Over the course of the pandemic, Shein has doubled its revenue to US$10 billion and dethroned Amazon as the top shopping app in the US. Following its rapid success, many competitors have emerged from China with hopes to take a slice of the e-commerce pie, with the likes of Alibaba and TikTok jumping into the fast fashion ring.
All this after beginning as a dropshipper with products sourced from China’s wholesale clothing hub in Guangzhou.
Winning with TikTok
Part of Shein’s success is that it was among the few companies to thrive in the pandemic, unlike its Western counterparts. While H&M and Zara were weighed down with logistics problems and store closures, Shein’s direct-to-customer, digital-only approach minimised losses from lockdowns.
Another large factor in Shein’s success, however, was its early adoption of TikTok. Shein leveraged TikTok’s increasing popularity by inundating the app with viral styling challenges and haul videos, which became a hit amongst Gen Z users. At the time of writing, Shein’s official TikTok account has more than 3.7 million followers and #Shein has captured over 24 billion views.
Seeing Shein’s massive popularity on the app, TikTok owner ByteDance launched its own fast fashion platform, called Dmonstudio, in late 2021. Described as “an online shopping mall featuring the latest in women’s fashion apparel and fashion accessories”, it was poised to be Shein’s biggest competitor, as it boasted the ability to produce over 500 new products a week and serve over 100 markets around the world.
The new venture was headed by Kang Zeyu, the previous head of e-commerce business at ByteDance. Dmonstudio was also said to poach nearly 100 employees from Shein in a bid to outdo its competitors. But in February of this year, ByteDance abruptly pulled the plug on Dmonstudio after just three months. Thus far, no reason has been given for its closure.
Last October, mega tech-titan Alibaba launched its own low-cost fast fashion contender, AllyLikes. Similar to Shein, AllyLikes is positioned to target the US and European markets, with prices starting as low as US$4.99.
This is Alibaba’s first formal foray into the global fast fashion scene, but its interest in expanding beyond China had been brewing ever since the debut of AliExpress – its international online marketplace.
Benefiting from the Trump-era trade war
Another important factor in Shein’s success was its ability to seize opportunities the China-US trade war created.
The Trump administration’s conflict with China resulted in increased tariffs on Chinese exports, which affected the fashion industry, including America-based retailers that were sourcing their products from China. However, Shein’s direct-to-consumer business model, in which it ships orders from its warehouse in China directly to US consumers, allowed the company to avoid such tariffs.
Professor Fan Di from The Hong Kong Polytechnic University’s Institute of Textiles and Clothing explains: “These packages are tax-free if worth less than $800, enabling Shein to keep prices low when its competitors were facing higher operating costs due to the trade war.”
In 2018, after the tariffs went into effect, China’s online retail exports went up 67 per cent and grew into a US$265 billion industry.
At present, Shein is still exempted from export and import taxes on most of its products. This loophole will enable more Chinese cross-border e-tailers to thrive as well, as customers choose to continue shopping online even well after the pandemic. Retailers that carry inventory, especially those with a physical presence, such as Zara and H&M, are at a serious disadvantage.
“If you’re Zara, there’s no way you’re going to get around US import duties, because you’re not shipping to individuals, you’re selling to stores, and importing in bulk,” said Michael Horowitz, a partner at Retail ROI Ltd., a consulting firm based in Hong Kong.
China’s tech-powered advantage
Beyond social media and a robust supply chain, many of China’s biggest retailers also have access to advanced tech that can help them churn out products at a faster rate.
Alibaba’s renowned deep-learning technology consolidates data from its vast ecosystem, which extends to payment customers, sellers, payment gateways and e-wallets, to inform future product development.
As a subsidiary of Alibaba, AllyLikes is expected to share the same features as seen on other Alibaba-owned e-commerce platforms. Examples include livestreaming, direct chat with sellers, e-wallets and loyalty point systems.
Shein employs a similar data-driven approach to lead its merchandising process. Product developers at the company study the website’s consumer patterns to detect emerging trends quickly and leverage its network of factories to begin producing the products. If the first batch does well, the product is immediately reproduced in bulk. It has been reported that Shein sources its product from more than 3,000 suppliers in China.
But what about the environment?
There is a downside to such efficiency. The cycle of fast fashion is only bound to get quicker and increase in volume as consumers continue to buy into the next trend, only to throw it out for the coming trend. Eventually, we will see a surplus of clothing circulating in the ecosystem, filling up landfills – with detrimental effects on the environment.
These direct-to-consumer platforms have proliferated despite the calls to reduce gas emissions and improve fashion’s carbon footprint, putting a massive hurdle in the way on the industry’s path to sustainability.
After the collapse of a factory in Bangladesh’s Rana Plaza killed over 300 people and injured many more, many fast fashion brands, like H&M and Primark, took the heat. For a while, customers were deterred from buying these brands. This prompted H&M and Zara to launch lines focusing on sustainable and consciously made products, sold at a higher price point.
“Consumers – particularly young consumers – appear to be more savvy about the environmental impact of fashion and fast fashion brands feel pressure to respond to them,” notes Veronica Bates Kassatly, an independent analyst associated with British sustainability consulting firm Eco-Age.
Shein is not immune to these pressures. With its ultra low prices and high-speed production, many are questioning the company’s impact on the environment. Recently, the brand has begun to incorporate more sustainable materials, such as recycled polyester and organic cotton; however, critics say these are signs of greenwashing – a brand taking actions that only make it appear more environmentally conscious.
Ultimately, regardless of the materials used, if the factories continue to burn precious resources and emit greenhouse gases, these brands are still contributing to climate change. “It doesn’t matter how sustainable the materials are that you’re using, if you’re wearing an outfit six times then disposing of it, you’re wasting resources,” Bates Kassatly said.