Impacting the valuation of hundreds of billions of dollars Fast fashion cross-border e-commerce "volume king" SHEIN can become an Amazon challenger?

Per reporter: Chen Ting Per intern reporter: Yang Xinyi Per editor: Liu Xuemei

Since its birth, SHEIN has been shrouded in mystery.

On April 3, according to media reports, fast fashion cross-border e-commerce SHEIN is secretly raising a new round of financing of at least $1 billion, after which the company's valuation will be as high as $100 billion.

36Kr reported that the round of financing was led by General Atlantic and another large investment group willing to invest $700 million, followed by old shareholders such as Tiger Tiger Fund and Sequoia Fund.

If the above financing is successfully completed, SHEIN, as the vanguard of cross-border e-commerce, may become the fourth Chinese company with a market value of more than 100 billion US dollars after ByteDance, Ant Financial and Alibaba Cloud, with a valuation of more than H&M and Zara combined.

As a "super unicorn" that always keeps a low profile with the outside world, its highlight moments are far more than that.

Looking back at App Annie's statistics, on May 17, 2021, SHEIN surpassed Amazon for the first time and topped the list of in-store shopping app downloads for Android and Apple in the United States. At the end of March, SHEIN surpassed Amazon again.

In this regard, e-commerce analyst Li Chengdong told the "Daily Economic News" reporter, "The rise of SHEIN is not relying on advertising and marketing, but on a supply chain that is twice as efficient as ZARA, which is a 'dimensionality reduction blow' of China's clothing supply chain to the global market." ”

For the international fast fashion industry, positioned in the "fast fashion cross-border e-commerce" SHEIN can be called "roll king", through the integration of domestic garment industry production capacity, SHEIN has created its own characteristics of the supply chain, massive SKUs with small single fast return production mode, so that SHEIN can respond quickly to market trends, the product is new faster than ZARA and other international fast fashion giants, the cost is lower.

Shein's sudden rise has even raised the confidence of domestic enterprises to go to sea, ali and ByteDance have successively launched cross-border e-commerce platforms that benchmark SHEIN.

Next, can SHEIN, which has created its past glory, go all the way to triumph? Can the various doubts imposed on it be "settled" by subsequent actions?

Amazon's challenger

Without publicity and rarely interviewed, SHEIN's self-introduction is not easy to tell.

According to public information, in 2008, SheIN founder Xu Yangtian established Nanjing Dianwei Information Technology Co., Ltd. in Nanjing, and the prototype of SHEIN began to appear.

According to "Late Post", because the original external supply chain has been unable to withstand the pressure of stock demand, in 2014, SHEIN moved from Nanjing to Guangzhou Panyu, and the mythical story of this cross-border fast fashion company also began.

At the end of 2014, SHEIN acquired Romwe and MAKEMECHIC, a cross-border sales platform for women's wear, to expand its territory by acquiring such competing brands.

Until around 2019, SHEIN ushered in a big outbreak, stood on the outlet of the overseas Internet celebrity economy, with cooperation with Instagram, TikTok and other social media influencers, superimposed price advantages, SHEIN set off a wave of overseas consumption frenzy.

Relevant data show that from 2019 to 2021, SHEIN's GMV has soared from $2.3 billion to more than $20 billion, an increase of about 10 times, and its users have also spread to 220 countries around the world.

Xiao Li (pseudonym), who studied in New York, told the "Daily Economic News" reporter that the reason why he likes to shop on SHEIN is because of the variety of products and cheap prices, "the average price of skirts, shirts and the like is about 10 US dollars, and the price of domestic Taobao is close." And there are also small things such as bags and clips on the platform that can be bought, and many students around are also using SHEIN. ”

Cheap, is sheIN swept the world's largest label. According to Guojin Securities, the average unit price of SHEIN products is 10-20 US dollars.

According to App Annie's statistics, in May 2021, SHEIN's downloads surpassed Amazon for the first time, becoming the most downloaded shopping App in the Android and Apple stores in the United States.

According to relevant data, in 2021, Amazon ranked first in the US shopping app list with 40 million downloads, followed by SHEIN, with only 8 million times. Notably, SHEIN downloads increased by 68% compared to the same period a year ago, while Amazon decreased by 2%.

In March, SHEIN won the chase again, surpassing shopping apps such as Amazon and Walmart to regain the top spot.

From the perspective of market share, according to the data of citic securities research department, as the largest clothing retailer in the United States, Amazon's full-platform footwear and apparel sales in the United States reached $41 billion in 2020, accounting for 38.26% of online clothing sales in the United States.

In the U.S. fast fashion apparel market, SHEIN's market share quickly rose from 7% in January 2020 to nearly 30% in June 2021.

