- Introduction
Today’s era is the era of digital where e-commerce has made a huge impact on it. Due to the concept of globalization and the revolution of e-commerce, people from different countries are connected to each other through e-commerce through social networks such as chatbots, mobile applications and many more that have made e-commerce business popular worldwide by reducing operational costs and saving time. In this connection, the rise of Shien’s has played a pivotal role in this digital era. Due to its emergence, the e-commerce revolution is changing global business and trends.
- The rise of Shein
- History and development
The Fast fashion brand SHEIN founded in Nanjing, China in 2008 headquartered in Singapore now, is a global online fast fashion retailer that offers a complete range of ever-evolving products i.e. women’s wedding dress, jewelry, beauty products, footwears, handbags, home textile, electronic goods etc. focusing on customer needs. At the initial stage, it was not involved in design and construction. Rather, it sourced products from Guangzhou’s wholesale textile market. In early 2012, it began setting up its own supply chain system, transforming itself into a fully integrated retailer and becoming the world’s largest fashion retailer by 2022. By 2022, it has established its supply chain in Guangzhou with a network of more than 3,000 suppliers.
Rebranding itself as “Sheinside” 2 years after its founding in early 2010, the company also began selling cosmetics, jewelry, shoes, handbags, and various accessories. As of 2013, Shein overhauled its marketing approach, evolving into a fully integrated retailer. In 2015, the company changed its name to “Shein” with the aim of increasing name recognition. In short, Shein rise has been from startup to fashion powerhouse.
The development of Shein can also be categorized into the following points:
- The establishment and initial business approach (2008-2012)
- Rebranding and transformation into a retail company (2012-2019)
- From COVID-19s onward – (2020- Present)
- Business model and strategy
Since Shein’s business model is on-demand, it implements an on-demand model, challenging the traditional supply-driven model by focusing on customer preferences. It initially operated primarily in a B2B (business-to-business) model, providing clothing wholesale production services. Later it transformed into B2C(business-to-consumer) transactions by promoting itself through social media like TIKTOK and YouTube, fashion bloggers, celebrity endorsements, and utilizes advanced supply chain management and data analytics technology to improve production efficiency and meet market demand. It empowers thousands of small and medium-sized businesses by reimagining the supply chain, giving them complete insight into what customers need. In essence, it centers on 3 points i.e. on demand production, minimizing waste and reimaging the supply chain.
Its strategy can be mentioned in the following points:
- Evolving and refining product offerings by enabling the release of 500- 2000 new pieces daily with diverse and affordable offerings.
- Growing marketplace as per customer desires and needs particularly targeting women, Gen Z consumers, and young parents.
- Localizing the supply chain by empowering local business
- Empowering independent designers and celebrating innovative entrepreneurs across Shein
- Hunger marketing using social platforms.
- Micro-influencer marketing
- Ready to face global challenges.
Key factors in success:
SHEIN’s key factors are mainly its low price, timing, and global market strategy as well as diversified products according to customers’ needs. It focuses on extremely low prices to capture the global market by reducing the quality requirements. Thus, it has succeeded in attracting the attention of young consumers worldwide. It focuses on the use of automation and fragmented transportation and has been able to control logistics to flatten the world.
Now it is using AI to quickly spot fashion trends and produce different styles of products in small batches for market testing. Another important key success factor is its website and app which uses ‘long stay’ mode.
- Shein’s global impact
- Market expansion and penetration
Its expansion can be said to have started in March 2011 when it created its website ‘Sheinside.com”, advertising itself as a ‘Global leading wedding dress company’ even though it sold normal women’s clothes. At the time, it sourced goods from Guangzhou wholesale textile market and was not involved in garment design or production. In 2012, it began selling its products such as shoes, purses, jewelry, women’s clothing, and cosmetics in Spain, Italy, Germany, and Russia. Similarly, social networks like Facebook, Instagram and Pinterest were also used in collaboration with fashion bloggers on its current website to sell its products. In 2014, Shein acquired Romway, a Chinese e-commerce retailer and continued to add staff for business operations. In 2015, its name was changed again from Sheinside to Shein. Now it is being marketed in over 150 countries worldwide.
- Impact on traditional retail
The rise and shine of Shein has greatly affected the traditional retail trade using advanced technology. In the age of the Internet where businesses rely on traditional forms of production, marketing and sales are leaning towards technology and information and beyond doubt remain one step behind. Furthermore, the production of goods/items as per the needs of customers with time, culture and geography, the speed of production and distribution according to the income of the people as well as the cost effectiveness of Shein have had a wide impact on the traditional retail. Additionally, as Shein is implementing AI tools, it helps retailers improve the accuracy of their demand forecasting and optimize product placement on their sites and social media. Because of this, the situation of traditional retailers has been badly affected.
- Supply chain innovations
The supply chain of Shein is aggressive and amazing. It empowers thousands of small and medium-sized businesses, providing them with complete insight into customer needs, and implementing digitized supply chain parts with insights and tools to support their business so they can grow with it. It also builds long-term relationships with its supply chain partners i.e. third-party contracts.
