European and American consecutive victories, SHEIN becomes the clothing and fashion website with the largest global traffic.
Author | Hanbo Wang
Cover Source | Enterprise Picture
Recently, according to statistics from the data analysis website Similarweb, SHEIN has become the clothing and fashion website with the largest global traffic in September 2024 and the third quarter. Its traffic share in the third quarter accounted for 2.68%, followed by NIKE, H&M, and ZARA, ranking second to fourth respectively.
At the same time, the number of users on SHEIN has also increased significantly. According to Earnest data, the number of users who made transactions on the SHEIN platform in August increased by nearly 40% compared to January, making it the fastest-growing among the overseas platforms, followed by Tiktok. While other platforms have even shown a decline.
Previously, the French professional consumer journal LSA announced that SHEIN's annual sales in France in 2023 exceeded those of H&M, Primark, and Kiabi, making it the second-largest clothing and fashion brand in France, only second to ZARA under the Spanish Inditex Group. Now entering the fourth quarter of 2024, institutions predict that SHEIN's sales in France this year will exceed ZARA.
Meanwhile, in Germany, SHEIN has also become the fourth-largest clothing brand in the country in 2023 and is likely to move up one place in 2024.
During more than 10 years of cross-border e-commerce layout, SHEIN has experienced rapid growth in many countries' markets. Looking globally, it can be compared to international giants such as NIKE, H&M, and ZARA, and even surpassed the latter three in momentum in September and the entire third quarter of this year. The latter three have been established for 52 years, 77 years, and 49 years respectively.
The background for SHEIN to achieve this result is that compared to 10 years ago, the goods that currently support domestic exports have shifted from low-value-added consumer goods to high-value-added intermediate and capital goods.
A recent research report from Shenwan Hongyuan shows that in the past 7 years, the export proportion of low-value-added consumer goods and OEM products has continued to decline. For example, the proportion of textiles, clothing, shoes, hats, and bags has dropped to 11.7%, while the export proportion of high-value-added goods such as equipment manufacturing has continued to rise.
In this context, one of the important reasons for SHEIN's contrarian growth in the international market is that it has created a flexible on-demand supply chain, leveraging the production capacity of thousands of suppliers, while increasing the added value of its own products. On the other hand, the "small-batch and quick-response" production model based on sales is also helping these clothing manufacturers achieve digital upgrading, go overseas with the SHEIN brand, and seize a larger market with more efficient operations.
Inventory Rate Drops to Low Single Digits, Payment Period Shortens to One Week at the Shortest
According to statistics from the Zhongtai Securities Research Institute, the global clothing retail sales entered a stable range after 2014, while the per capita global clothing consumption almost stopped growing after 2008.
Under this trend, it seems difficult to find new increments in the clothing market. However, the overseas population and consumers attracted by SHEIN are still continuously increasing, which is not easy. Previously, the "2024 Mobile Market Report" released by the market analysis agency Data.ai showed that SHEIN has topped the global shopping app download list for two consecutive years in 2022 and 2023, and the number of active users is still on the rise.
Mainly targeting regions such as Europe, the United States, the Middle East, South America, and Southeast Asia, where the e-commerce concentration is relatively low, objectively giving new forces like SHEIN a growth opportunity. And the extremely rich, diverse, and cost-effective products are the main reasons why SHEIN retains overseas consumers. Moreover, the accumulated traffic advantage has also driven the transformation and growth of SHEIN brand suppliers.
For example, Xingyu Wang, the operator of a Shantou underwear factory who first cooperated with SHEIN in 2019, saw a nearly 150% year-on-year increase in underwear sales during last year's Black Friday; his peer Tengfei Liu experienced a nearly hundredfold expansion in the factory's production capacity this year, and the success rate of new product launches continued to increase; Li Wu, who entered the industry earlier and even encountered setbacks and has transformed and started a new business, has expanded from a 300-square-meter factory with 10 workers to 6 factories in less than 3 years, and the number of orders received is still increasing.
It is hard to imagine that such individual growth rates occur at a time when global clothing consumption has "reached the ceiling".
In fact, after going through the extensive growth period and entering the stock market, most clothing manufacturers have experienced or are experiencing the pain of transformation.
This pain mainly stems from two risk points that have long existed in the past: high inventory and difficult payment settlement. High inventory pushes up operating costs, and long payment periods occupy cash flow and increase the bad debt rate. These two factors thin the profits of clothing enterprises, but they were previously masked by the high-speed growth of the industry.
Li Wu has a deep understanding of these risks. In 2013, she founded a clothing brand and opened 400 franchise stores and 60 joint-venture stores in 19 provinces across the country at its peak, but eventually closed the factory and gave up independent production.
