Author: Takato
Original: Deep Eye Finance (chutou0325).
Chinese culture emphasizes "Tao" and "art", thinking is "Tao", and behavior is "art".
Taken from "Lao Tzu", "the sound of the voice, the elephant is invisible", in terms of business management, it seems to be quite particular about balancing "Tao" and "art", and follows the harmonious development of enterprises, brands and ecology.
Recently, SHEIN made a low-key appearance on the 2023 Guangzhou Unicorn Enterprise List, which means that "the real strong voice is actually SHEIN, which has no voice", although it has been named as one of the "Top Ten Fastest Growing Brands in 2023" in the United States on the same level as ChatGPT, but it is still mysterious and low-key.
As a new unicorn company, what kind of business philosophy has SHEIN refined, and what kind of regular trends have been explored for Chinese enterprises to go overseas on the way to the global sea of stars?
Trends in the field of clothing and fashion have always been difficult to capture.
Especially since the turn of the millennium, on the one hand, Generation Z, who pursues individuality and thousands of faces, on the other hand, is the pursuit of simple and generous minimalism and the pursuit of elegant and intellectual young professionals.
Fragmentation, stratification, diversification, and niche have become the keywords of fashion consumption, which makes it difficult for clothing brands to fully grasp the front-end trend trend, and it has become a kind of metaphysics to create a "resignation to fate".
Generally speaking, according to the traditional garment manufacturing and production methods, the fixity and planning are very strong, and the styles are designed two or three quarters in advance, and each style is stocked with tens of thousands or even hundreds of thousands. As a result, guessing the preferences of consumers has become an open blind box, and the inventory is difficult to digest.
In fact, at present, most clothing brands still use marketing to lead product development and production, rather than customizing product planning according to market demand, which is equivalent to cooking rice and then selling, so there is a separation between product and marketing.
When there are problems and pain points in an industry, companies that can propose solutions will become a weather vane.
Back in 2012, SHEIN took a path of differentiation at the beginning of its establishment.
Unlike most other cross-border e-commerce enterprises with the help of third-party platforms such as Amazon and Dunhuang, SHEIN, which has been building its own brand since the beginning, chooses to establish an independent operation station.
It can be said that from the very beginning, SHEIN did not adopt the traditional manufacturing thinking to do the clothing industry, but the Internet user thinking.
In the face of users from different countries, SHEIN extensively analyzes consumer purchase behavior, and then empowers the design and production departments through trend analysis to make modular permutation and combination recommendations.
After the production of ready-to-wear garments, we will dig deep into user preferences, make a large number of personalized recommendations, and continuously establish rich user feedback channels, "talk" with users, timely feedback user opinions, and improve the reach rate.
The so-called occupation of users' minds, the first step is to let users be able to see, which is why new tea brand stores have opened everywhere in the past two years.
Of course, no matter what country the consumer comes from, the user experience they want is the same, and even the emotional connection with the brand is more important than the product itself.
Therefore, SHEIN's user mindset is reflected in the fact that it strives to respect and localize different cultural customs around the world, so that users feel "valued". For example, SHEIN's ** and app will automatically adjust the content of the pop-up window according to the user's login location and language, and even change the model in **, and will also provide products with a suitable style for consumers in different regions.
The extreme sensitivity to user needs and user experience reflects the consumer-centric and people-oriented brand business philosophy.
The product is the "art", the user's thinking is the "way", the way and the art are equally important, but the two need to be balanced. Based on the ultimate user thinking, supplemented by product technology with quality assurance, SHEIN is quite accurate in the fashion trend of clothing.
A classic story is that SHEIN has accurately ** the lace elements that are popular in the United States in the summer of 2018, and the cotton material that is popular in India.
As a result, without relying on the Chinese domestic market, SHEIN has made a huge breakthrough in the global market by using China's mature garment manufacturing capabilities, and has swept the European and American markets, and even become a brand loved by the American "Generation Z".
According to the latest data, SHEIN APP has hundreds of millions of registered users, and has surpassed Amazon to become the world's largest shopping app on iOS and Android platforms.
Piper Sandler's research data this fall shows that Shein ranks second among the most popular shopping items among American teenagers, accounting for 12%.