To save money and time by paying more attention to customers’ needs, it always focuses on the supply chain system and keeps track of which items are in stock and which are out of stock based on popularity. And through a core group of analysts, goods/items are produced using an integrated system.
- Challenges and controversies:
With the rise, growth, and progress of Shein, it is facing challenges such as tariffs, competition, declining user data, declining valuations and strict quality control mechanisms for suppliers that affect its business, profitability, and business. It is accused of avoiding tariffs on goods worth billions of dollars by typically placing orders of less than US$800. The company’s strict “price verification” mechanism, and transparency regarding disclosure errors and allegations of child labor abuses are burning challenges.
Shein’s main controversies are allegations of intellectual property theft and copyright infringement, labor concerns and transparency and quality issues. H&M, the Swedish fashion powerhouse, accused Shein in July 2023 of infringing its copyrights and trademarks and took legal action against it. In the same month Fashion designers and brands around the world have accused Shein of copying their designs without permission. Similarly, independent designers also filed serious allegations against it, claiming the company engaged in infringement-related fraud in a lawsuit.
Shein is also accused of involving children and enduring grueling 18-hour workdays, minimal holidays and receiving meager wages – less than US$0.4 per item produced. Also, many customers have expressed dissatisfaction with the quality of Shein’s products, citing issues such as poor durability, discoloration, and breakage. Aside from these, environmental impact can also be added. It is said that the use of polyester, a common but environmentally taxing fabric, significantly increases Shein’s carbon emissions. Indeed, it has internal challenges, external challenges, and IPO challenges, but those challenges can be divided into two parts as regulatory challenges and legal challenges. Regarding regulatory challenges, the EU and other countries are investigating Shein on online content compliance by targeting harmful and illegal online content. Following the enactment of the EU’s Digital Services Act (DSA) in February 2024, it applies to larger platforms like Shein, requiring them to take stronger measures against such content.
Ethical violations against the fashion giant continue to grow, with some of its Gen Z targeted consumers questioning the company’s environmental and business impact. Critics have raised concerns about its environmental impact and questionable business ethics. Shein is said to be leading to large amounts of unnecessary and disposable consumption, and that’s not good for the environment. However, it claims that it is a signatory to the United Nations Global Compact (UNGC) and supports ten principles focusing on human rights, labor, environment, and anti-corruption.
- The future of cross -border e-commerce
The future of cross-border ecommerce is both exciting and challenging. Today’s age is the age of the internet, the future of e-commerce is very comprehensive. Thus. E-commerce can be taken as a global industry with global opportunities. Anyone can order or receive anything from anywhere through e-commerce. However, there are challenges as well. First, knowledge and experience of localization. When entering a global market, it is important to be concerned with localization. Because localization gives international customers a shopping experience according to their culture and language. Second, the issue of multilingual websites. Likewise, issues of taxation, payment mode and methods, issues of under-orders and over-delivery, issues of logistic planning etc.
Lessons from Shein’s business model
Looking at the future of cross-border e-commerce from the perspective of Shein’s model, as mentioned above, it is both bright and challenging. This is undoubtedly attractive for any business because in today’s era, especially the young generation is running on supply and demand depending on innovation and imitation. Since Shein’s business model is on-demand, it focuses on customer preferences using B2B, B2C etc. models and promotes itself through social media, fashion bloggers, celebrity endorsements, etc., it has gained unprecedented popularity in the world. So, the future of cross-border ecommerce is very bright.
On the contrary, to address tariffs in a legal and fair manner, to address declining user data, declining valuations and strict quality control mechanisms, strict price verification, making disclosures transparent regarding errors, respecting intellectual property theft and copyright infringement, and controlling labor concerns and quality issues, etc. are to be properly addressed as lessons to be learnt from Shein’s business model.
Emerging trends and technologies
Post-vovid-19, shoppers switched to online as their preferred shopping channel and consumers also began to use it to buy their favorite products. These trends have benefited both parties. In this regard, five trends are now emerging that will particularly affect the future of cross-border e-commerce. They are:
- Customer purchasing behavior and their changing expectations.
- Focused on localization.
- The role of budgeting in online retailers
- Brands are to be mobile optimized and localization ready.
- Cross border and domestic relations are to be reconciled.
Similarly, trends between customer vs. brand, delivery speed and cost, product satisfaction, tax calculation, on-time performance rate, customer clearance, carrier network structure, collaboration mergers and acquisitions etc. are also emerging trends. Prominent among the emerging technologies are AI and machine learning, logistics automation, online marketplaces, and new technological advancements over time.
The integration of advanced technologies, such as AI, machine learning, and augmented reality, has proven to be a transformative force in the E-commerce landscape. The surge in mobile commerce activities underscores the significance of adapting to changing consumer behaviors.
Conclusion
Shein, a fast fashion brand founded in Nanjing, China in 2008, has become the largest global cross-border fast fashion e-commerce company, marketing in over 150 countries around the world. In this journey of the last 16 years, Shein has gone through many ups and downs. Its supply chain management, brand marketing and data processing capabilities are exemplary, which is making it successful in the Middle East market after Europe and the US. However, it is also not free from allegations of serious crime committed by any legal person. Which is why, shein should address or resolve the allegations/challenges against it & adopt transparency as soon as possible.
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