Thanks to algorithms and data, how did this mysterious Chinese company become the world’s most valuable online fashion brand?

The Chinese fashion retailer’s Shein app just surpassed Amazon to become the most downloaded shopping app in the US this year.

Not only that, according to a report by Euromonitor, they are now the largest online fashion company in the world, and are redefining the instant fashion industry by cutting production time to just one week. and adding about 3,000 new models per week on average at significantly lower prices than the competition.

According to Coresight Research, its revenue is estimated at 10 billion USD in 2020 – equivalent to an increase of 250% compared to the same period last year. Meanwhile, their rivals in the online fashion space – Asos and Boohoo – only generated about $4.4 billion and $2.4 billion in sales in 2020.

Why has this mysterious Chinese company achieved such incredible success?

Founded in 2008 by Chris Xu. With a background of working experience in marketing and keyword optimization, Xu started to turn to selling dresses online. In 2012, he began diversifying into women’s clothing and later changed the brand name to Shein.

Currently, Shein is supplying its products to both men, women and children to 220 countries around the world.

Part of Shein’s success today is down to her tailored fashion model. New products are created only in small volumes (about 100 units of product) and production is only ramped up for clothing models that are popular.

This helps the company reduce the amount of wasted fabric from products that are in stock in large quantities, which are not well received by customers.

An event of Shein in 2019

Algorithms and data science are powerful tools to help them identify new fashion trends. According to Coresight, Shein on average adds 2,800 new pieces of clothing to their website each week.

Meanwhile, their UK competitor, Boohoo, only adds about 500 new models per week to the website.

Number of new products displayed on company website

Such fast shipping is due to their unique supply chain system. Xu forged strong relationships with its partners from the start in a very simple way – paying on time.

In return, factories must use Shein’s supply chain management software, which allows the company to closely monitor production and share in real time customer search data with suppliers. Offer to guide design and manufacture.

Customers come to Shein’s store in London in 2019

According to Bloomberg, suppliers must be within a 5-hour drive of the company’s hub in Guangzhou. They must also be able to complete the design and manufacturing process in about 10 days.

This is significantly faster than competitors, including clothing retail giant Zara, which usually takes five weeks to get products.

Cheap prices also contribute a significant part to their success. It’s “strangely low,” said Erin Schmidt, senior analyst at Coresight Research. Accessories start at as little as $1, and you can even find dresses for less than $10.

Incorporating low prices is their zero-dollar marketing strategy through social networks like TikTok and Instagram. The widely shared videos on these social networks have created a trend for online shoppers, often teenagers. For example, videos show how many items you can buy for $100.

Shein currently has about 21.4 million followers on Instagram and 2.4 million followers on TikTok. Besides, the company also cooperates with celebrities to promote this brand on social networks.

In 2020, Katy Perry is one of the celebrities performing in Shein .’s virtual fashion show

However, the design process based on Shein’s algorithm has also led to great risks in the past. This year, the company caused controversy when it released a necklace with the swastika symbol. Many people think this is a Nazi swastika symbol, but the company thinks it is a Buddhist symbol.

Shein’s controversial swastika necklace

Another product that has been criticized is the Muslim prayer rug, which is listed on the company’s website as “decorative rugs”. Shein then posted an apology on her Instagram and removed the product from the website.

Consult Business Insider