China needs a new form of going to sea
"Going to sea is no longer a matter of choice, but something that must be done. ”This is the consensus formed by many Chinese companies in the past few years after experiencing market tempering.
That being said, going to sea is not easy. On the one hand, for most operators, overseas markets are new and unfamiliar territory. We have seen that there are many cases of failure to blindly go to sea in order to chase the wind.
On the other hand, the traditional overseas mode of fighting for cost and manufacturing is also being challenged. In the sea 1At stage 0, Chinese enterprises are attached to other brands and are foundries that complete a certain process; Arrived at sea 2At stage 0, Made in China can export its own goods, but it is still trapped in "high quality and low price" and lacks competitiveness. As costs rise and demand changes, the added value of the first two decreases and prevents them from establishing an impact on the global market.
Today, China needs a new form of going to seaIs there a group of Chinese brands that can gain a firm foothold in the global market with independent product research and development, technological innovation and first-chain management? It's different from going to sea in the past few decadesThis time, they are not only selling goods, but also competing on behalf of China's brand power and industrial chain.
Despite the extraordinary hardship, a Chinese brand called Shein did it.
Recently, the "Top 10 Fastest Growing Brands in the United States" survey report released by Morning Consult, a well-known authoritative consulting company in the United States, showedSHEIN is as famous as ChatGPT and Coca-Cola, and is not only ranked fourth in the "Top 10 Fastest Growing Brands in 2023", but also the only Chinese brand to be included in the list. At the same time, Shein was selected as one of the "Top 10 Fastest Growing Brands among Millennials in 2023", second only to ChatGPT, and is loved by young people across the United States.
On January 15, the market analysis agency DataAccording to AI's latest "2024 Mobile Market Report", Shein will once again win the global shopping APP** volume champion in 2023, surpassing Temu, Amazon, and Aliexpress, which are in second, third, and ninth places, respectively.
In the United States, Brazil, or Europe, Southeast Asia and other places, more and more people go to SHEIN** to buy clothing; Celebrities and influencers share SHEIN outfits through social platforms such as ins and Twitter; At SHEIN stores in New York, Tokyo, and Berlin, young boys and girls line up to try out the latest fashion items ......
People tend to attribute the success of a brand to fortune, but ignore his new style of play, the strategy that goes with it, and the determination to be long-term. In my opinion, the same is true of most of the outside world's evaluations of Shein. For example, the rise of SHEIN is just that the ultimate cost performance has collided with the consumption environment that fits him? Of course not.
Next, we will take SHEIN as a sample to dismantle the real logic of the brand's going overseas. I believe that after reading it, you will have a deeper insight.
SHEIN brand, the mystery of "small single quick reaction".
When it comes to the fashion brand giants that radiate the world, which brands can you think of at the first time?
In the past, I believe many people would have mentioned Zara, H&M, Uniqlo, and so on. But now, in the minds of consumers, there is another Chinese brand name - SHEIN.
According to ** report, the number of users of Shein reached 1500 million, covering more than 150 countries and regions; In 2022, it surpassed Zara's full-year sales with a GMV of $29 billion. From 2020 to 2022, SHEIN's performance continued to grow. According to third-party reports, SHEIN has surpassed Nike and Adidas to become the most searched clothing brand on Google.
As a new brand, why does SHEIN compete with old-timers such as H&M, Zara, and Nike on the same stage and still gain favor? In my opinion, one of the keys is its extreme "small single quick reaction" mode.
In the past, the apparel industry was characterized by large orders and long cycles, that is, enterprises produced a certain product in batches according to the plan, and then sold it through fixed distribution channels. Once the product misses the trend, it will be quickly eliminated, making consumers pay for the best inventory costs.
SHEIN has innovated the "small order quick reverse" model: under the premise of real-time analysis of fashion trends, a single SKU is ordered at a minimum of 100-200 pieces, and if the sales trend is good, the order will be returned immediately, and the production will be suspended if the sales do not meet expectations. On the one hand, the "small single quick reflex" can ensure that the brand captures the current trend and launches new products in a short time; On the other hand, the savings in inventory costs further reduce the product**. The combination of the two makes SHEIN more efficient, more fashionable, and more cost-effective than traditional fashion giants.
Model innovation is very important, how to ensure its implementation? You must know that "small single quick reaction" is also synonymous with high efficiency. It means that SHEIN's upstream factories not only have to respond to orders at any time, but also have to deliver goods in a short time. In China's garment manufacturing industry, there are more than 90%, more than 1560,000 micro, small and medium-sized enterprises. Most of these small, medium and micro enterprises still rely on traditional methods such as manual labor, excel, and email to arrange production, which obviously does not have the advantage of efficiency.
