SHEIN

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Salutations, Olio aficionados! 👋

Happy Hump Day and welcome to the 56th edition of Weekly Olio - your trusty source for giggles, wisdom, and a dash of intrigue courtesy of our tantalizing thought piece (yes, buckle up for Publisher's Parmesan). 🧀

In today's instalment, we unravel the magic behind SHEIN's lightning-fast production and vast network of creators, catering to the insatiable hunger for fashion. But wait, there's more! SHEIN isn't just about clothing – they've expanded their empire to encompass home decor and electronics, reeling in a global fanbase that just can't get enough.

Exciting, right? 👏

Will come to that, but let’s first start with the curation.

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The Quote󠀢 💭

The Tweet 🐦

Economist and best selling author Tyler Cowen is a reading machine. He reads more than 100 books every year and is a prolific writer. This thread has eighteen useful tips that have enabled him to read fast while absorbing the important stuff. If your resolution for the upcoming new year is to just read more, this thread is a good place to start.

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The Short Read 📝

The Indian siblings taking the chess world by storm - by BBC

Rameshbabu Praggnanandhaa, commonly known as Pragg, has taken the chess world by storm. All of 18 years, he finished second at the 2023 Chess World Cup - right behind Magnus Carlsen. Along the way, he has managed to beat Magnus three times in online matches. His elder sister, Vaishali, is not too far behind. She won the Women’s Grand Swiss Tournament in 2023 and qualified for the Women’s Candidates Tournament. She is India’s only third female Grandmaster.

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The Long Read 📜

Inside Foxconn’s struggle to make iPhones in India - by Rest of the World

Apple has been trying to shift a part of the iPhone production out of China. In this race, India has emerged as a winner with both Foxconn and Winstron setting up plants to assemble iPhones. Starting with the less expensive SE models, these plants now produce the newest models alongside factories in China. This article is a great summary of the challenges faced by Foxconn - one of Apple’s largest partners in getting their Indian plants upto speed.

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Publisher’s Parmesan 🧀

🎉 Drum roll, please! 🥁 Let's give a hearty round of applause to our guest post collaborator, Pooja Prusty! 📜🎩

Pooja is currently a Strategy Manager at Philip Morris International, where she works on the long-term priorities of the organization. Previously, she has worked with Strategy&, Deloitte and Urban Company.

Shein

In the world of fashion, the pace is racing faster than ever before! 🏃‍♂️💨 From the roaring speeds of production to the thunderous growth of online shopping, the industry has undergone a meteoric transformation.

In 2019, it took just 60 days to whip up those fabulous clothing designs we adore, and by 2023, our closets were practically singing with five times the outfits we bought back in the '80s. 😲💃 Meanwhile, the global fast fashion empire ballooned to a staggering $123 billion - that's a whole lot of style packed into one industry!

And let's talk tech – the rise of e-commerce giants like Amazon rewired our shopping brains! By 2023, a whopping 2.6 billion savvy shoppers had clicked their way to at least one online purchase. Cha-ching! 💻💳

US e-commerce sales catapulted from $571.2 billion in 2019 to a jaw-dropping $1.1 trillion in 2023 – that's enough to make any online window shopper's eyes sparkle.

But wait, there's more to this fashion frenzy! Ever heard of SHEIN? 🌟👗 This global fashion powerhouse doesn't just ride the trend wave; it practically sets the rhythm! With a slick digital platform and an arsenal of tech, SHEIN taps into lightning-fast production and a sprawling network of creators to keep those fashion-hungry souls satiated. And it doesn't stop at clothes – oh no! SHEIN's gone on a full-scale conquest, adding home decor and electronics to their treasure trove, attracting a global fanbase that can't get enough.

In this whirlwind of fashion-forward madness, SHEIN's not just a player; it's a maestro conducting the symphony of fast fashion and e-commerce. 🎶🛒 

Founding Story

Founded officially in 2012, its roots trace back to the early days of a small e-commerce venture called Nanjing Dianwei Information Technology (NDIT) in 2008. The trio behind NDIT—Chris Xu, Wang Xiaohu, and Li Peng—quietly began their journey, with Xu's tech expertise, Xiaohu's business finesse, and Peng's consulting prowess.

Huddled in a Nanjing office, they tinkered with products, experimented with distribution, and honed the high-volume, low-margin model that would define SHEIN. Their focus on clothing stemmed from the belief in leveraging local manufacturing, mirroring strategies used by Western brands.

But in 2012, a plot twist shook things up. Xu veered the ship, closing NDIT and ushering in the era of SheInside.com, initially a typical Chinese e-commerce retailer sourcing wholesale goods from Guangzhou's garment markets.

Then came the transformation. In 2014, SHEIN shifted gears, acquiring the rival retailer Romwe and broadening its horizons to European territories like Spain and Germany. Xu orchestrated the rebranding to SHEIN in 2015, securing over $50 million in funding and assembling a vast network of Chinese manufacturers. By 2016, a team of 800+ designers propelled SHEIN's ascent, ditching suppliers of subpar quality for a focus on excellence.

Their big splash in the US market came in 2017, with TV ads and influencer partnerships. Yet, CEO Chris Xu remains an enigma, shunning the spotlight despite being one of China's wealthiest individuals.

What does SHEIN offer?

SHEIN has woven itself into the fabric of global fashion, famed for its vast array of trendy yet pocket-friendly clothing and accessories. Acting as a bustling marketplace, it orchestrates a symphony between over 6,000 manufacturers and the ever-evolving cravings of consumers worldwide. 🌎👗

Initially famed for its wallet-friendly private labels like Romwe, SHEIN's growth spurt has seen it sprawl into a plethora of categories: think electronics, decor, appliances, and more. With a website and app offering a mind-boggling selection of nearly 600,000 items, it's a treasure trove for the fashion-forward on a budget.