Recalling that experience, she calculated an account: It costs nearly 5 million yuan to lay a special shelf for a year; it costs about 10 million yuan to hold a quarterly order meeting and product planning meeting in advance. And the profits generated from these investments are usually realized in the sales season after 2 - 3 quarters.
Once encountering "black swan" events such as a "warm winter", most of the goods on the shelves will turn into returns and inventory, eroding the profits of brand merchants.
In addition, the payment period of several months in the clothing industry also aggravates the cash flow risk of enterprises. Li Wu mentioned that to this day, franchisees who were doing their own brands still owe her more than 30 million yuan that has not been recovered.
Based on these industry pain points, SHEIN has transformed the supply mode and created an on-demand flexible supply chain. Under the premise of real-time analysis and tracking of fashion trends, for all SKUs, it starts with an order quantity of 1 to 200 pieces. It only takes 1 - 2 weeks from fashion trend capture to production. After the products are launched, market feedback is immediately obtained. If the products are popular, they will be quickly re-ordered for production, and products with a lukewarm response will be immediately stopped.
With the "small-batch and quick-response" model, SHEIN brings the sales link forward, changing the traditional "production-based sales" to "sales-based production", effectively reducing inventory. Data shows that the unsold inventory rate of the SHEIN brand has currently dropped to a low single-digit, while the industry average is 30%.
At the same time, based on SHEIN's own advance payment model, the payment period it provides to suppliers is usually 30 days, every two weeks, or even as short as one week, which is better than the industry average of 90 days, significantly improving the cash flow adequacy of suppliers. The two sides form a positive feedback ecosystem within the supply system, promoting each other and jointly driving product launches.
From Almost Being Eliminated to a Leading Supplier
An unsold inventory rate that is less than one-tenth of the industry average and a payment period that is far better than that of peers - while providing highly competitive cooperation conditions for suppliers, SHEIN also places higher requirements on suppliers' on-time performance and delivery quality. But this has also pushed the factories cooperating with SHEIN to continuously improve their capabilities.
Usually, the traditional clothing supply chain requires a preparation period of 6 - 9 months from predicting demand to achieving supply. For example, the design department conducts product planning and design 6 - 9 months in advance based on historical data and fashion trend predictions; the brand holds an order meeting half a year in advance, and distributors place orders; according to the order meeting data, external suppliers start production, and the total time of each link is about 4 - 5 months; after production is completed, it takes about 1 month for warehousing, sorting, and distribution.
In contrast, SHEIN often produces only 1 to 200 pieces for the first order of each SKU, but the overall efficiency and richness are greatly improved. Xingyu Wang mentioned that workers who are used to the large-order and long-cycle mode of traditional foreign trade orders in the past are not adapted to the "high-turnover" mode of small first-order quantities, fragmentation, and shorter timeliness. In the initial stage of cooperation with SHEIN in 2019, his factory was once almost eliminated.
However, to guide suppliers to adapt to the new production method, SHEIN conducts all-round training for suppliers in many aspects such as operation management, planning and development, production scheduling, operation and inventory preparation, and quality management, such as providing free digital management tools to help suppliers handle a large number of fragmented orders. It is understood that currently, SHEIN has internally designed the "Three Steps of Supplier Cultivation", providing corresponding technical and resource support for suppliers at different development stages.
For example, for suppliers in the trial period, SHEIN will assign a teaching specialist to provide one-on-one guidance with a "secret manual to avoid pitfalls"; for suppliers in the growth stage, SHEIN will cultivate them from multiple dimensions such as supply chain integration, system support, and operation management; for core suppliers, SHEIN will carry out project-based cultivation and match more cooperation rights and interests.
Now, after 5 years of cooperation, Xingyu Wang has become a leading supplier of SHEIN. After the factory adapted to the flexible supply mode of "small-batch and quick-response", the underwear sales during last year's Black Friday promotion increased by nearly 150% year-on-year. In fact, during the same period, many underwear and homewear business operators in Shantou are on a similar transformation path as Xingyu Wang.
Previously, Shantou was known as the "Capital of China's Underwear and Homewear". The local underwear and homewear production accounts for about 45% of the national total, and the production of related brand products accounts for more than 75% of the national total. Xingyu Wang's factory started in 2010 and has developed into a large clothing foreign trade enterprise in Shantou. He and many of his peers have experienced the most prosperous era of the underwear industry, witnessed the "big scenes" of large orders and long cycles, and also encountered bottlenecks of low digitalization, weak brand power, and low product added value under the traditional mode.