In 2014, when foreign trade in clothing was still limited to receiving orders, finding factories, and making price differences, SHEIN had built its own brand and set up a digital chain system for this purpose.
In terms of front-end fashion trends, SHEIN can track the sales dynamics and consumer feedback of the app in real time, accurately analyze the popular colors, pattern colors, changes, etc., and formulate the positioning of follow-up products accordingly to prepare for the "next popular style".
After entering the production process, SHEIN provides a visual digital tool for the first factory. The factory can obtain the production standards of each style, carry out production scheduling, production management, accept brand feedback and adjust in time. According to internal calculations, from the moment of capturing the trend, to the completion of design and development, small batch order production, and then to the terminal garment delivery, SHEIN's fastest cycle is 7 days.
In addition, the relationship between the general brand and the factory will come to an end after the four steps of "order-production-delivery-checkout". But SHEIN has gone deeper and farther - starting from the listing of goods, ** merchants can see the market feedback of products on the digital tools built by SHEIN. "Which product sells well", "which yardage is broken", "which color is unsalable", are all clear at a glance. When the data shows a trend of explosive orders, the factory will prepare in advance to purchase fabrics and recolor goods, and when the order arrives, it will immediately accelerate the production of firepower.
It can be said that from the front-end fashion trend, design and development, small batch production, rapid replenishment and other links, SHEIN has opened up digitalization. With the help of the digital chain, both small factories and large enterprises can achieve agile production.
The data shows that compared to the industry average of 30% of the unsold inventory level, the inventory rate of the SHEIN brand remains in the low single digits. The cost of inventory is reduced, which naturally helps brands to make them more attractive**. Both the SHEIN brand and consumers have also become the beneficiaries of the "small order quick reaction" model.
From one brand, to the entire brand ecosystem
Beneath the surface, there are often even bigger icebergs.
When it comes to SHEIN, many people focus on "small single quick reaction", but ignore the entire flexible ** chain supported by digitalization. When we see the SHEIN brand shining overseas, it is also likely to forget the huge ecology behind the brandEvery year, hundreds of clothing manufacturers provide production support for SHEIN's own brand; There are hundreds of billions of dollars of fashion clothing that will travel from Chinese factories across the ocean to all over the world.
SHEIN has never been a single brand going overseas, but has built a brand ecology and gone out with the Chinese clothing industry chain, how did it do it?
Standard + Training: Quotient from 0 to 1
There is a famous saying in the industry: first-class enterprises set standards, second-rate enterprises make brands, and third-rate enterprises make products.
Overseas young people's love for SHEIN has always been built on the cornerstone of consistent brand standards, high-quality products, and trendiness. But how to make a good product reach consumers quickly? SHEIN proposes standards for ** merchants, including quality, efficiency, etc.
For factories, with standards, there is direction。A leading manufacturer of swimwear for SHEIN said that under the high standard of brand requirements, it has formed a set of production system: every morning, each group is convened to hold a "prenatal meeting" to train the styles to be produced; During the production process, special personnel are arranged to carry out intermediate inspection and sampling inspection on the machine; Finally, the performance appraisal of quality inspectors is linked to the new success rate of defective products, so that the rewards and punishments are clear. After a long period of running-in, the defective rate of the factory is only 1% all year round, and it has the strength that a product can be customized.
"Because of SHEIN, we were able to break through and do things that we couldn't do before. ”The above-mentioned swimsuit ** business mentioned that in addition to proposing standards and daily empowerment, SHEIN will also carry out special training from the whole process of operation management, planning and development, production scheduling, operation and stocking, and quality management.
In 2023, SHEIN will hold a total of more than 620 trainings. A ** businessman once commented: "The only one in the industry that can make ** businessmen learn from 0 to 1 is SHEIN." ”
Expansion and transformation: fulfill the mission of "chain master".
With the growing voice of the SHEIN brand, many people like to make an analogy between the "SHEIN chain" and the "fruit chain": as terminal brands, SHEIN and Apple mobile phones have all kinds of industrial chain layouts such as raw material suppliers and foundries; In terms of business management, both have a set of extremely strict screening and assessment systems; When the first business enters the industrial chain, it can obtain order growth and technical support.
I think all of the above is true, but not comprehensive. Because as the "chain owner", SHEIN sees the entire clothing industry, rather than the interests of a single brand
On the one hand, with the expansion of the scale of the first business, SHEIN took the initiative to subsidize funds to support the expansion and transformation of the factory。From March 2022 to the end of 2023, SHEIN has completed the construction support of more than 130 commercial factories with a total of 430,000 square meters. In the future, it aims to cover about 300 ** businesses, and the planned investment will reach 100 million yuan.