The rise of SHEIN was so rapid and sudden that Amazon can no longer ignore the menacing challenger.

At the same time, capital also saw the results of users voting by hand. According to public information, SHEIN completed series A to E rounds of financing in 2013, 2016, 2018, 2019 and 2020, and investors include Asia's established venture capital institutions JAFG Asia, IDG Capital, Jinglin Capital, Shunwei Capital, Sequoia Fund, Tiger Tiger Fund, etc.

As capital increases again and again, SHEIN's "value" rises. In June 2021, Forbes magazine said shein's latest valuation could reach $47 billion. Recently, according to media reports, SHEIN is seeking a new round of financing of $1 billion, with a valuation of about $100 billion.

At the same time, SHEIN is marching into the full category, putting further pressure on Amazon. SHEIN said in its official public account "SHEIN Investment" that its early focus on women's fashion products, has now expanded to men's wear, children's wear, home and other categories, is committed to providing global consumers with cost-effective fashion products. A huge online market of "body shape" has gradually taken shape, and it has also attracted more and more young male and female consumers, including Xiao Li.

Cui Lili, executive director of the E-commerce Research Institute of Shanghai University of Finance and Economics, told the "Daily Economic News" reporter that shein needs to explore the whole category, "The clothing supply chain may not be the same as the supply chain of other categories." Fast fashion, the shopping frequency of cheap and good clothes should be different from the shopping frequency and sales of other categories. But if you already have the basis of brand influence, you have an advantage in exploring other categories. ”

The production model of "company + farmer"

There are many opinions in the industry about the reasons behind the rapid rise of SHEIN.

Cui Lili said that SHEIN has hit foreign shelf-style e-commerce platforms with the current "social + red + low-price model" that is more fashionable in China, and the advantage of the model lies in "brand marketing + flexible supply chain".

Zhang Zhouping, director of the B2B and cross-border e-commerce department of the E-commerce Research Center of the Network Economic Society, and senior analyst, told the Daily Economic News reporter that the core competitiveness of SHEIN is "fast" and "provincial".

The construction of these two core competitiveness is closely related to its supply chain. "Fast is through the supply chain fast return, air transport + overseas warehouse to ensure timeliness; the province is to provide the ultimate cost-effective goods, cut to one of the most important needs of users, thus bringing the user's high repurchase and high stickiness." Zhang Zhouping said.

The competitiveness shein has built on the supply chain is attracting increasing attention. As one of the important foundations of SHEIN's rapid rise, what kind of existence is its supply chain? The reporter's research and interview found that SHEIN has its own uniqueness in the requirements and choice of suppliers.

Yang Dajun, a strategic expert in the garment industry, told the "Daily Economic News" reporter that the procurement model of small single fast return requires even small single factories to be willing to do, "General factories are not willing to do it, because the clothing assembly line is very long, the larger the amount of orders, the lower the cost." ”

Zhongtai Securities mentioned in the relevant research report that SHEIN has 40,000 to 50,000 new SKUs every week, and the explosion rate is 50%, which shows that many styles of orders are actually small single volumes, rather than large-scale production, which requires suppliers to undertake 100 small orders; Zara has 12,000 new pieces and 500 minimum orders every year. In contrast, the efficiency of the SHEIN supply chain is driven by front-end orders to rear-end production, requiring manufacturers to return quickly according to the different order sizes of the front-end.

Through the small single fast return model, SHEIN can start from small orders (generally 100 to 500 pieces), test the market's preferences, only by consumers love the style has the possibility of mass production, which is the so-called flexible supply chain.

Zhongtai Securities' research report believes that digitalization and supplier management are the keys to flexible supply chains. Cross-border e-commerce represented by SHEIN has integrated the production capacity of the garment industry, realized flexible transformation, and gradually matured the flexible supply chain.

Cheng Weixiong, an independent analyst in the footwear industry, told the "Daily Economic News" reporter that in essence, SHEIN is still a platform provider, just using the platform to link the C-end and the small B-end to achieve the current massive business, "SHEIN's success lies in the pre-sale system, putting massive styles on the platform for users to choose." ”

As a result, small and medium-sized suppliers have become their main partners.

Zhang Zhouping said that SHEIN through the establishment of high-viscosity and high-trust cooperation with small and medium-sized suppliers to achieve flexible supply chain, suppliers unified use of supply chain management system, "the advantage of its supply chain is fast payment, stable single volume, low settlement costs, so that the cooperative factories and suppliers are willing to cooperate with it." ”

Cheng Weixiong believes that the workshop-style production supply chain with very little MOQ has created the SHEIN myth. "Through the extreme production cost, the take-ism achieves a relatively low retail price, and supplies overseas users to meet the demand, that is, the low price and high quality are the basis for SHEIN to become bigger." He said.