With the transformation of this pillar industry in Shantou, SHEIN's purchasing volume of underwear in the area has been growing rapidly in recent years and has generated a large number of popular products overseas. While driving the batch overseas expansion of Shantou underwear enterprises, the more far-reaching significance of SHEIN for Xingyu Wang and his peers is to optimize the production process of individual enterprises and promote the transformation and upgrading of this traditional industry.
This kind of cooperation is also an epitome of SHEIN's continuous help in upgrading the entire clothing and fashion industry in the past 10 years. And with SHEIN deepening the platform strategy on the basis of its own brand, the assistance of SHEIN's on-demand flexible supply chain and global sales is rapidly extending to more industries.
The Platform Model Helps More Small and Medium-sized Merchants Go Overseas
From starting the brand building of cross-border e-commerce in 2012 to becoming the largest clothing and fashion brand in terms of global traffic in September and the third quarter, and expected to become the top brand in terms of fashion sales in France by the end of this year, SHEIN has been comparable to global fashion brands such as NIKE, H&M, and ZARA in more than 10 years. The latter three have been established for 52 years, 77 years, and 49 years respectively.
Overtaking fashion giants in a short period of time is the success of a fashion brand; the launch of the platformization has become a fast train for more merchants, brands, and industrial belts to aim at the global market.
In the early stage of deepening the platform strategy, SHEIN invested a huge amount of funds and resources to help merchants develop and improve the construction of warehousing and distribution centers, and consolidate a more long-term competitive advantage through continuous investment. Last year, SHEIN officially launched the National 500 City Industrial Belt Program to help industrial belts across the country expand the global market through cross-border e-commerce. Up to now, more than 300 city industrial belts in over 20 provinces across the country have settled in the SHEIN platform. In Guangdong Province, the supply chain center, SHEIN has achieved full coverage of the industrial belts in 21 prefecture-level cities in the province, covering more than 20 categories such as clothing, shoes and bags, jewelry and accessories.
In fact, in addition to operating its own brand, SHEIN began to introduce the products and brands of third-party merchants many years ago. In 2023, SHEIN further iterated the platform model to form a "self-owned brand + platform" dual-engine development. It is understood that the platform model provides cooperation forms such as agency operation empowerment, semi-trusteeship, and independent operation for third-party merchants.
Specifically, for merchants who choose the SHEIN platform for agency operation, SHEIN provides platform support for their brand operation, promotion, warehousing, distribution, and after-sales service, and they can focus more on product development and supply, which is suitable for merchants such as traders and manufacturers who have their own supply sources and product advantages.
The independent operation model is mainly for merchants with cross-border e-commerce operation experience and capabilities, who need to be responsible for product selection, pricing, operation, logistics, and after-sales services on their own.
The semi-trusteeship model is a new model launched by SHEIN this year. Settled merchants need to complete overseas inventory preparation, product selection and listing, and price reporting, and the rest of the links will be assisted by SHEIN. Compared with agency operation empowerment, this model enhances the autonomy of merchants; at the same time, compared with independent operation, the semi-trusteeship model lowers the cooperation threshold. Currently, the semi-trusteeship has been launched in European and American markets such as the United States, the United Kingdom, Germany, and France.
Compared with starting from cultivating suppliers of self-owned brands and optimizing the production process of the corresponding industrial chain, the platform model will undoubtedly touch and change the original traditional models of many industries more widely.
In fact, the on-demand production and "small-batch and quick-response" model have not been unattempted before, but most of them have failed to have a radiation effect on the entire industry. With the influence of the platform, SHEIN's years of experience, models, resources, and traffic foundation can better empower merchants in various细分 fields, thereby promoting the optimization and upgrading of the industry.
At the same time, facing the global market, SHEIN also launched the "SheInspires Millions Sellers Program" last year, planning to help 10,000 merchants worldwide, including those in China, achieve annual sales of over one million US dollars in the next three years, and help 100,000 small and medium-sized merchants achieve annual sales of 100,000 US dollars.
At the 2024 China (Guangzhou) Cross-border E-commerce Fair held not long ago, the Guangdong Provincial Department of Commerce released 7 "Innovative Cases of Cross-border E-commerce Empowering Industrial Development" with demonstration and representativeness, and both SHEIN's "SheInspires Millions Sellers" and the National 500 City Industrial Belt Overseas Expansion Program are included.
In fact, as the entire cross-border e-commerce develops from pursuing high-speed growth to a more high-quality and sustainable direction, SHEIN is also taking measures to help the "high-quality products" of industrial belts go overseas, further enhancing the competitiveness of cross-border merchants' products and brands, strengthening the cultivation of high-quality merchants, supporting