Text | Kaiboluocaijing, author | Jiaoying Wu, Editor | Golden Dragon
SHEIN, who has been making money for many years, can no longer be low-key.
SHEIN (Xiyin), a cross-border e-commerce brand that focuses on fast fashion and cost-effective women's clothing, has developed in less than 10 years, designed and produced in China, the market, consumers overseas, in the form of B2C rare in the industry, has its own independent website and APP, known as the "Chinese version of ZARA".
Due to its focus on the European and American markets, and the fact that the founder team rarely appears, SHEIN rarely appears in the public eye and media reports. Recently, SHEIN's status as "China's most mysterious unicorn company" has attracted attention, stemming from the fact that it has been reported by many media to carry out a new round of financing, and its post-investment valuation may reach 100 billion US dollars (equivalent to about 666.6 billion yuan).
What is the concept of unlisted companies with a valuation of hundreds of billions of US dollars? According to analyst firm CB Insights, this valuation is second only to $140 billion byTeDance and $100.3 billion to SpaceX in the global unicorn startup rankings.
A cross-border e-commerce brand that does fast fashion clothing business, is it really worth hundreds of billions of dollars? From the three sets of numbers, you may be able to see one or two.
One is financing and valuation. According to Bloomberg, SHEIN is raising a new round of financing of at least $1 billion, including Transatlantic Capital, Sequoia China, and Tiger Global Fund. Prior to this, SHEIN had completed five rounds of publicly disclosed financing, and its valuation was only $15 billion when it was last raised in August 2020.
The second is scale and growth rate. According to the research reports and media reports of a number of securities companies, as of 2020, SHEIN has grown by more than 100% for 6 consecutive years, with revenue of about 10 billion US dollars in 2020, and sales in 2021 doubled compared with the previous year. The latest data from dolphins shows that SHEIN's sales in 2021 will be 100 billion yuan, with a growth rate of 89%.
The third is users and daily active. PYMNTS's shopping app rankings show that in May 2021 and January 2022, SHEIN's APP downloads surpassed Amazon twice. According to Late Post, in June 2021, SHEIN registered more than 120 million users and more than 30 million daily active users (DAUs).
Dolphin Society founder Li Chengdong to open pineapple financial analysis, hundreds of billions of dollars of valuation, represents the capital of SHEIN's high expectations, from the past few years of the company's GMV growth rate and growth, "the problem is not big." In addition, he revealed that SHEIN is not short of money and has been in a profitable state.
It is worth exploring, behind these eye-catching data, how did SHEIN, who went overseas alone, become a unicorn? Where does the 100 billion DOLLAR valuation come from? Will it be copied and where will it go?
SHEIN's overseas customs clearance code: low price, many things, new and fast
Open THE OFFICIAL WEBSITE OF SHEIN, smiling European and American models, brightly colored display pictures, and popular design elements look no different from common European and American fast fashion brands.
But looking at the unit price of the goods, this is simply a "pinduoduo in the clothing industry": a dress for $14, a T-shirt for $9, jeans for $24, a set of accessories for $2... The lowest price in the same category, ZARA is $6-10 more than SHEIN.
The price is so low, the discount is still quite a lot, the official website as low as 40% off Slogan flickering non-stop, a variety of half-price items show sold out. During the "Black Friday" period last year, SHEIN discounted nearly 10,000 items, up to 75% discount, the more you buy, the more discounts.
SHEIN official website
The number of goods is also large enough to make people pick a dazzling eye, there are more than 80,000 dresses, more than 30,000 T-shirts, and as many as 170,000 product links for jewelry, shoes and bags. In the past week, the official website has averaged nearly 6,800 new products per day, and there are currently as many as 340,000 pieces of women's clothing on sale.
Compared with traditional fast fashion brands such as ZARA and H&M, it is difficult not to let overseas consumers in the middle and low-end markets "really fragrant".
On social platforms such as Instagram and Facebook, countless young people posted SHEIN's shopping list, calling "addiction" and "surprise", and Chinese young people living overseas also shared SHEIN's skirts, fitness clothes and trinkets in Xiaohongshu, saying that "picking top goods in a variety of clothes, super healing" "Don't want to wait for domestic transfer, SHEIN can meet the needs."
