Shein became the largest fashion retailer in the world in 2022. The continuous growth and expanding geographic presence of this Chinese fast-fashion company pose a threat to other established fast-fashion retailers such as Zara and H&M and other clothing and apparel brands including Nike and Uniqlo. Understanding the success of Shein requires understanding the key elements of its business strategy.
Key Elements in the Business Strategy of Shein
Shein is an online fashion retailer that was founded in 2008. It is a subsidiary of Roadget Business Pte Ltd and is headquartered in Singapore. The company sells a wide range of clothing, shoes, and accessories for men, women, and children. The company has experienced rapid growth since its founding. It has a presence in over 220 countries and regions, and it is known for offering trendy, affordable fashion options to its customers.
Production Strategy: Efficiency Through Fast-Fashion Business Model and Small-Batch Production Approach
One of the integral elements of the business strategy of Shein is its fast-fashion business model that is similar to companies and brands such as Zara and H&M.
Note that the company started as a drop shipping business focusing on reselling products it bought from the wholesale market in Guangzhou in China. It was not involved in designing and manufacturing. However, starting in 2014, it changed its business model after building its own supply chain system and became an integrated fast-fashion retailer.
Shein has a network of more than 3000 suppliers in China providing raw materials or production inputs and outsourced manufacturing capabilities.
The fast-fashion business model provides notable competitive advantages. It follows the latest fashion trends set by major fashion houses and fashion brands while also making predictions on upcoming trends using available market information. It can produce items within three days due to the close collaboration between its designers and manufacturing partners.
Part of the production strategy of Shein is its small-batch approach and low inventory aimed at market testing. The company limits its orders to 100 items to gauge customer interest.
The fast-fashion model supplements its small-batch production strategy because the company can quickly arrange additional orders with its suppliers if market interest and demand pick up. It is also worth mentioning that its proximity to outsourced manufacturers enables faster transactions, collaboration, and product movement.
Distribution Strategy: Focusing on Electronic Commerce and Maximizing the Benefits of an Online Storefront
Another reason that makes Shein a successful fashion retail company is its specific distribution strategy that focuses on electronic commerce.
The company does not operate physical stores unlike fast-fashion brands such as Zara and H&M which operate a chain of retail stores across the world as part of their global distribution strategy. Note that traditional fashion brands including fashion houses and casual apparel brands also depend on the sales performance of their retail stores.
Nevertheless, Shein has capitalized on the advantage of electronic commerce by building and maintaining its own online storefront via its official website.
The company has succeeded in reaching specific geographic markets in Southeast Asia and the Pacific, East Asia, North America, Europe, the Middle East, and South Africa through electronic commerce. Its online store has the same features and capabilities as larger online retail platforms from companies like Alibaba and Amazon.
It has also built warehouses in strategic areas within its geographic markets. The company partners with local couriers for deliveries and order fulfillment.
Promotional Strategy: Paid Digital Advertising, Influencer Marketing, and Sales Promotions
An interesting aspect of the business strategy of Shein is its promotional strategy which is compatible with its online-based distribution strategy.
The company uses digital mediums of communication instead of traditional mediums and channels for marketing and promoting its products. It uses paid digital advertising. Adverts appear on news and media websites through ad networks, search engines, social networking sites, and even mobile apps such as messaging apps and mobile games.
It has also maximized the advantages of social media. The brand has gained further traction through social media trends coursed through platforms like TikTok and Instagram.
Shein also has an influencer marketing program that works similarly to traditional affiliate marketing. It involves enticing content creators to produce and post content related to the brand. The content includes an affiliate link or coupon codes that allow content creators to earn a commission with each sale coming from the web traffic they deliver.
Influencer marketing is a cost-efficient sales driver. The company fundamentally capitalizes on content creators rather than physical store attendants or sales representatives.
Note that the online storefront also rolls out sales promotions such as price discounts and special offers. Most of these promotions are based on moment marketing. It also uses algorithms and machine learning to provide product recommendations. Other features of its website include a built-in rewards program and a gamified user and consumer experience.
The Business Strategy of Shein in a Nutshell
Shein is a technology-driven fast-fashion retail company. Part of its success comes from its strategy that centers on a fast-fashion or on-demand manufacturing model that connects suppliers to its agile supply chain. This results in cost savings from reduced inventory waste while also allowing it to deliver fashion-forward products to its customers.
A distribution strategy through an online storefront and a promotion strategy that capitalizes on digital marketing is also to critical aspects of the business strategy of Shein. The company reduces its costs further by doing away from physical retail store operations while building brand equity through modern trends in digital marketing.