It seems like everything is getting pricier these days, but there’s one outlet that is almost unbelievably cheap: Shein. The online fast fashion retailer boasts prices so low that customers can easily put together a trendy outfit (accessories included) for under $30.
Shein’s direct-to-consumer retail operation has absolutely dominated the fast fashion industry. Even during the pandemic, when McKinsey predicted almost 30% global market shrinkage year over year starting in 2020 – Shein’s market share soared, with (US) profits rising 568% between 2020 and 2022.
There is extensive reporting surrounding Shein’s cultural impact, predictions for the apparel industry, and calls to environmental sustainability and proper working conditions, but one take has been neglected until now: the manufacturing angle.
Just exactly how does this one company manage to produce so many new items in so short a time?
And how does their production process inform the rest of the company’s rousing success? Is it a hindrance, or an asset?
Even more curiously, Shein has become the dominant fast fashion retailer in the contemporary garment industry while apparently ignoring production waste – the one key variable that most manufacturers agree should be eliminated as much as possible to perfect lean production.
Is sustainable business growth possible without a focus on eliminating production wastes?
If so, this could mark the beginning of a new type of supply chain strategy for the post-pandemic market. Let’s take a closer look at the manufacturing implications of Shein’s rapid rise.
What is Fast Fashion?
First, let’s differentiate between the traditional fashion industry and fast fashion, because they occupy very different niches; it would be poor analytics to assess their target markets and growth equally.
Whereas upscale or designer brands release high quality collections for purchase at prices that usually reflect their workmanship and materials, fast fashion brands use cheaper materials, which is also reflected in their prices.
Some of the most popular fast fashion brands of the last ten years:
- Forever 21
- Zara
- H&M
- Asos
- Boohoo
- Fashion Nova
- NastyGal
- Shein
Now, many criticize fast fashion as an entire industry as compared to higher-end fashion labels.
Their reasons are many, from environmental impacts to dubious labor practices, and while these are important things to consider, we’re taking a more specific look.
Taking for granted that fast fashion will always exist as an industry due to demand for cheap items, what are the indicators of sustainable growth in a business sense for a company within that niche?
Shein has to be doing something right, right?
What is Shein?
Shein (pronounced "she-in") is a Chinese clothing company that started as a dropshipper with a niche in wedding dresses in 2008. Shein began its own supply chain in 2014 after it purchased Romwe, a similar retail company in China.
If you haven’t heard about Shein, you’d better get acquainted because the fashion giant surpassed Amazon as the most-downloaded shopping app in the US last year, as The Guardian reported. Shein has been evaluated as being worth $100 billion. It’s definitely the equivalent of a blazing fire with no indication of waning.
Waste Variables in the Fast Fashion Industry
From a smart manufacturing perspective, eliminating waste is key to industrial success. Waste goes beyond leftover raw materials, including anything that costs the company money, time, or other resources.
For example, running the assembly line before the design process specifications are most optimal is risking a higher chance of quality control errors, and thus is a wasteful process. Waste could also be the opportunity cost of keeping large components inventory rather than using that space for other operations.
Principles of waste reduction are prominent in lean manufacturing, Total Quality Management, and Six Sigma methodologies alike. The classic advice for burgeoning businesses is to “cut” everything as close to the margins as possible: time, materials, distribution, and anything else that is deemed unnecessary for adding value to a final product (within reasonable and safe working conditions, of course).
Notably, “cutting waste” isn’t the same as trying to get away with as little as you can – it’s more about the optimization of individual processes to control standardization throughout the production cycle. In other words, the final product will have value, work properly and according to design specifications, and look identical to every iteration of the same product coming off the line.
But Shein is so successful that classic conceptions of treating waste may be outdated – maybe certain manufacturers have more wiggle room to play with production standards. Let’s go through each main type of waste visible in Shein’s manufacturing process to identify any illuminating insight on the modern supply chain and manufacturing process.
Shifts in Fast Fashion’s Inventory & Supply Chain Management
Most fashion outlets need one basic thing: inventory.
Customers and operations specialists alike know the frustration of missing out on a trending purchase because the store just “doesn’t carry that size,” or when a popular item is consistently out of stock. For customers, it’s immediate FOMO, and for internal ops, missed opportunities may cost them their jobs.
Lack of inventory has also become increasingly poisonous to brands when it correlates with size discrepancy: influencers may decry a brand’s lack of plus-size or inclusive items, inciting a pushback from other fashionistas and ultimately resulting in sales losses.
Most online retailers don’t operate by creating the item upon every order submission – that would take far too long – but pull the packaged product from a nearby warehouse for shipping.
