In September 2024, Shein became the world’s most visited fashion and apparel website, according to data from Similarweb. With a global web traffic share of 2.68% for the third quarter, Shein outpaced major players like Nike, H&M, and Zara, which ranked second to fourth, respectively.
At the same time, Shein’s user base saw a significant rise. Data from Earnest shows that the platform’s transaction-making users in August surged nearly 40% compared to January, marking it the fastest-growing international platform, followed closely by TikTok. Meanwhile, other platforms have even shown declines.
Earlier, French consumer publication LSA reported that Shein’s 2023 annual sales in France surpassed H&M, Primark, and Kiabi, positioning it as the country’s second-largest fashion brand, trailing only Zara, owned by Spain’s Inditex Group. As we move into the final quarter of 2024, institutions predict Shein’s French sales may soon exceed Zara’s.
In Germany, Shein also became the fourth-largest fashion brand in 2023 and is likely to move up another rank in 2024.
With over a decade of cross-border e-commerce expansion, Shein’s growth across multiple international markets has been swift. On a global scale, it is now comparable to industry giants like Nike, H&M, and Zara, even surpassing them in web traffic during September and the entire third quarter, despite those brands’ long-established histories of 52, 77, and 49 years, respectively.
Shein’s achievements highlight a shift in the nature of China’s export base. Compared to ten years ago, Chinese exports have shifted from low-value consumer goods to higher-value intermediate and capital goods.
A recent report by Shenwan Hongyuan indicates that, over the past seven years, the share of low-value consumer and original equipment manufacturer (OEM) products in China’s export mix has continuously declined. Categories like textiles, apparel, footwear, and bags have dropped to 11.7%, while higher-value goods showcase a reverse, upward trend.
Amid this shift, Shein has sustained international market growth, largely due to its on-demand, flexible supply chain model, which has mobilized the production capacity of thousands of suppliers, thereby enhancing the value of its products. This “small batch, quick response” approach, which ties production to sales, has also helped garment manufacturers digitally upgrade and enter overseas markets with increased operational efficiency.
Single-digit inventory rates, payment terms as short as one week
Data from Zhongtai Securities shows that global apparel retail sales have plateaued since 2014, and per capita apparel consumption has hardly increased since 2008.
In this environment, Shein’s sustained growth in overseas consumer interest is impressive. According to the “State of Mobile 2024” report by Data.ai, Shein topped the global shopping app download chart in 2022 and 2023, with active user numbers still on the rise.
Targeting regions such as North America, Europe, the Middle East, South America, and Southeast Asia, Shein has capitalized on low e-commerce market concentration in these areas. The platform’s extensive, diverse, and high-value product range remains key to retaining international customers. This traffic advantage has, in turn, boosted the growth and transformation of Shein’s supplier network.
Take Wang Xingyu, owner of a Shantou-based lingerie factory that started working with Shein in 2019. During last year’s Black Friday sale, his lingerie sales jumped nearly 150% year-on-year. His colleague Liu Tengfei saw his factory’s production capacity grow nearly a hundredfold over the past year, with a steady increase in product launch success rates. Wu Li, who transitioned from a small 10-person, 300-square-meter factory, now operates six factories after less than three years and continues to receive an increasing volume of orders.
Such rapid individual growth is notable, particularly in a global apparel market that appears to have reached a peak.
Most apparel manufacturers that have moved from rapid expansion into mature, saturated markets have faced the pain of transformation. This difficulty largely stems from two persistent industry risks: high inventory and challenging payment collection. High inventory drives up costs, while long payment cycles tie up cash flow and raise bad debt rates, thinning profit margins. These challenges, however, were often masked during the industry’s high-growth phases.
Wu has experienced these issues firsthand. She previously founded a fashion brand, which, at its peak, had 400 franchise stores across 19 provinces in China, along with 60 co-owned stores, before eventually shuttering her factory and giving up in-house production.
Reflecting on that period, Wu calculated the costs: dedicated store shelves required close to RMB 5 million (USD 700,000) annually, and quarterly product launch events and marketing meetings added another RMB 10 million (USD 1.4 million). The profits from these investments often took two to three quarters to materialize.
A mild winter or other black swan events could turn products into returns or unsold stock, eating into brand profits. Additionally, payment cycles that could last several months added financial strain. Wu noted that, even now, her former franchisees owe her more than RMB 30 million (USD 4.2 million).
In response to these challenges, Shein has shifted its supply model to an on-demand production flexible supply chain. By closely tracking fashion trends, the company launches each SKU with an initial order of just 100–200 items. Products are produced based on real-time market feedback, quickly reordered if successful, or discontinued if response is lukewarm.
Through this model, Shein has reversed the traditional production-driven sales model, lowering inventory risks. Shein’s unsold inventory rate now sits at low single digits, compared to the industry average of 30%.
Additionally, Shein’s prepayment model has improved suppliers’ cash flow by reducing payment cycles to as little as one week, while the industry average stands at 90 days. This creates a positive feedback loop within Shein’s supplier ecosystem, enabling mutual growth and accelerating product launches.
