The Power of Shein
Move over Forever 21, H&M and other fast fashion companies… Shein seems to be the new hype with its ridiculously cheap clothing, so cheap that you know there is no way that a shirt can be sold for $4 without some sort of shady labor practices. However, today I am not here to make claims about environmental impacts, geopolitical trade policies or human rights, although they are important. I want to explore how Shein has grown so pervasively into mainstream culture and how Shein has skillfully integrated technology to capitalize on consumer behavior.
A little bit of background…
Founded in 2008, Shein is now valued at ~$15bn, for context, Zara is valued at ~$14.7bn and H&M is valued at ~$23bn. Shein releases 700 and 1,000 new items a day. This turnaround time is record breaking. When Inditex’s Zara first set out with their highly integrated supply chain model, it shook the entire industry. Essentially, half of Zara’s product were manufactured in factories mostly owned by Inditex and the other half came from outside suppliers. Zara orders high quantities of basics on hand compared to trendier pieces. By keeping high inventory of basics — think simple black and white shirts- that are versatile and could be embellished or elevated easily, Zara can reduce lead time and keep up with trends. They aimed to have a completely different set of inventories in stores every two weeks. However, this turn and leadtime is nothing like that of Shein. With the stage set, let’s dive deeper into Shein.
Shein uses an almost Uber-like production process to predict demand and stay relevant
Have you noticed how the Shein items being released daily are somehow correlated to the hottest trends? When Tiger-King was the hype, animal print fashion flooded Shein’s homepage. When Alabama Rushtok was the hype, cute whimsical dresses with a Southern flare were suddenly all over the site. Like most retailers, Shein tracks how you got to the site and what search terms took you there, and all the activity you do when you get to the site. Like most retailers, Shein monitor trends online and what is most discussed. However, Shein takes real-time integration to a whole new level. Using data to influence what new item is created, Shein’s will send a phone notification to factory managers to produce a minimal amount of the product to start. From that moment, Shein is tracking how many people are sharing it, how many people have it in their wishlist, how many people have it in the cart, and how many people are sharing it on social media. Once it hits a certain threshold, factor managers then get a notification to ramp up production. This automated process and fine-tuned algorithm allows Shein to predict sales quickly and accurately. This type of data-use combined with the ability to turn out items at a record pace ensure that Shein is always relevant.
Shein knows how to work social media
I am sure you have seen some sort of Shein haul online. With an army of influencers posting on all sorts of social media platforms, #Shein on Tik Tok alone has over 14.3bn views and Shein has over 30 million followers. The pervasiveness of the brand comes from the fact that their influencers do not preclude everyday people. #Sheinhaul with over 3.5bn views shows videos of everyday girls buying hundreds and thousands of dollars’ worth of merchandise. You will see in fact that not every Shein haul video is positive. There are videos out there that show how horrible the quality of the merchandise is from the site. However, at the price of the brand, everyone can feel like an influencer trying on hauls and piles of clothes. At the end of the day, Shein economy depends on overconsumption and this overconsumption has turned into entertainment for many.
Shein knows its audience
You may be asking how on earth are people still buying from Shein if there are so many horror stories about how off the actual merchandise is from the online photos? Easy… prospect theory. It essentially says that people perceive losses more than gains. A $500 loss would make you feel more sadness than a $500 gain would make you feel happiness. In that case, prospect states that the reference point determines how you ultimately feel about the outcome. When you are buying from Shein, you know that you shouldn’t expect much from a shirt that costs $4. That means that when it rips or when it comes in a distorted form, yes you are annoyed, but it was very much in your expectation. On the other hand, let’s say you are buying a pair of shoes from Jimmy Choo and you are expecting the highest quality. If it comes damaged or if the item is not to your expectation, your reference point was so high that any deviation from that point would make you devastated. Most people when they order on Shein, they have the reference point that most of items won’t fit well, but that means that when the items do fit, they are over the moon. Shein has set the reference point in the right spot so that you are willing to spend the money without being overly upset. It keeps you coming back.
Shein has concocted the perfect recipe to capitalize on consumer behavior
Despite all the problematic sides of Shein, it is truly impressive how they can take data, turn that into the next trendiest piece of clothing in such a short cycle and predict with accuracy which items would go viral and which would not. With algorithms in place to scrap the internet for the latest trend and being able to turn out trendy items with a simple notification to factory workers, Shein capitalizes on the fact that you expect things not to fit, that you want to chase the next biggest trends and that you will continue to over-consume.