Fueling this fashion feast is a tech-savvy engine! SHEIN's not just about pretty clothes; it's about algorithms and real-time data analysis. Their secret sauce? Serving up a staggering 10,000 new items daily, tailored to individual tastes. How do they pull this off? By cosying up to their network of nimble manufacturers in China, reacting at lightning speed to voguish trends and shipping directly from the source.

Meet their MVP: the Large-Scale Automated Test and Reorder (LATR) system. It's SHEIN's crystal ball, spotting a hot design, placing a small order (typically 50-100 units daily), and scaling up if it hits the style jackpot. No wonder SHEIN's inventory dances through cycles in just 47 days!

And the cherry on top? A global distribution network that streamlines delivery, ensuring those fabulous finds reach your doorstep in no time. Oh, did we mention prices? Brace yourself—clothes on SHEIN can be ~60% cheaper than those from competitors like H&M, making it a paradise for the thrifty fashionista. 👠✨

SHEIN seems like the supreme player. Is there no competition?

In the ever-evolving world of online retail, SHEIN is at the heart of a battleground teeming with competitors vying for the crown of affordable fashion dominion.

Temu emerged in 2022 as SHEIN's formidable adversary in the realm of pocket-friendly e-commerce. This newcomer, backed by PDD Holdings, stormed the Western markets, captivating 61 million monthly users within a year. Yet, its growth, fueled by a $600 million annual promotional frenzy, sparked legal clashes with SHEIN over alleged anticompetitive actions.

Fashion Nova, another player, rocked the scene in 2013, leveraging celeb and influencer endorsements to conquer the fashion world. Boasting a billion-dollar annual sales figure, it ventured beyond women's wear into men's clothing, kids' apparel, and beauty products.

Venturing into the omnichannel arena are stalwarts like H&M and Zara. H&M, although a pioneer in fast fashion, trails SHEIN in market share, despite recent efforts to amp up its game with a marketplace for third-party brands. Similarly, Zara, operating as a more upmarket brand within the fast fashion sphere, maintains an edge in revenue and profit margins over SHEIN, focusing on premium products and eschewing third-party collaborations.

On the grand stage of global marketplaces, the titan Amazon looms large, commanding a significant chunk of the online apparel market. Its speedy delivery prowess stands as a stark contrast to SHEIN's slightly longer shipping times, despite both sporting private label offerings.

Enter the social media phenomenon turned retail contender: TikTok Shop. This offshoot of the popular video platform joins the fray, offering integrated shopping for its colossal user base, with plans to sell private label goods, marking its territory in the competitive landscape.

So, what gives SHEIN the edge?

SHEIN's fashion empire is built on speed and efficiency, crafting a lightning-fast supply chain to churn out trendy, budget-friendly clothing at a dizzying pace. At its core lies an arsenal of factories and distribution hubs, where the magic happens: a sprawling inventory, constantly refreshed to mirror the latest fashion vogues.

With an average price tag of around $8 per item, SHEIN dances on the edge of low margins, sourcing and shipping products through its tightly knit network. In 2022, their net margin on fashion items hovered around 3.5%. But SHEIN's not just about selling its threads; it's beckoning third-party sellers into its marketplace, dangling a competitive 5-10% take rate—trumping Amazon's hefty 15-17% cut—as bait.

An ace up SHEIN's sleeve? Tax wizardry. While competitors wrestle with import and export duties, SHEIN navigates a duty-free paradise. Thanks to a 2018 Chinese government rule for direct-to-consumer brands, their exports sail tax-free. And stateside? SHEIN capitalizes on a loophole, sidestepping taxes on individual packages under $800—a stark contrast to bulk-imported goods that traditional retailers grapple with. Each SHEIN piece enjoys its own factory-to-doorstep journey, skipping the bulk import route, sparing them and their customers from tax woes.

In the world of fashion economics, SHEIN's mastered the art of speed, margins, and tax savvy, setting itself apart in the race for retail supremacy.

But there are concerns too…

SHEIN's meteoric rise hasn't come without challenges. As the world navigates shifting consumer preferences and geopolitical tensions, SHEIN finds itself at the epicentre of a whirlwind of risks.

Consumer tastes are morphing

While SHEIN surfed the convenience wave during the pandemic, recent slowdowns in spending have left penny-pinching patrons tightening their purse strings. Quality is taking precedence, with the secondhand market booming—consumers valuing sustainability and durability more than ever. Hybrid shopping, blending online and in-store experiences, is gaining traction, signalling that pandemic-induced online habits might not stick around permanently.

SHEIN treads a precarious political tightrope

Despite relocating to Singapore, it's caught in the crossfire of escalating tensions between China and the rest of the globe. From India's ban to US lawmakers' scrutiny, SHEIN's perceived connections have made it a political pawn. Lobbying efforts aim to reshape its image but navigating the East-West divide remains a daunting challenge.

Legal woes further cloud SHEIN's horizon

Copyright disputes with H&M and others, alongside lawsuits alleging manipulative contracts, cast a shadow on its highly automated model. Opacity in its corporate structure adds fuel to critics' claims of evading accountability.

Ethical concerns also plague SHEIN's image

Environmental criticisms over its carbon footprint and labour controversies regarding unsafe factory conditions have stirred public outrage. Efforts like EvoluSHEIN and SHEIN X aim to polish its tarnished reputation, but public scepticism lingers. Even a factory tour for influencers faced a backlash, highlighting the uphill battle to sway a conscious consumer segment.

As SHEIN strides toward the future, its ability to navigate political entanglements and rectify ethical concerns remains a question mark. However, its solid positioning and trajectory suggest that its story is far from over—it might just be getting ready for its next chapter on a bigger stage.

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