A classic business problem - when your company is in a hegemonic position in the industry, do you choose to strongly integrate upstream and downstream to build barriers?Or do you want to open up the ecosystem to develop gameplay and let more people participate in making the cake bigger?
An entrepreneur like Musk will not hesitate to choose an open ecosystem, and Tesla has published almost all new energy vehicle patents.
And the overseas e-commerce giant Shein is using its industry hegemony to set off an "intellectual property war" in the fast fashion industry.
Quantum Connection learned that SHEIN used a simple and crude way to let the cooperative factories hand over the intellectual property rights of their clothing products. If you still want to sell clothing on the SHEIN platform, then the copyright, ** and layout of your design are all owned by SHEIN, and you will not get any fees, and you cannot sell them online on other platforms.
SHEIN's move made many small and medium-sized factories dare not speak out. Design copyright can be said to be one of the core assets of many clothing factories, which is equivalent to letting them hand over their half-life to SHEIN for free.
To make such a move, industry insiders analyzed that because SHEIN has been trapped in the fast fashion industry for many years and has intellectual property problems, SHEIN is often exposed to selling some "similar models" of big brands.
World-renowned brands and independent designers have sued SHEIN for plagiarism. Fashion retailer H&M, Spanish clothing brand Zara, Australian swimwear brand Tribe Tropical, American jeans manufacturer Levi Strau, British brand DR Martins and other world-renowned companies have all taken court against SHEIN.
In the successful process of SHEIN, the flexible manufacturing model of "small single quick reaction" is the key. In the "small order quick reflex" model, the first order of each style of clothing may only produce one or two hundred pieces. If sales are good, add orders quickly.
In this cycle,Design time is highly squeezed, and IP compliance becomes difficult to guarantee.
1. Use the simplest and crudest way to solve the most important industry problems
It is understandable for Shein to ensure its own commercial interests, but its brutal approach is rare in Internet platforms.
An investor in the Internet industry told Quantum Connect that when Internet giants encounter similar industry problems, they will solve the problem by forming industry exchange meetings, jointly negotiating industry standards, establishing a benign ecology, and even investing heavily in cooperation.
The investor cited the example of Temu and TikTok, which are both overseas e-commerce platforms, and other e-commerce platforms that go overseas, they are all working hard to establish their own benign merchant ecology and help and support small and medium-sized factories on the platform.
SHEIN insiders said that SHEIN has also made efforts for its intellectual property ecology.
At the beginning of 2021, SHEIN launched the "SHEIN X Designer" campaign. In just one year, the company has established cooperation with 1,442 original designers around the world. However, the designers that SHEIN cooperates with are mainly young designers who need to be "incubated", and SHEIN pays a total of about $1.5 million in copyright fees to the contracted designers - less than 1% of the company's annual revenue, and each designer receives an average of about $1,000.
These young designers can't quickly solve the problem of SHEIN's lack of original design intellectual property rights, perhaps due to the pressure of listing, SHEIN decided to throw the problem to the cooperative factories, so that the factories can hand over their core intellectual property rights for free, hoping to solve the problem of intellectual property rights in the fast fashion industry that gives them a headache.
Second, the person who understands you best will grasp you the deepest
Although SHEIN directly forced the small and medium-sized factories in the ecosystem to hand over their intellectual property rights, causing their interests to suffer, many small and medium-sized garment factories had to sacrifice themselves because they could no longer leave SHEIN.
According to public data, SHEIN's revenue is expected to exceed $30 billion this year, and there are more than thousands of companies in the ecosystem. SHEIN can be said to be one of the companies in the world that knows the best clothing chain.
In 2014, the newly established SHEIN set up a first-chain base in Guangzhou, where China's fashion clothing production is concentrated.
SHEIN persuaded small and medium-sized garment factories to cooperate with it in depth, and at first the merchants just used SHEIN as a sales platform to test the waters. From design to production to delivery to overseas consumers, SHEIN first tests 100 200 small orders in the factory, then tests the water in overseas Internet advertising, and then adds or stops production according to sales feedback - this is the famous "small order quick reaction" model.
