Shein's meteoric rise challenges global retail giants
An extensive army of producers managed through a complex digital system, ensured the rapid development of Shein, writes "South China Morning Post." The journal describes a network of small factories in the Chinese city of Guangzhou, which supply goods for the app that's conquering Western markets.
11:43 AM EDT, July 6, 2024
Shein, a Chinese company, is becoming a leader in so-called fast fashion. The company now has three times the revenue of traditional retailers, recently reported "Rzeczpospolita," based on a study conducted by the Boston Consulting Group.
The growth is so dynamic that the USA and the European Union are considering imposing tariffs on goods purchased through Chinese online platforms to protect local businesses. The Ministry of Development and Technology is also addressing the issue. One concern is that the majority of orders are not taxed.
"South China Morning Post" on Saturday published a report from the city and province of Guangzhou. In the 18th century, several trading houses operated with exclusive rights to trade with the West in tea, porcelain, and silk.
"Today, foreign trade is alive and well in the southern port, where a new breed of merchants have emerged. Taking advantage of the internet and the country’s vast army of factory workers, companies like Shein – pronounced "she-in" – and others have quickly risen as contenders to global retail giants from Amazon.com to H&M Group," writes the journal.
Shein suppliers urgently need workers
Shein's supply center is hidden in a maze of residential buildings and small factory complexes. "At the nearby Dexing Industrial Park, walls and walkways are covered in recruitment ads for workers, who are needed to fill the flood of orders coming from Shein" describes "SMC".
The report mentions the rates. One of thousands of small factories—there are at least seven workshops in one five-story building —is looking for seamstresses for "cross-border trade." It promises a sign-on bonus of $140, an annual bonus of $1,100, and a rent subsidy of $40.
According to the journal, the leader in so-called fast fashion and its competitors keep thousands of small factories in operation. "All day long, trucks plastered with Shein logos stop by to load up on freshly sewn boxers and cocktail dresses," reads the article.
China is building a "digital silk road"
One of the managers of a jeans factory for Shein explains that the company usually orders 100 new products, multiple times more than other clients. But they also earn less per pair - generating a margin of about 6 percent, while for different clients, it's 10-20 percent. It's about the quantity.
The pace at which Shein orders goods is also challenging for suppliers, often requiring them to halt production for other clients and work overtime. The company requires suppliers to participate in training sessions to familiarize themselves with the developed system.
"Through a website called Geiwohuo, meaning "give me goods" in Mandarin, sellers on Shein can access a wide range of data, including product lists, orders and inventory management, according to documents provided by a supplier," reveals the Chinese journal.
Competition with Chinese companies will not be easy for Europe either. Beijing has recognized cross-border e-commerce as a key part of its plan to develop the "digital silk road." Serbia and Hungary are opening the back doors of the Old Continent for Xi Jinping, which became evident during the Chinese leader's recent visit to Europe.
