Last September at Hong Kong’s Sohn conference, during which hedge fund managers pitch investment ideas to their peers, someone suggested shorting Inditex, the parent company of fast-fashion giant Zara. The hedgie argued that with the rise of the new crop of online apparel makers from China, Zara would struggle to stay competitive.
While Inditex’s share price has not gone down – as a matter of fact, the stock is up 24% this year – there are some troubling trends for the Spanish retailer. In mid-May, a less well-known Chinese apparel maker SheIn toppled e-commerce giant Amazon as the most downloaded iPhone shopping app in the US while achieving the same feat on Android the week before, according to analytics firm App Annie. Separately, SheIn’s website has become the world number one in web traffic in the fashion and apparel category, ahead of Zara, Nike, Lululemon and Adidas.
SheIn (pronounced as ‘She-In’) is one of the fastest growing e-commerce companies in the world (it is also included in our Top 50 China Unicorns ranking). The firm, notoriously private, is believed to have raked in around $10 billion in revenue in 2020, up from just Rmb4 billion ($624 million) in 2016. It was valued at $15 billion in a fundraising round in August last year, says news website 36Kr, an incredible leap from $500 million in January 2019.
Most Chinese consumers have never heard of the Nanjing-based retailer. That’s because the brand mainly produces trendy apparel (think crop tops and miniskirts) for Gen-Z shoppers in the US and Europe. It has virtually no retail presence in its home country.
Excluding the world’s largest consumer market hasn’t dampened SheIn’s growth. What sets it apart from the competition is that it has taken ‘fast-fashion’ to a newly frenetic level. On average, SheIn churns out 2,000 new designs a day and a designer who works for the company reckons that design-to-point-of-sale takes between three days and a week (by comparison, Zara’s cycle is about three weeks).
SheIn is not only faster than Zara, its clothing is also cheaper. T-shirts and crop tops cost around $6; you can snap up a body-con dress for just $6 and a handbag for $9. Like another Chinese e-commerce darling Pinduoduo, SheIn offers plenty of discount coupons to drive sales.
The Chinese brand understands that young women in their teens and twenties shop predominantly online rather than on the high street so it does not operate any physical stores. Instead, the brand aggressively pushes its ads on Tik-Tok and Instagram, aligning with influencers like Addison Rae to model its merchandise. One micro-influencer (that is, someone with sizable but smaller social media audiences) says that when she posts her SheIn outfits on her personal Instagram, the company offers her six free items every month, according to an article on Zhihu. Influencers with bigger social media followings can also receive commissions for every purchase fans make on the SheIn website.
Last year, SheIn further raised its global profile by tapping Katy Perry, Rita Ora and Hailey Bieber to appear in a virtual fundraiser, which could be streamed exclusively on its app, for the Covid-19 Solidarity Response Fund.
Founded in 2008 during the global financial crisis by businessman Xu Yingtian, SheIn got its start selling inexpensive wedding gowns. Xu reckoned that with the economic downturn consumers would want to buy cheaper clothing. In 2015 he changed tack to fast fashion, subsequently rebranding his start-up as SheIn from SheInside.
SheIn designs and produces all of its garments in China, working closely with contract manufacturers in the Pearl River Delta, most of which work almost exclusively for the brand. In fact, the company has become so big that many within the garment industry quip that “approximately one-third of domestic clothing production capacity is dedicated to SheIn”, reports Cifnews, a website that covers cross-border e-commerce.
It has four product and design teams in Nanjing, Shenzhen, Guangzhou and Hangzhou and six global distribution centres in China, Belgium, the US and India for speedy packaging and delivery.
Still, the company faces plenty of competition from other ultra-fast-fashion retailers like Asos and Boohoo, which are all working overtime to beat Zara with super-quick lead times. SheIn has also been accused of using low-quality fabrics that are not environmentally friendly. Last summer it launched a pricier line called MOTF Premium but consumers were unimpressed. It is not the only Chinese company that has wrestled with the problem of trying to move upmarket. Luckily its core business continues to hum along nicely with more cost-conscious shoppers.
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