What's more worth mentioning is that SHEIN also won the "No. 4 favorite clothing brand of American teenagers in Piper Sandler", and became a company selected for both lists together with Nike.
In fact, this is not the first time that SHEIN has been on the list, since the spring of 2021, SHEIN has been ranked in the TOP10 of the "most popular clothing brands".
The data list is just an externalized carrier of brand influence, and the deeper meaning behind it is that SHEIN will focus on the thinking of brand building to the needs of users, and naturally it can also get users' "voting with their feet".
For SHEIN, what the market is familiar with and hotly discussed is its flexible ** chain and small single fast reflex mode, but similar to the situation of "I understand the truth, I still can't live this life", the distance from "knowing" to "doing" is the cognitive difference that SHEIN plays as a global brand.
The so-called concepts such as flexible ** chain, DTC, and C2M are not unique to SHEIN and are not the first to SHEIN.
Even in today's consumer field, there are many companies and brands that try the same model. The reason why Shein stands out may be that it achieves the ultimate in the integration of knowledge and action, so it also achieves the ultimate in the practical landing and innovation of small orders.
In fact, the first to start making small orders is the fast fashion brand Zara, which first produces small batches of clothes, at least 500 pieces, and delivers them to stores within 14 days at the earliest. Judging from Zara's previous brand influence, it can be regarded as the first wave of application dividends in the apparel industry.
Shein is the latecomer.
After using the market and sales analysis of the first fashion trend at the front end, after determining the design, the number of parts ordered by the first merchant was placed, and the proofing to production was completed, which took only 7 days. If the product is released and there is positive feedback, the order will be added.
Data shows that the SHEIN brand can reduce the inventory rate to the low single digits, less than one-tenth of the industry's average of 30% of unsold inventory.
Why is the merchant willing to accept such a small order?
The reason is very simple, SHEIN may never think that it is a relationship with ** businessmen as "Party A and Party B", but a close friend and cooperative relationship.
In order to build a flexible on-demand ** chain, SHEIN has contributed both money and effort, as well as technology.
For example, digital tools, after SHEIN develops them themselves, they will be used by ** merchants for free, and teach them how to use them by hand, and even send people to be stationed on site to sort out the process with ** merchants;Provide loans to manufacturers to buy factories, and will also provide subsidies to ** merchants to expand or renovate factories, and even subsidies for canteens and dormitories.
The owner of a factory cooperating with SHEIN said in an interview with **, "SHEIN's payment is sent once a month, or even once a week or even two weeks. For a decade, SHEIN has maintained a track record of timely payments, which is extremely rare in the apparel industry. ”
SHEIN's determination to go digital has even set off a digital revolution in Guangzhou's garment manufacturing industry.
By empowering the first business factory with the digital network, all the process information is synchronized and real-time operation, getting rid of the traditional offline manual work, document synchronization and other inefficient office modes in the garment industry in the past, so that many factories in Guangzhou have gathered in the area, and there is an intelligent manufacturing cluster with SHEIN as the core, and the first merchants have become good partners with SHEIN.
It's easy to walk with more friends.
SHEIN has more than 300 core merchants in Panyu, Guangzhou, and the total number of merchants is up to 1,000.
As a result, the inventory turnover rate of SHEIN, which was originally a latecomer, is much higher than that of ZARA.
The efficiency and response speed of the upstream chain will be transmitted to the downstream consumer end.
Only from the rough calculation of the number of first orders of the SKU, ZRA has a minimum production order of 500 pieces, and SHEIN has a minimum production unit of 100 pieces, which can be split into smaller and smallest units without generating inventory, and more efficient turnover efficiency makes this advantage more prominent.
After the inventory cost is reduced, SHEIN's products also have the best advantages, among which the average price of tops is $10, while H&M and Zara are $23 36 respectively.
With a negligible inventory, more styles can be tested, and the higher the chance of a hit. The flexible chain mode of small single quick reaction also avoids inventory problems.
The unity of knowledge and action on the flexible ** chain has made SHEIN several figures ahead in the same batch of small single fast reverse brands.