SHEIN dress Source / official website
Such an attraction, reflected in the data, makes it difficult for SHEIN to keep a low profile.
According to the Zhongtai Securities Research Report, in May 2021, SHEIN surpassed Amazon with 14 million downloads, ranking first in the number of shopping APP downloads in more than 20 countries. Guojin Securities Research Report predicts that SHEIN's sales in 2021 will exceed 16 billion US dollars, of which women's clothing accounts for more than 60%.
In the view of Chen Tao, senior analyst of the brand retail industry of Analysys, SHEIN can quickly become a cross-border e-commerce unicorn in just a few years, the main reason is to find the market positioning, with the main cost-effective brand concept directly to consumers, the first to break the international market in China's FMCG products equivalent to "white card" and "miscellaneous brand" cognition.
The SHEIN brand was officially established in 2014, after SHEIN founder Xu Yangtian has been rooted in cross-border e-commerce for several years, doing the wedding dress business that was very popular at that time, earning the first pot of gold. Later, Xu Yangtian took a look at overseas fast fashion women's clothing and decided to transform.
Since its inception, SHEIN has taken a different and adventurous path.
Chen Tao introduced to Kai Pineapple Finance that at that time, most of the Chinese companies that did cross-border e-commerce adopted the B2B model, selling bulk commodities to overseas traders or doing OEM production for foreign brands, and then they sold the products to local consumers. There are also some merchants that are directly facing consumers, but they basically sell through third-party platforms such as Amazon and Ali AliExpress.
SHEIN, on the other hand, was almost the only cross-border e-commerce company that adopted the B2C model at that time. Like many overseas clothing brands, SHEIN has established its own official website since its birth, and then made a mobile app.
"Independent stations and third-party platforms can be compared to the popular concepts of 'private domain traffic' and 'public domain traffic'." Chen Tao believes that it is such an independent channel that allows SHEIN to get rid of many rules of third-party platforms, have the opportunity to build its own brand power and operational capabilities, and gradually develop from a simple fast fashion brand to a platform with the nature of vertical e-commerce.
For overseas brands, it is not difficult to build independent stations, and the difficulty is where to find traffic. But SHEIN is lucky, because Xu Yangtian, who came from SEO (search engine optimization), is well versed in traffic marketing.
From the early days of the brand launch, SHEIN has registered official accounts on overseas mainstream social platforms such as Facebook, Instgram, Youtube, etc., and placed a large number of advertisements to improve exposure; at the same time, it also sent free clothing and coupons to Internet celebrity KOLs in exchange for them sharing "planting grass" on the account. Later, SHEIN further launched the alliance rebate plan, through a single transaction rebate of 10%-20% to absorb members, accelerating brand promotion and traffic precipitation.
It is through the diversion from the public social platform to the private domain e-commerce platform that SHEIN has completed the original traffic accumulation of going to sea.
"Small single fast return", SHEIN is how to do the explosive model?
In SHEIN's overseas puzzle, in addition to finding the blue ocean market, self-built independent stations, and precision traffic marketing, the core and most frequently discussed later is its "small single fast return" model.
The so-called "small single fast return", that is, the first small batch production of different styles of products for market testing, and then through the terminal data feedback, the "explosive model" of the rapid return order, in order to maximize profits, while reducing inventory risks.
"The women's wear industry has very high requirements for fashion sensitivity, and whether it can grasp the changes in demand in various markets around the world in a timely manner is one of the factors for success." Therefore, SHEIN should select a large number of clothes with obvious design differences for sales testing, see which styles are more popular in which regions and which consumer groups, and then mass-produce the explosive models in various markets. Chen Tao explained.
In the "small single fast return" model, before putting a large number of test models on the market, SHEIN's buyer designer team needs to obtain a large number of the latest fashion elements through online data and offline stores, combine the popular elements that have been mastered, give the style to the supplier, and the supplier factory will see the picture and make the goods. This is one of the three major cooperation models between SHEIN and ready-to-wear suppliers: the OEM model.
