Made in China but not for China: how a mysterious fashion retailer has emerged to take on the world

·5-min read

Kenny Li’s garment factory works on a tight schedule: while factories usually have a month or two to make thousands of T-shirts for a brand, Li only has five days, as required by his client Shein, a mysterious Chinese online retailer that is helping to re-shape the global fashion industry.

On top of the short lead time in production, Li is told to develop 100 to 200 new designs for consumers on Shein to choose from, even though Li’s factory only has one designer. Shein also makes it clear that deliveries will be returned to Li’s factory if any problem on a long list of defects is found, such as a skipped stitch in a piece of clothing.

Li, whose factory employs around 100 people, said “no other brands have such detailed and demanding requests like Shein”. If things go smoothly, the T-shirts Li makes leave the factory gate bound for Shein at a price of 20 yuan (US$3) each, shipped on to overseas markets by the e-commerce retailer, including the US and the Middle East, where they sell for US$10 a piece.

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But Shein, although a demanding client, is hugely popular among China’s suppliers in the Pearl River Delta, a large export base for Chinese-made clothing. Why? Well, for one thing, it has a reputation for paying garment-producers on time.

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China’s sophisticated supply chain, which enables suppliers like Li to source all the materials he needs in the space of a few hours, as well as the country’s early bounce back from the pandemic, has made it possible for Shein to target Generation Z consumers across the globe with appealing, relatively low cost products, such as US$14 high-waist short jeans and US$3 bandanas for pets.

Shein - which adds nearly 5,000 new items to its website every day – topped Amazon.com as the most popular app in the shopping category of the Apple and Google app stores in May in the US, beating big name competitors such as Zara, H&M and Uniqlo.

The company keeps a low profile and declined to comment for this article.

Xu Yangtian, the 38-year-old founder and chief executive of Shein, has never accepted any media interviews or made a known public speech – a rarity for a company with a valuation estimated at around 300 billion yuan (US$46 billion).

“They are close to the factories, so they source to see what is being made by other brands, allowing a much shorter lead time in production.,” said Mark Tanner, managing director at Shanghai-based consultancy China Skinny. “They try out over 10,000 new products a month, overlaid with data modelling, and can quickly determine what works and what doesn’t.”

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Shein was the most talked-about brand on ByteDance’s TikTok in 2020, with 1.2 million followers and over 4,000 influencers talking about it on the platform, according to a report by Hype Auditor, a US influencer marketing firm.

Shein doubled its sales in 2020 to reach US$10 billion, according to Chinese tech media Latepost, narrowing its gap with Zara, whose offline stores were hit heavily by the effects of Covid-19 in 2020.

Chance Jiang, who started a fashion tech start-up in 2014 and is now chief customer officer at Guangzhou-based tech consultancy firm Chatek, said a highly efficient fashion manufacturing ecosystem around Guangzhou is one of the key factors underpinning Shein’s business model of selling fast, selling in bulk and selling cheap.

Shein started in 2008 in China’s eastern city of Nanjing, the capital city of Jiangsu, as “a cross-border e-commerce platform”, according to a blog post on the company’s WeChat account. Its founder Xu started with search engine optimisation and selling wedding dresses made in China to overseas customers.

To this day the company mainly targets overseas consumers, with little selling aimed at the domestic market. Its Weibo and WeChat accounts are used mainly for supplier recruitment.

This contrasts with Shein’s high profile overseas presence, where it teams up with key influencers, such as music artists Katy Perry and Rita Ora and models like Hailey Bieber. These celebrities headlined its online event last year in aid of Covid-19 relief called “Shein Together”.

Tanner said although the company has tried to play down its Chinese origins “given growing anti-China sentiment globally from both consumers and policymakers” its success is nevertheless derived from the country’s structural advantages as the world’s biggest factory floor.

“They are prepared to try a lot of things by throwing spaghetti against the wall and seeing what sticks. This lean start-up, easy-come-easy-go approach has now become part of their brand DNA,” Tanner said. “As China is the world’s factory, they see what is being made very early on and can quickly imitate and improve.”

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