According to data from market research company Statista, global cross-border e-commerce retail sales have reached 4$29 trillion and is expected to reach $4 by 2023$86 trillion.
As for Shein, according to ** reports, its revenue in 2023 will exceed $30 billion.
As a big textile country, clothing is a strong product for export. In 2022, the export value of apparel was 182 billion US dollars, accounting for 31% of the global market share7%。
It can be seen that whether it is cross-border e-commerce or clothing exports, there is enough room for development in the domestic and global markets.
In addition to building its own brand, SHEIN has also extended its platform business, empowered platform merchants, and made the cake bigger with everyone. Don't eat alone, and walk wide.
In terms of platform business, SHEIN provides third-party merchants with a variety of "menu-style" options for cooperation to help merchants better go overseas.
As early as May this year, it launched the "Hope Gravity" million seller plan, which is expected to help 10,000 merchants around the world, including China, in the next three years, with annual sales exceeding one million US dollars, and helping 100,000 small and medium-sized businesses to achieve annual sales of 100,000 US dollars.
In addition, SHEIN's "altruistic" thinking is not only the guiding ideology of the platform business, but also the guiding ideology for the ecological construction of the industrial chain.
Based on the platform's huge sales network, rich market operation experience and perfect first-chain system, SHEIN can help more sellers worry about it, easily open the international blue ocean market, help expand the brand and influence, and be more proficient in the international market, enhance the comprehensive competitiveness of sellers, and promote development and growth.
Behind the private label model, SHEIN has been comprehensively helping first-class merchants improve their comprehensive capabilities.
On the one hand, it is the use of technical tools to drive the transformation of leading businesses from traditional production and manufacturing to digitalization and the Internet.
On the other hand, SHEIN also continues to provide businesses with flexible on-demand production needs, management training, factory construction and public welfare services and other related businesses, last year SHEIN set up the first garment manufacturing innovation research center, to explore the combination of small single quick reaction and lean manufacturing, and output more lean production solutions to the first business, providing training from the whole link including production scheduling, quality inspection, etc.
In 2023, SHEIN announced that it will invest 500 million yuan in 5 years to continue to deepen the empowerment of leading businesses in technological innovation, training support, factory expansion, and community services.
It is better to teach people to fish than to teach them to fish, and SHEIN's all-round empowerment of partners also provides a guarantee for the stability of SHEIN's ** chain.
Between the way of balance and technology, SHEIN has created a classic philosophical paradigm for Chinese brands to go overseas, and at the same time balances the "fast" of the first-chain reaction speed and the "slow" of the steady construction of the brand, and has embarked on a long-term route.
In fact, in the past many years, Chinese enterprises have only stayed at the first-chain level, and have become OEM factories for global production through labor cost advantages, and low value-added production links have led to limited profit margins for enterprises, which are located at the bottom of the industrial value chain.
In the process of restructuring the global value chain, Chinese brands represented by SHEIN, similar to Apple and Tesla, have grown into innovative enterprises and brands with global influence through strategic links such as R&D, design, brand operation, and marketing channels.
A few days ago, Morning Consult ranked the fastest-growing brands in the U.S. market this year, and Shein became the only Chinese brand on the list, ranking fourth in the overall list, and the only fashion brand in the world to be shortlisted. And the list of the fastest-growing brands among millennials in the United States ranks second after ChatGPT.
In terms of specific revenue data, according to the latest report, SHEIN's revenue in the first three quarters of this year rose by more than 40% year-on-year to $24 billion, and is expected to reach $32 billion to $33 billion this year.
Perhaps, the significance of SHEIN lies not only in the continuous growth of sales performance, but also in the influence of driving China's fashion industry to global brand power and industrial power. According to the ** report, the American fashion brand forever21, the British brand Missguided, and the Australian designer brand will all use SHEIN's flexible on-demand ** chain system for production and sales on the SHEIN platform.
Cross-border going to sea is blowing in the East, and Made in China is also accelerating the pace of moving towards the global market through brands and platform carriers, and the road to globalization is also the only way to raise the development ceiling of enterprises and even industries.
China's garment industry has come out of a shein, and made in China goes to sea, and more "shein" is also needed.