The OEM model requires a 5-day validity period and a production limitation period of 7 days Source / SHEIN investment official website
In addition, shein garment category also adopts the ODM model and OBM model to cooperate with suppliers, the former is pushed by the supplier, the buyer selects the money, requiring the supplier to have independent development ability and shooting ability; the latter cooperation object is mostly brand suppliers, requiring development and design capabilities, supply chain and operation capabilities, and all need to be independently stocked.
This means that SHEIN works with a large number of suppliers of different sizes, characteristics and characteristics at the same time. To this end, shein's headquarters was also moved from Nanjing to the Pearl River Delta region, where the garment supply chain is more concentrated, and landed in Panyu, Guangzhou. According to a number of media reports, hundreds of core suppliers of SHEIN are now located in the Pearl River Delta.
"Small single fast return" requires suppliers to receive small batch orders at any time, and the demand for delivery time is very high. According to SHEIN Cloud Factory, its orders are mostly small batch orders of 100-500 pieces /single, and the OEM and ODM delivery requirements are 7-11 days and 10-15 days respectively. Therefore, SHEIN divides its suppliers into S, A, B, C, D a total of 5 levels, hierarchical management, survival of the fittest.
How did SHEIN "take down" these suppliers under such harsh conditions?
Zhang Ke, a apparel industry practitioner who has studied SHEIN's supply chain, believes that SHEIN's cooperative suppliers should be mostly small and medium-sized factories, "because they are less considerive of scheduling, more flexible, but the highest efficiency." ”
"These factories may usually cooperate with many other businesses, but once there is a demand for explosive orders from priority partners such as SHEIN, it only needs to give a slightly higher profit, and it can quickly change roles and prioritize production for each other." He explained that this is commonly known as "packaging factory" in the industry, and can also be understood as the basic version of "flexible supply chain".
According to Zhang Ke's understanding, many small and medium-sized factories in the industry close to the SHEIN industry chain have a strong willingness to cooperate, in addition to the fast checkout speed and short payment cycle, they are also interested in the scale effect of SHEIN.
"Garment manufacturing is a labor-intensive industry, the cost mainly includes fabric and labor two parts, characterized by the larger the scale, the lower the cost, the higher the profit." The gross profit of the clothing industry is generally about 50%, but a clothing to do 100,000 pieces and 1,000 pieces, the cost difference is very large, sometimes can be compressed by 20%. Therefore, Zhang Ke said that in the face of SHEIN, a partner with many explosive models and a high return rate, suppliers are happy to hear about it, and are even willing to undertake extremely compressed construction periods and small batch orders in the early stage.
Source of product circulation methods of SHEIN and general apparel enterprises / Zhongtai Securities Research Report
Li Chengdong told Kai Pineapple Finance that behind SHEIN's "small single fast return", there is a type of supplier role that manages a number of chain factories, which connects a variety of excipient suppliers upstream and multiple cooperative brands downstream. Such a large core supplier, based on digital and intelligent system management, can greatly improve production efficiency and compress the production cycle.
"Generally speaking, the production cycle of traditional clothing brands is 2-3 months; fast fashion giants such as ZARA, the first single from design, production to offline display of the entire cycle of about 1 month, extreme cases can be compressed to half a month; and backed by such suppliers SHEIN, the first production cycle is only half a month, in the case of urgent cases will be compressed to one week." He said.
In the view of many relevant practitioners who have paid attention to and studied SHEIN, the "small single fast return" model based on a strong supply chain, coupled with the scale effect, is the key to SHEIN's competition with ZARA: it makes SHEIN's market response faster, the new speed faster, and the shipment speed faster.
China's most mysterious unicorn, there is no far-sighted and near-term worry
As China's most mysterious unicorn, SHEIN has no shortage of competitors. In recent years, the most popular people to share the cake are the Internet factories that go to sea.