After 9 years of development, some garment factory owners have made money with SHEIN and decided to be deeply bound to SHEIN, and SHEIN is now a super unicorn with a valuation of 90 billion US dollars, and its founder Xu Yangtian will be worth more than 110 billion yuan.
This is a beautiful thing, the platform relies on the prosperity and rapid growth of small and medium-sized enterprises, and the enterprises in the ecosystem have also reaped rich returns. Perhaps after years of development of the Internet, everyone has tacitly assumed that platforms have the obligation to protect the rights and interests of ecological partners, but not every platform needs to fulfill this obligation.
Sometimes, the person who knows you best will also grasp you the deepest.
SHEIN holds the sales and data of the platform's merchants. Through the "MES process management system" in the background, SHEIN firmly controls all production links of the merchant, the size data of the product, the style modification data, the sending version, the delivery, the order, the return and the raw material information, etc., and a series of system data, once the merchant does not cooperate, it will be taken off the shelf, and the merchant has no room for resistance.
Now that Shein has given an order, small and medium-sized businesses have to hand over their property.
3. Shein Kernel is still a traditional enterprise and needs to make up classes
Back to the question at the beginning of this article - would you choose an intra-industry monopoly?Or do you want to build an open ecosystem?
I've worked with business schools and entrepreneurs about this questionThe founders of traditional enterprises tend to monopolize inward to build barriers, while CEOs with Internet technology backgrounds feel that the ecosystem should be opened.
In fact, it is not difficult to understand that most of the traditional industries are relatively stable and simple, such as commercial real estate, as long as you do a good job in mergers and acquisitions and operations, then the upstream businesses that cooperate with you must be attached to you and run with you, and you only need to operate within the industry.
Internet technology is dynamic and explosive, and the best business model is to become "infrastructure", and the more open the ecology, the better. Android rises in an open ecosystem, and many developers win-win. Apple is such a strong company, and every year it will hold a special conference to curry favor with developers and upstream chains in the ecosystem.
On the Chinese Internet, there have been many tens of billions of listed companies in the WeChat ecosystem, and Ma Yun said that there is no difficult business in the world, and Ali has always regarded "empowerment" as the responsibility of his platform.
Looking back on the development history of SHEIN, although it is the shell of the technology Internet, you will find that its genes are actually more like a traditional foreign trade company. Xu Yangtian, who was born in Shandong, is not wealthy, he began to do a small business to subsidize his life when he was in college, he and his friends opened a ** shop to sell wedding dresses during college, in 2008, when he found that the same wedding dress overseas can be sold several times **, he decided to sell the wedding dress abroad, which is the predecessor of SHEIN.
The SHEIN team started from the traditional ** chain, they soaked in the factory, looking for all kinds of good goods to sell overseas. In 2015, 7 years after starting its business, SHEIN got its first institutional investment and began to use the model of the Internet platform to build itself.
Unlike technology founders such as Jack Ma and Ma Huateng who have their own Internet genes, Xu Yangtian established SHEIN just to sell goods, and his original intention was a simple foreign trade enterprise.
A company's "original genes" are very important, so SHEIN has a subtle sense of separation, and when it develops, SHEIN is like an inclusive Internet company, and when it encounters some problems, it begins to show its original appearance.
However, if the technology industry has a monopoly within the industry, I am afraid that there may not be good results. Taking Japan's hydrogen energy industry and IT industry as an example, Japan's leading car companies in hydrogen energy, in order to protect their own interests, frantically registered intellectual property rights for patent monopoly, and the final result is that no one intended to play with them, China and the United States skipped the hydrogen energy industry and directly began to lay out lithium batteries. The crazy registration of intellectual property rights by Japanese enterprises has made the upstream and downstream players of the ecology almost lose their production space, which has directly led to the decline of the entire industry.
As one of China's "Four Tigers Going to Sea", SHEIN has accumulated a good first-mover advantage thanks to the explosion of the foreign trade industry, but it still needs to make up for it in terms of Internet ecological layout and platform governance.
As the well-known science fiction ** "Three-Body Problem" famously said, "Weakness is not an obstacle to survival, arrogance is".