Right now, the fast-fashion company Shein is selling a knot-shoulder, split-thigh, hologram slip dress for $13, and that’s one of the more expensive products on the company’s website. Don’t wait long to buy one if you want it though; Shein puts as many as 6,000 new products up on its website every day. The inexpensive goods are produced in small batches that get ramped up, or discontinued, depending on their popularity.
If any given dress might not be a bestseller, in aggregate Shein is apparently selling a lot of these extremely cheap, of-the-moment clothes, home goods, beauty products, and pet supplies. And by a lot, we mean enough that potential investors are valuing the company at as much as $100 billion. That valuation makes the Chinese, online-only fashion retailer one of the most valuable companies in the world, worth more than H&M and Zara put together, and the world’s third most valuable startup, after ByteDance, which owns TikTok, and SpaceX, which owns, well, rockets.
Shein is privately held. It was valued at $15 billion in 2020. A lot of money, to be sure, but $15 to $100 billion is quite a jump in just two years. They were not just any two years though; the 2020 valuation refers to the pre-pandemic era. The recent prediction reflects what happened for Shein during the pandemic. Even as COVID-19 was wreaking havoc for virtually everyone, it was benefitting Shein.
But why? The answer seems tied to the most valuable startup in the world: ByteDance, owner of TikTok. This platform has 1 billion users, and many of them are feasting their eyeballs on advertisements for Shein, which include celebrity come-ons from the likes of Katy Perry and Lil Nas X, as well as seemingly countless videos of influencers unboxing and trying on huge hauls of shockingly inexpensive purchases. Some of these influencers are on Shein’s payroll, so their purchases are even cheaper (i.e., they’re free).
Shein also offers customers loyalty promotions; the more they spend, the more they get. It all adds up to a teen base of shoppers who love Shein so much that last year it even surpassed Amazon as the most downloaded shopping app in the United States. But in addition, “We offer something for everyone at very affordable prices,” George Chiao, head of Shein’s U.S. operations, told Wired. “Whatever customers need, they’ll be able to find it on Shein.”
Of course a big company makes a big target, and Shein has its share of detractors—among them critics of its copyright infringement habits, its questionable labor practices, and the environmental cost of producing so many garments that are created for the purpose of being quickly tossed in the garbage. But it’s easy to wash those concerns away when a Hello Kitty top with a trendy cutout is only $8. One enthusiastic Shein shopper epitomizes the dilemma that the retailer poses for conscious marketers: “All that stuff kind of falls to the wayside because you just get so much for your money.”
Discussion Questions:
- Why is Shein such a valuable business?
- What are the downsides to Shein’s business model?
- If you were advising Zara or H&M, would you advise them to try to compete on Shein’s terms, and if so, how?
Source: Pauline Neerman, “This Is the Largest Zara in the World,” RetailDetail, April 11, 2022; “Chinese Fast-Fashion Company Shein Blows Past H&M and Zara with U.S. $100 Billion Value, Ranking It Among World’s Most Valuable Start-ups,” South China Morning Post, April 4, 2022; Kayla Marci, “Decoding the Ultra Fast Shein Business Model,” Edited, May 3, 2022; Miriam Gottfried and Charity L. Scott, “Shein Valued at $100 Billion in Funding Round,” The Wall Street Journal, April 4, 2022; Vauhini Vara, “Fast, Cheap, and Out of Control: Inside Shein’s Sudden Rise,” Wired, May 4, 2022; Mary Hanbury, “How China’s Most Mysterious Billion-Dollar Company, Shein, Won Over U.S. Teens and Became TikTok’s Most-Hyped Fashion Brand,” Insider, October 5, 2021; Tom Ryan, “Why Has Shein Become a Breakout Hit With America’s Teens?” RetailWire, August 3, 2021; Eva Xiao and Trefor Moss, “How Shein Became the Chinese Apparel Maker American Teens Love,” The Wall Street Journal, August 2, 2021