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How China’s most mysterious billion-dollar company won over US teens and became TikTok’s most-hyped fashion brand

According to Coresight Research, it pulled in an estimated $10 billion in revenue in 2020.

Shein blue ruffled flower print skirt.

Edward Berthelot/Getty Images


This represents a 250% year-on-year increase in revenue. Meanwhile, online rivals Asos’ and Boohoo’s revenues reached $4.4 billion and $2.4 billion respectively in 2020.

So why has it been so successful?

shein

Iskra Lawrence walks the runway during Walk Your Wonderful presented by Shein Together on September 19, 2020.

Getty Images for SHEIN


“It has changed the way that fashion is produced,” Erin Schmidt, senior analyst at Coresight Research, said in a recent telephone conversation with Insider.

The company operates an on-demand business model.

Guests attend SHEIN Summer Pop Up Preview Evening on May 23, 2019 in London, England

Guests attend a Shein event in 2019.

David M. Benett


This means new products are created in small batches (around 100 items) and production is only ramped up depending on their popularity.

There is less clothing waste because the company doesn’t create large quantities of products that customers don’t want.

This speedy approach is possible because of its unique supply-chain setup.

shein pop-up

Guests attend Shein summer pop-up preview evening on May 23, 2019 in London, England.

Dave Benett/Getty Images for SHEIN


Xu created a close relationship with his suppliers from the start, according to Schmidt, by doing something that can sometimes seem radical in this part of the world – paying them on time.

In return, factories are required to use Shein’s supply-chain management software, which allows the company to closely monitor the manufacturing process and share real-time customer search data with suppliers to guide design and production.

According to Bloomberg, manufacturers must be located no more than a five-hour drive from its sourcing hub in Guangzhou.

Zara factory

A Zara distribution center in Northern Spain.

Business Insider/Mary Hanbury


Source: Bloomberg

They must also be able to complete the design and production process in as little as 10 days.

This is substantially faster than its competitors, especially legacy brick-and-mortar rivals such as Zara that typically have a five-week turnaround time. 

 

Its price point is also a big part of the appeal. It’s just “ridiculously low,” Schmidt said.

Shein

$6 for a dress.

Shein.com


Prices start from under $1 for accessories and you can easily snap up a dress or sweater for under $10.

This has helped to create a subculture of internet shoppers, who are often teens, who post Shein “haul” videos on TikTok and Instagram.

Shein packages with clothes inside, $100 bills thrown on top

“Shein hauls.”

Insider


Such videos are widely shared on social media and illustrate how many items you can buy for $100, for example. This is free marketing for the brand and a key reason why it’s become so successful on social media.

It has 21.4 million followers on Instagram and 2.4 million on TikTok.

 

Its algorithm-driven design process has also led to some major mishaps in the past.

shein swastika necklace

A screenshot of the necklace for sale on online clothing retailer Shein’s website.

Shein.co.uk


This year, it caused controversy for selling a necklace with a swastika charm, which it later said was meant to represent a Buddhist symbol, rather than a Nazi swastika.

It was also called out for listing Muslim prayer mats on its site, which were advertised as “decorative rugs.” Shein apologised via a statement posted on Instagram. It also removed the prayer mat items from its site.

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