THE DARK SIDE OF DISRUPTION
When one thinks of a fashion disruptor, they think of a company that found a gap in the industry and a better way of catering to the consumer needs. They may not be the first to invent something, but they are the best. That’s exactly what Shein has done.
Shein captivated Gen-Z shoppers across the US despite its window of delivery of 10 to 15 days. They provide stylish pieces at "ultra - low price". It also adds an average of 5,000 new products a day. Furthermore, they are able to access data about consumer trends and track changes in fashion brands in real time. They do this by scanning media posts and using influencers. This allows them to adjust faster to trends than their competitors. Shein also produces small quantities of a product in order to test out the market as opposed to their competitors who produce on a larger scale and can lose more money.
However, the apparel company which was founded in China in 2012 realized that their young consumers don't want to think two weekends ahead what they'll be wearing, so they must deliver their merchandise at a faster pace. As a result, Shein opened a distribution center in Indiana in April, 2022 and is expected to open more centers in the US. These facilities will only stock certain products. Inventory will be chosen based on what will sell best in the US. Shein will also open other distribution centers that will service Europe and Canada.
Improving their delivery speed helped Shein, which was already valued at $100 billion this year. It became popular through its website, marketing on TikTok, shopping app, and its very low prices. According to a survey, Shein is the 9th most popular brand among Gen-Z women in the US. "There have always been disruptors in the fast fashion space, but what Shein brings to this is a bigger scale, coming from China," said Caroline Gulliver, a London analyst for Stifel Financial Corp.
Shein is a competitor to US chains such as Forever 21 and American Eagle Outfitters that cater to the same consumers. It also competes with H & M and Zara. Shein is expected to generate $24 billion in revenue this year. However, Shein has to account for potential new costs when opening up distribution centers in the US. Sending bulk inventory to the US from China will be taxed, whereas before sending merchandise directly to the customer from China was tax free. In addition, Shein was making on demand garments, whereas now they'll be shipping big bulk quantities of apparel to distribution centers which may or may not all sell.
Shein has been criticized for unsafe work environments, long work days, low wages, using harmful toxins in their products and ripping off ideas from designers. The company has denied all the allegations and wrote, “Shein’s Responsible Sourcing standards hold our manufacturing suppliers to a code of conduct based on International Labor Organization conventions and local laws and regulations governing labor practices and working conditions.”
With all of these obstacles, will Shein be able to maintain their low price point and maintain their competitive edge?
That's yet to be seen...