories move on to the next big Trend now if any one of you have ever tried importing from China you would know that the biggest roadblock when it comes to Chinese factories is MOQ minimum order quantity demand for those who don’t know the Chinese vendors do not ever take orders for 50 or 100 pieces especially for low cost items like clothes so they would always ask you to order either 1000 or 10,000 pieces but here’s where Shein has a special superpower Shein tells these suppliers that if they join the supplier Network they will get small orders but they will get many small orders which will keep their factories running consistently for example if a supplier called denim craft partners with shein. shein May place an order for 100 units but they will place these small orders 50 times a year so denim craft gets a steady order of 5,000 units per year which gives them both working capital and it allows them to maintain production levels all throughout the year and in return Shein can quickly get trendy denim style jeans that can keep Pace with a fast changing fashion trends So just like this Shein has vendors who can do everything from jeans to shoes to t-shirts to sleep wear to gowns to every category you can possibly think of.
How Shein Manage Manufacturing
Which is speed and scale of manufacturing as in how quickly can the manufacturer rapidly produce use and adopt to changing order quantities and Designs all across the world and here since there is a factory for every category in China for Shein there is no delay and everything happens at an unimaginable speed just to give you an idea while Zara supply chain can take a design from concept to store in 2 to 3 weeks Shein often does it in as little as 7 to 10 days sometimes even 3 days for certain hot items but the challenge over here is that if these clothes are shipped by C it it would take at least 20 days to go from us to China? right and 25 to 40 days to go from China to Europe?
How Shein Managing Shipping
How is Shein taking these orders from concept to store in 7 to 10 days well here comes the fourth block which is distribution as in how effectively does the shipping strategy handle global distribution to various markets so how does Shein shift from China all the way to North America and Europe if the ship takes 20 days well they do that with airfare and not ship fare so if Sheen predicts a SP like in demand for light wear bomber jackets in Germany and New York a factory in gango quickly manufactures 1,000 bomber jackets tail to foretasted preferences and these jackets are immediately shipped via air from Gango to the airports in Frankfurt in Germany and New York in Us in Germany the jackets arrive in Frankfurt and are moved to a local warehouse and from there they are distributed all across the country similarly jackets arriving in New York are stored at a nearby Warehouse to facilitate quick distribution throughout the United States this entire process can happen in just 7 to 12 days.
How Shein Store Display
Store display as in how quickly can the store display the products and how effectively can you Market your product to tell your customers that you’ve got trendy clothes and here Shein simply leverages influencer marketing to gift clothing to Young YouTubers, instagrammers and Tik Tok creators and they’ve been so successful that by 2022. Shein content has already crossed a billion views on Tik Tok not a million but billions of views on Tik Tok. so this generates an insane amount of visibility eventually resulting in an insane amount of sales.
How Shein work on their customer feedback
So, after the product is bought how quickly can the customer feedback be collected and analyzed to then drive decisions for the next cycle of production this is where again using tracking Sheen sees which products are selling well and which products are not selling well if they do sell well more orders are placed in the Chinese factories if not the next trend is spotted and the next batch of production starts.
How Shein broke Zara and H&M
This is how Shein broke Zara and H&M’s with unmatched speed extreme assortment a digital only model and a disruptive marketing strategy but even after all of this when it comes to fashion and e-commerce there is one big nightmare that every fashion aggregator and brand has to deal on a daily basis and this is the problem of returns.
How does Shein handle Returns
It very simple they usually allow customers to get one free return per order and any additional return from the same order incurs a fee so this discourages excessive returns and encourages customers to send back multiple items in one go which reduces the logistics cost for sheet and for low value items they just let the customers keep the product this builds loyalty and saves them a lot of processing and return Logistics cost.
Shein is coming to India with Reliance
So now the question is if such a super high-tech giant company is coming to India and that to with a cash machine like reliance what is going to happen in India let’s understand this partnership first Shein return to India comes via a strategic tie up with Reliance retail and it is structured as a licensing and Technology partnership rather than a joint venture or Equity stake so Reliance retail subsidiary next gen fashion limited operates the new Shein India platform while Shein itself acts only as a technology provider and brand licenses so this means Reliance fully controls the Indian business including the app local operations and customer data and Shein has no ownership stake or Direct Control in the Indian entity under this partnership Shein Indian operations are being localized end to end which means the shein India app is developed built and hosted in India by Reliance and all products on this platform are designed and manufactured in India through Reliance network of domestic suppliers and next gen fast fashion will Source April from a wide network of Indian manufacturers who will produce Sheen branded clothing locally so this is a huge opportunity for Indian msmes in the clothing sector so by marrying Shein fast fashion expertise with reliance’s robust Indian operations this partnership will localize Shein entire business model for the Indian market so while Reliance owns everything it will pay a licensing fee to Shein to use its Tech if this is very very clear to you let’s come to the impact of Shein in the Indian market firstly if reliance is able to match Shein Trend catching and if it is able to partner with local msmes to produce Dirt Cheap trendy clothes it will be a huge huge benefit for the msmes and a huge threat to Zara H&M and zudio but considering Indian manufacturing costs I don’t think Indian manufacturers can match the prices of Chinese manufacturers but if they do it’ll be absolutely crazy secondly since Reliance also has physical stores Shein is now practically after zudio because just like zudio Shein will make low cost trendy clothes to hit the market and lastly D2C Brands like snitch will have to innovate.
What we learn from Shein
Before i Say Goodbye there are three very important lessons that we need to learn from Shein lesson number one data driven decision- making is perhaps the most important thing in the game of skill in this case is Shein success is largely due to its ability to use real-time data to capture and react to fast changing consumer preferences and it’s not just Shein snitch does this Zara does this and so does matter but the question is how are you tracking your customer data and how are you tracking Market sentiment to modify your business.