The "blackbox" principle was first derived from the field of cryptography to describe the security of cryptographic algorithms. In cryptography, the black box means that only the input and output relationships are known, but the specific encryption and decryption process is not known.
The reason why Shein is "mysterious" is to create a unique fast fashion "black box". This "black box" links many small and medium-sized garment workshops on the one hand, and overseas consumers on the other, and delivers low-cost clothing overseas through the drive of low prices, completing the closed loop of the business model.
Many small and medium-sized garment workshops have always been suppressed at the lowest end of this fast fashion chain, they have nothing to do with going overseas, and they cannot reach overseas consumers, so they can only succumb to the "black box" and share the meager profits. Although SHEIN has strong design and sales capabilities, it still continues to use the "black box" to further transmit risks and costs to the upstream ** chain, which greatly compresses the premium space and brand development awareness of small and medium-sized garment workshops, making them deeply trapped in low-end manufacturing and unable to extricate themselves.
There is no moat, no sense of security.
The layman looks at the bustle, and the insider looks at the doorway. Removing the mysterious fog deliberately created, SHEIN's business model does not have much technical content, nor does it have an insurmountable moat, and it is also very easy to be imitated, plagiarized, and iterated. In essence, SHEIN's success is to achieve relatively low retail ** through extreme production costs, and establish a "black box" to complete the information matching between supply and demand.
Strictly speaking, SHEIN is only a channel, not a brand. It does not rely on the strong association of brand loyalty to connect consumers, but relies on "large volume, small profits and quick turnover, and continuous explosions" to continuously stimulate consumers to buy. Therefore, SHEIN can make the scale very large, but it will not form a space for technology accumulation and brand premium. Ultra-low production cost and ultra-high production efficiency are the main guarantee of SHEIN's profits, and these need to be mined by SHEIN from the best end.
*Both the end and the consumer side are open, which makes SHEIN extremely insecure. Temu's documents accusing SHEIN show that SHEIN used its market monopoly position to force clothing manufacturers to sign exclusive agreements with them to prevent clothing manufacturers from cooperating with TEMU. According to data given by Temu, as of May this year, about 8,338 manufacturers had signed the agreement, and these 8,338 manufacturers accounted for 70% to 80% of the total number of capable merchants. It can be seen that in order to improve the sense of security, SHEIN has to increase its control over the upstream ** chain.
Create a "black box" and control the source factory.
SHEIN's low price and rapid launch are based on the "workshop-style" low-end ** chain, in other words, a workshop-style garment factory with several or dozens of people is the core competitiveness of SHEIN to create fast fashion. Their rapid response ability and cost-effective products have become a powerful tool for SHEIN to pry open the overseas market.
In order to improve efficiency and better control the design and production of upstream small and medium-sized factories, SHEIN began to create its own "black box". The launch and application of the "MES process management system" allows SHEIN to firmly control all production links of merchants, such as the size data of goods, style modification data, consignment, delivery, orders, refunds, raw material information, and a series of system data. This system acts like a "black box", separating countless workshop-style garment factories from consumers. Garment factories will always get low-margin orders, and once they don't cooperate, they will be kicked out of the "black box" and beaten back to their original shape.
The emergence of Temu made SHEIN more nervous, and gradually began to revise the exclusivity agreement with the merchant, further expanding the exclusivity requirements in the agreement, forcing the merchant to transfer the image of the product, ** or ** the intellectual property rights, and granting SHEIN a worldwide, irrevocable exclusive license. In order to ensure the superiority of SHEIN at the end of the **chain.
The dream of small and medium-sized enterprises is broken, and it is only SHEIN that goes to sea
SHEIN did bring orders to many small and medium-sized garment factories, but did not take them to sea. Only SHEIN went to sea, and the others were the "fuel" for the big ship of SHEIN to sail to the sea of stars.
There are only two ways to get orders from SHEIN, OEM or ODM. The former is paid by the SHEIN buyer designer, and the merchant is responsible for production;The latter is selected by SHEIN buyers, and the merchant is responsible for development and production. Because SHEIN's contracted designers can no longer meet the incremental needs of their business, they can only ask the merchants on the platform for productivity and production efficiency again.
At the same time, this measure will also greatly alleviate the large number of intellectual property lawsuits faced by SHEIN. Zara, H&M, Nike, UGG, Levi Strauss, Kikay earrings, trendy brand Stussy, Oakley sunglasses, and Tribe Tropical have all filed infringement lawsuits against SHEIN.
If the merchant chooses the ODM model, not only the merchant needs to be responsible for the design of the product, but also the copyright, ** and layout of the design are 100% owned by SHEIN free of charge, and cannot be sold online on other platforms. And, once SHEIN encounters a lawsuit because of these designs, the consequences will be borne by the merchant.
Therefore, the industry's evaluation of SHEIN's model is "lack of constructiveness for the industry". Under the fast fashion "black box" created by SHEIN, those small and medium-sized manufacturing factories that are the first chain still belong to the "low-end industry" in the clothing industry chain, and nothing has changed. In the eyes of industry insiders, SHEIN's success is "not beneficial" to the transformation and upgrading of the apparel industry. It is only SHEIN that goes to sea, and small and medium-sized manufacturing factories just accompany it to make a colorful dream of going to sea.