With the rise of online shopping in the digital age, retailers quickly realized that one inventory option was far cheaper than the others: the digital supply chain.
They realized that there was an untapped opportunity in eliminating physical storefronts as a different type of inventory. In other words, fashion retailers could eliminate inventory waste by getting rid of the costs related to physical retail locations. These costs are many, and include aesthetics and decorations, rotating seasonal displays, on-site staff, and extra shipping costs (i.e. direct-to-store instead of offloading the costs of direct-to-consumer onto the consumer).
With the rise of online shopping in the digital age, retailers quickly realized that one of those inventory options was far cheaper than the other: warehouses could be packed to the brim, whereas stores needed aesthetics and changing rooms.
“Not having to keep hundreds of stores stocked meant Boohoo could be flexible about inventory management. In 2018, H&M was sitting on $4.3 billion worth of unsold items," according to The Atlantic on “ultra” fast fashion.
"Boohoo [in contrast to H&M] could order as few as 300 or 500 units of a given style—just enough to see whether it would catch on. Over time, Boohoo accumulated rich data about online consumer behavior, and further tailored the shopping experience to its shoppers’ tastes.”
The Atlantic article also notes that the fast fashion brand Nasty Gal – once the “fast growing retailer” in 2012, Inc. magazine – filed for bankruptcy after a few years. Boohoo bought out the brand and closed the physical stores, foreshadowing the rising preference for online retail in the fast fashion niche.
Shein's Environmental Impact
Synthetic fabrics, the choice materials for fast fashion, include microplastics and other man-made textiles. Cotton and other organic materials are more used by upscale brands, in contrast, since they are so costly to produce organically.
The claim to synthetic fibers is that while cheaper, they also can be recycled, but this optimistic view of sustainability neglects to mention that most of these clothing items actually aren’t recycled, and instead pile up in landfills.
Other companies evade these criticisms through clever marketing – for example, “vegan” leather, a popular alternative for clothing and handbags, has been touted as a new type of luxurious material that is environmentally friendly by being animal-free. However, what this marketing strategy deliberately avoids saying is that vegan leather is simply plastic, and its production has all the negative effects of any other non-biodegradable material.
It is a shame that due to Shein’s fragmented, small-contract production sites, owners cannot make use of Smart Factory applications that can mitigate environmental degradation. For many manufacturers, partially within industries that require the use of fossil fuels, moving forward sustainably requires every little advantage that can be taken in lowering emissions. Smart Factory sensors and other operating devices can make precise measurements that allow for as little waste as possible in production.
Smart Factories aren’t the only solution: if Shein were to centralize and standardize more of their production then things as simple as clean electric power could fuel a higher proportion of output such that environmental effects could be mitigated.
Shein seems to be a big perpetrator of environmental waste, and has received a lot of backlash for its practices, but as of now it appears Shein has decided to not address any vision towards environmental stability, clearly seeing it as unimportant to their overall strategy. Perhaps as the effects of climate change worsen they will reconsider – although perhaps they also don’t plan on staying around long enough to find out.
Quality Control & Standardization
Shein definitely has a problem with quality control, but it remains to be seen whether or not they will acknowledge the issue. Shein styles are notoriously bad quality, with inconsistent sizing and amateur sewing technique. It’s quite common for someone to order a regular size, like an XL, and receive something resembling a doll’s outfit.
More concerning are cases of contaminated materials, like the kids’ jacket that got recalled by Health Canada because it had a lead content nearly 20x the allowable limit.
As well as the health concerns, most product returns end up in a landfill because discarding the garment is less costly than investing in proper quality control either from the beginning of production or at the end of the customer support process.
Maybe Shein can get away with various sizing discrepancies, but one too many health hazard lawsuits could cripple reputation and profits, so their best bet is an inexpensive yet effective solution like standard work instructions or quality control KPIs at the beginning and end of the production process.
Pro Tip: VKS’ digital work instructions are a customizable SaaS solution that has proven results of lowering training time, raising productivity, and ensuring a higher success rate with quality control metrics and automatic analytics systems. Whether you’re dipping your toes into lean production practices or you’re a seasoned manufacturer, VKS software can connect your processes into a more cohesive digital ecosystem for your industrial production.
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Product Development
Fast fashion retailers usually add a few hundred new styles maximum a day to their sites. Shein’s number hovers around 6000. The pace feels unsustainable, but also has a very practical approach to testing new products: throwing everything at the wall to see what sticks.
This is also reflected in their marketing strategy, where they partner with influencers who primarily target the Gen Z customer base. By focusing on novelty over quality, Shein is able to churn out sales even with such low prices.