Cheng Weixiong believes that the supply chain built by SHEIN is actually similar to the production model of "company + farmer", "as long as the source of orders is rich, the production awareness of farmers is still easy to meet." He said that SHEIN has closed most of the small workshops in China, from a few people to dozens of people, the overall scale is not large, only the primary ability of production, so the growth of SHEIN in the early and medium term needs to recruit a large number of production pattern designers, do a good job in the production of small workshops to follow up on the quality of production patterns, "It can be seen that 'Millet Plus Rifle' has achieved SHEIN, and also allowed small workshops to grow rapidly." ”

The "roll king" of the clothing industry chain?

While SHEIN has achieved rapid growth, old internationally renowned fast fashion brands such as ZARA and H&M have been miserable.

According to the data, as of the end of February this year, H&M had a total of 4721 stores worldwide, a decrease of 228 year-on-year. In the group's plans for the coming year, the number of new stores opened and closed is 95 and 224 respectively.

At a time when fast fashion brands are no longer popular, why does SHEIN, which is positioned as "fast fashion cross-border e-commerce", still buck the trend? In this regard, Zhang Zhouping believes that this is determined by the shein model.

"Judging from the number of SKUs on the new one, the new SKUs on SHEIN are faster than those on fast fashion companies such as ZARA." Zhang Zhouping said that compared with ZARA and other fashion companies that mainly rely on designers and store customer feedback to collect trend information, SHEIN uses big data to track fashion trends and design auxiliary systems for designers, so the products are more fashionable and the predictability of explosive models is stronger.

Chart source: Zhongtai Securities Research Report

Zhongtai Securities Research Report believes that because SHEIN has no offline stores, only online data, so the product market test (A/B test) speed is about 5 times that of ZARA, which means that SHEIN can test more clothing styles in the same period of time, and the explosive rate is also higher. SHEIN can suppress 50% of the blockbusters, higher than zara's 20%.

In addition, SHEIN adopts a new daily model, with an average of 40,000 to 50,000 pieces /week of new rates far exceeding ZARA. The above research report mentioned that SHEIN only takes 14 days from product design to shelf, while Zara takes about 21-33 days from design to product to home, and the data still needs to wait for store feedback, which is many links and long.

At the same time, SHEIN has also achieved the ultimate in "province", which is one of the reasons why it can supply low-priced products to the market for a long time. Comparing ZARA's 10% rental cost in 2018 with Uniqlo's 2.9% rental expense in mid-2021, SHEIN further reduced this cost. At the same time, due to the lack of stores, SHEIN rental cost savings allow it to fully control the inventory, online stores can display SKUs without a ceiling and carry out near-zero cost SKU rapid update, more suitable for the rapid update mechanism of fast fashion.

SHEIN has gone to the extreme in its model, which has also attracted questions.

Cheng Weixiong said, "SHEIN is not a brand owner, at most it is a channel provider, while international brands such as ZARA are fashion brands, and the connotation of the brand is different from the appeal of the platform provider." SHEIN seems to be doing a big job, but there are not too many technical thresholds, and international brands such as ZARA are not purely price-oriented, but brand value-oriented. The brand has a future, and the platform is easily iterative. ”

In addition, SHEIN's low price and rapid innovation are based on a "workshop-style" supply chain, and these factories, in the eyes of industry insiders, belong to the "low-end industries" in the apparel industry chain. In the eyes of industry insiders, the success of SHEIN is "not beneficial" to the transformation and upgrading of the garment industry.

According to media reports, the head of a small supplier of SHEIN said, "Compared with international brands, SHEIN has much lower requirements for manufacturing, packaging and other processes, and the main fight is production capacity and speed." ”

In any case, SHEIN's success has attracted more and more latecomers to flock to the cross-border e-commerce track, and they have also assembled into SHEIN's new competitors.

On November 16, 2021, ByteDance launched the overseas e-commerce platform Fanno, developed by the "Magellan XYZ" team, aiming to provide global users with a cost-effective comprehensive category. A more vivid description is that Fanno is positioned as the "European version of Pinduoduo". Ali has also entered, and in 2021, Ali's fast fashion women's clothing platform "Allylikes" has been launched.

Cui Lili believes that shein's success has reference significance for latecomers, which has further encouraged the confidence of domestic enterprises to go to sea, but it is difficult to replicate. At the same time, it is undeniable that it has also greatly grabbed the dividends of the domestic garment industry chain. Yang Dajun believes that the emergence of SHEIN has "squeezed" the surplus value of the domestic traditional clothing industry chain. In the long run, if SHEIN wants to go further in the future, it may need to think about how to bring more value to society.

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