Alibaba, which holds the veteran cross-border e-commerce platform AliExpress, has invested in Southeast Asian e-commerce platform Lazada in recent years, Trendyol, Turkey's fashion e-commerce platform, Tokopedia, Indonesia's largest e-commerce platform, etc., and launched allylikes, a cross-border e-commerce platform for women's clothing last year.
Allylikes official website
ByteDance, an upstart on the Internet and holding an emerging overseas short video social platform TikTok, officially launched TIK TOK Shopping and independent e-commerce APP Fanno last year, the latter of which was described as the "European version of Pinduoduo". At the end of last year, ByteDance also launched a women's cross-border independent station Dmonstudio that is considered to be the benchmark SHEIN.
Official website of Dmonstudio
A number of analysts admitted to Kai Pineapple Finance that the various links of SHEIN are dismantled, many of which are not its first, the threshold is not high, and it is not difficult to copy the model of SHEIN.
For example, "small single fast return", in fact, is the common model of China's garment industry, "but SHEIN applied it to the blue ocean market of fast fashion, which was not paid much attention to at that time, and also got external financing, which can polish the supply chain." Zhang Ke said.
Another example is KOL planting grass, Chen Tao believes that from the original Weibo public account graphic content, to today's short video live broadcast of The Little Red Book, it also belongs to the mainstream marketing method in China. "SHEIN learned from the successful experience in China, moved overseas to try, and ate the first wave of overseas dividends."
Zhang Ke recalled that a few years ago, many clothing merchants wanted to do sea business through the Ali AliExpress platform, but many people lacked courage and capital, and never regarded cross-border e-commerce as the main business. "But SHEIN did this, from the beginning to study the clothing style and habits of overseas users, after finding the demand, it returned to the domestic docking supply chain, do not do explosive models, do not drill brands, do cost-effective."
Today, when SHEIN already has enough scale advantages and can exchange high profits for high profits and reverse drive suppliers, it is difficult for latecomers to recreate a SHEIN.
According to investment reports, Dmonstudio focuses on fast fashion women's wear, and the selection overlaps with SHEIN very high; covering more than 100 countries and regions, laying out overseas warehouses around the world; and even half of its team is recruited from SHEIN. However, the wind came and went quickly, and in February this year, Dmonstudio announced that it would cease operations just three months after going live.
In Chen Tao's view, many new projects of Internet manufacturers have the meaning of experimentation, and such admission or closure is normal. "Big companies may start multiple projects at the same time to see which model is to invest less resources but more profitable and more cost-effective, and if it does not meet expectations, cut it off."
Back to SHEIN itself, external troubles have not yet been close, but there are many internal worries.
The most commonly criticized is the quality of its products. Although the price has made many consumers take the initiative to reduce expectations, on social platforms at home and abroad, such as "the quality of clothes is generally not very good", "thin cloth, small version, poor texture" and "frustrated shopping experience" are still not in the minority. Along with this, there are also accusations by overseas environmentalists that SHEIN products are not friendly to the environment and waste resources.
At the same time, SHEIN's massive fast fashion products have also encountered infringement disputes due to suspected imitation and plagiarism. According to the Observer Network, in June last year, the British Martin boot brand Dr. Martens sued SHEIN for plagiarism and use of the original photo to promote, but SHEIN subsequently denied it. That same month, U.S. jewelry brand Kikay accused SHEIN of copying one of her earrings, which was later removed from shelves.
It can be seen that although SHEIN has successfully gone abroad as a brand, if it wants to take root in the global fast fashion field and even seek to go public in the future, SHEIN's focus is bound to shift from scale, efficiency and profit to quality, image and corporate responsibility.
Dmonstudio's folding of the sword proves to a certain extent that the cross-border e-commerce fast fashion business is not so easy to do. SHEIN's internal worries can also be seen, "new players are not completely without opportunities". Chen Tao believes that because the global clothing market is large enough, SHEIN's market share is not so high, "new players may be able to pay attention to more segmented blank tracks, play a differentiation, such as Southeast Asia, the Middle East market, and men's wear, children's wear, or women's clothing in swimwear, sports and fitness clothing and other categories."
*At the request of the interviewee, Zhang Ke is a pseudonym in this article.