From near elimination to becoming a top-tier supplier
Shein offers competitive terms while setting high standards for timely delivery and quality. This motivates suppliers to continually enhance their capabilities.
In traditional apparel supply chains, demand forecasting to fulfillment requires six to nine months. Design teams typically plan products six to nine months ahead, factoring in historical data and trend forecasts. Brands hold ordering events six months prior, after which suppliers begin production—a process that can take four to five months. Finished goods then undergo sorting and distribution, requiring another month.
In contrast, Shein’s initial orders per SKU are typically just 100–200 items, significantly improving both efficiency and product variety. Wang said that his factory, initially accustomed to large, lengthy traditional orders, had to adapt quickly to Shein’s high turnover model. Early on, he almost lost Shein as a client.
To support suppliers in adapting to its operational model, Shein is said to provide training across areas like management, planning, production scheduling, stock operations, and quality assurance. Shein has even designed a three-stage supplier development program tailored to each supplier’s growth stage, offering targeted technical and resource support.
For trial-phase suppliers, Shein assigns mentors to provide one-on-one guidance, sharing professional advice and tips on avoiding pitfalls. For growth-phase suppliers, Shein offers training in supply chain integration, system support, and management practices. For core suppliers, Shein uses project-based training, allowing them to access additional cooperative benefits.
After five years, Wang has become one of Shein’s leading suppliers. His factory adapted to Shein’s flexible model and saw a near 150% sales increase during last year’s Black Friday sale. Many other Shantou-based businesses in lingerie and loungewear have undergone similar transformations.
Shantou, once known as “China’s underwear and loungewear capital,” supplies roughly 45% of the nation’s loungewear and 75% of related branded products. Wang’s factory, launched in 2010, grew into one of Shantou’s major apparel exporters, mirroring the boom and digitalization challenges of the local industry. With Shein’s steady demand, Shantou’s lingerie exports have flourished, leading to an industry-wide transformation.
This partnership exemplifies Shein’s decade-long role in upgrading the global fashion industry. Shein’s ongoing platform strategy extension helps a wider array of suppliers enter international markets.
Empowering more small businesses to go global
Since 2012, Shein has transformed itself from a single brand into a global platform, with site visits surpassing all other fashion websites as of September and third-quarter 2024. By the year-end, Shein is expected to be France’s top-selling fashion brand, outranking global icons Nike, H&M, and Zara—companies founded 52, 77, and 49 years ago, respectively.
While Shein’s swift rise marks a significant achievement for a fashion brand, its platform strategy offers an even faster track for many vendors eyeing global markets.
During the early stages of this strategy, Shein invested substantial resources in vendor development, as well as warehouse and logistics center construction, securing long-term competitive advantages. In 2023, Shein announced plans to extend its outreach to the industrial belts in 500 cities in China, which would enable businesses across over 20 provinces in China to access global markets through cross-border e-commerce.
Beyond operating its brand, Shein began incorporating third-party products and brands years ago. In 2023, it further refined its platform strategy, developing a two-pronged approach with both its brand and platform businesses. The platform offers options for fully managed operations, semi-managed support, or self-management.
Under the fully managed model, Shein handles logistics, warehousing, marketing, and after-sales services, allowing merchants to focus on product development and supply. This option suits traders and manufacturers with existing supply strengths.
The self-managed model, meanwhile, is for businesses with cross-border e-commerce expertise, requiring them to independently handle selection, pricing, operations, logistics, and after-sales.
In contrast, the semi-managed model, introduced this year, allows vendors to manage inventory and pricing while Shein supports the rest. Launched in markets like the US, UK, Germany, and France, this model offers greater autonomy and lower entry barriers.
Compared to Shein’s direct support for its brand’s supply chain, the platform model allows for a broader industry impact, reaching more sectors. Although on-demand production in small batches has been attempted previously, Shein’s established platform, methods, resources, and traffic help empower a wider range of businesses to grow.
In 2023, Shein also launched an initiative aimed at supporting 10,000 global vendors, including those in China, achieve annual sales of USD 1 million, and to assist 100,000 small businesses in reaching USD 100,000.
At the recent 2024 China Cross-border E-commerce Trade Fair, Guangdong’s department of commerce named Shein’s initiatives as model cases in cross-border e-commerce.
As the cross-border e-commerce industry shifts from rapid expansion to a focus on quality and sustainability, Shein’s initiatives support industrial belts and boost vendors’ global competitiveness. By nurturing quality vendors and promoting premium products, Shein helps drive sustainable global expansion for more small businesses.
Currently, Shein’s 500-city initiative includes more than 20 product categories, such as apparel, footwear, accessories, home goods, beauty, personal care, electronics, and outdoor sports products. Entrepreneurs across these sectors, like Wu and Wang, are experiencing similar growth stories.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Wang Hanbo for 36Kr.