Charles de Brabant, executive director of the School of Retail Management at McGill in Montreal, was quoted in a CBC piece about Shein, saying, “I’m always a little bit wary about exponential growth rates like that.” The article reflects his uncertainty, remarking upon Shein’s “razor thin margins” of profit. Perhaps, de Brabant says, other retailers will evolve by stepping up their game and following similar development routes.
“Shein's ability to execute small production batches and test them out with customers exceeds the capabilities of other retailers,” agrees Montreal-based McKinsey senior partner Sandrine Devillard.
Perhaps others can catch up for a moment, but the exponential pace of Shein’s market share is quickly shuttering others out.
Digital Marketing & Software Investment
Technically, the company prides itself on its digital infrastructure, which allows it to not only manage production, but also cater to audiences through online campaigns and one-on-one influencer contracts. This taps into the individual networks of a wide variety of icons – models, singers, comedians alike – who could spare a moment to promote Shein on sites like TikTok.
Very soon, the brand was everywhere.
Not only did Shein invest in influencers, but in the actual influences themselves, by feeding into the trending media like “haul” videos on youtube (where influencers order giant boxes of clothes and do a first-look where they review the dozens of items inside).
And how much longer will “haul” videos keep trending? Because if that’s what Shein’s advertising model is, then its success is dependent upon a long-lasting internet trend. And yes, long-lasting and internet trend in the same sentence is very oxymoronic, so the question remains:
With increasingly shorter trend cycles, how much longer can Shein be cool enough on the internet until they fall behind?
Maybe that’s not entirely a fair question, to be honest, because a large part of Shein’s success is because of their software capabilities: arguably the biggest point of investment in Shein’s production model is the analytical insight from data collected through their software program. If Shein’s algorithms are hitting on lucrative marketing opportunities then they sure are hitting the jackpot.
Predictive Forecasting
Shein’s trends forecasting process works a little differently from other fast fashion retailers’, partially due to its incredibly speedy production cycles. This isn’t just because of its optimal location, however, it’s because of some tightly organized batch processing:
Vox writes on the future of Shein and fast fashion, “Shein is constantly gathering and analyzing customer data and uses that knowledge to craft new designs – within as little as three days… [design] batches were much smaller than Zara’s and that of ultra-fast fashion retailers like Boohoo, which reportedly ordered about 300 to 500 units per style. If a specific top goes viral overnight on TikTok, for example, Shein will be able to instantaneously ramp up production on the garment and place additional orders depending on demand.”
Essentially, instead of placing all its bets on a few hundred styles, Shein placed smaller bets – with lower risk – on several thousand styles.
Forced Labor Concerns and International Response
Ever since Shein started churning out new product after new product with unmatched speed, human rights organizations have alerted the garment industry to possible labor infractions.
The impact of these claims would only be seen later, when more information came to light about Shein’s human rights violations, especially within the Chinese province of Xinjiang.
Shein is far from being the only fast fashion empire built on suspected labor abuses. Zara has also recently been targeted for investigation by watchdog groups for alleged forced labor concerns.
A curious point is that the massive Chinese affiliate retailer Temu (think Shein but for home goods, electronics, and other trinkets) seems to have noticed Shein’s rise and considered it threatening. The two companies traded lawsuits last year – Shein accused Temu of courting influencers to spread defamatory statements, and Temu accused Shein of violating US antitrust laws. As of October 2023, both lawsuits have been dropped, with no insight into conciliation or the two brands’ strategies.
This indicates that Shein’s own success is potentially its biggest weakness, as it alerts competitors in similar fast fashion/retail niches to the aggressive competition for customer and brand loyalty.
In other words, maybe – just maybe – manufacturing sustainability is the least urgent of Shein’s development concerns.
Conclusion: Has Shein Upcycled Waste?
There’s no doubt that Shein is controlling the fast fashion industry right now, and at an astonishing pace. While yes, this may partially be attributed to some dubious business practices in the interest of cutting expenses, there is also evidence of key manufacturing strategy shifts that can inform suppliers in the post-pandemic supply chain.
The biggest issues that stick out in this assessment are Shein’s runaway growth compared to its neglect of long-term production strategy.
Without having to recreate a whole new protocol of production practices, Shein could address a few of their major waste leakages with practical extensions of software applications.
But of course, we are unsure if Shein has a vision for long-term success or quick domination of the market before anticipated collapse. The verdict is unlikely that Shein has eliminated concerns about their output of industrial waste.
Perhaps they have proven that rapid-fire batch processing with sales analysis is the new shortcut to a successful supply chain.
Regardless of the unexpected outliers of success like Shein, digital marketing and software control over supply chain analytics will pave the way for future industrial evolution in a post-pandemic market.