On the other hand, SHEIN has also established a clothing manufacturing innovation research center covering an area of nearly 60,000 square meters。It is mainly used to explore the establishment of "flexible chain standards", and export the research results to clothing manufacturers, and promote the continuous operation of leading factories in a more scientific and lean way.
From solid factory support to an innovation center specializing in the industry, SHEIN is building not only a moat for its own brand, but also China's leading flexible production standards. Therefore, it is willing to spend real money and a lot of energy to let the value of innovation benefit local industries, manufacturers and even every specific position.
Community welfare: symbiosis between the brand and the factory
Going overseas is not just a brand expedition, but also a real and concrete person.
In June 2023, SHEIN launched the upgrading of the canteen, dormitory and multi-function room of the ** business factory, and the project is expected to cover more than 270,000 square meters of ** business community dormitories in the next three years, benefiting more than 40,000 ** business employees.
At the same time, focusing on public welfare services for the ** business community, the Ju Xingguang project set up by SHEIN provides financial assistance such as education and illness for ** business families. Since the launch of the project, it has covered hundreds of cooperative businesses and subsidized more than 400 business families, including more than 700 children in the education stage. Shein also plans to set up more than 10 children's homes to provide free services such as child care, learning and growth for 5 to 16-year-old children for ** business employees.
In my opinion, whether it is to establish standards and do training for the first business, or vigorously support it to renovate its factory, want to innovate, or set its sights on community public welfare, SHEIN and the first business have formed a new cooperation paradigm - using new technology and organization to jointly make the cake bigger and sail to a broader global market.
SHEIN+, the overseas infrastructure of thousands of brands
Shein's Chinese name "Xiyin" is taken from the big sound of "Lao Tzu", which roughly means "the real strong sound is actually no sound". In the past ten years, SHEIN's efforts in efficiency, digitalization, and industrial chain have been unknown at first, but they have become extremely amazing.
data.AI data shows that SHEIN's active users continue to rise. In the 2023 global shopping app active user ranking, Amazon still ranks first, while SHEIN rises three places to fourth, and Lazada, AliExpress, and Temu are ranked first.
fifth, seventh and twelfth places; In the 2023 global shopping app behavior penetration ranking, SHEIN rose four places to fourth, Lazada, AliExpress, and Temu ranked fifth, eighth, and twelfth respectively.
In 2023, SHEIN will not only maintain the high growth of the brand itself, but also have more capacity spillover. This spillover ability has led to the birth of a unique model of dual-engine development of self-operated brand + platform.
As a fashion brand, SHEIN will continue to enhance its influence by continuing to innovate and catch up with trends. As a platform, SHEIN has a greater retribution: from fashion clothing to household products, accessories, 3C supplies and other categories, and in the form of two forms of cooperation, namely, agency operation and independent operationProvide third-party merchants with a "menu-style" option to go overseas.
On the one hand, small and medium-sized sellers who have no overseas operation and sales experience can accept the agency operation service of the SHEIN platform model. SHEIN takes care of commodity operation, warehousing, logistics, customer service, after-sales and other services, while sellers only need to focus on the production links they are good at and drive high-quality products to the sea.
On the other hand, for brands with independent operation experience, they can independently manage product selection, shelves, marketing strategy, sales, inventory, logistics, etc., while SHEIN provides platform resources, operating rights and related skills training, etc., to further expand brand awareness.
Whether it is operated independently or on behalf of others, the SHEIN platform aims to become the overseas infrastructure for thousands of brands。The so-called overseas infrastructure is essentially a business ecology built by SHEIN for more Chinese products and Chinese brands by using its decade-long overseas accumulation. In such an ecosystem, overseas merchants at different stages and with different needs can accurately find their own solutions.
With the vigorous development and further deepening of the platform strategy, SHEIN will also go deep into the industrial belt and carry out the national 500-city industrial belt plan. This means that not only the clothing industry, but also SHEIN needs to create more industrial ecology. He is not only conducive to the transformation and development of Chinese brands, small and medium-sized businesses, and enterprise factories, but also expands sales and brand promotion in the global market, forming a virtuous circle.
From brand to brand ecology, SHEIN's journey to the sea is more like an endless race with itself.
The above article ** in Attack Wave Finance, the author of the big business group.
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Founded in Shenzhen, Yunyue Capital is a comprehensive industrial investment bank integrating "strategy + marketing + financial advisory". Originating from industry giants such as Huawei, ZTE, Goodix, and Dongfeng Motor, the Yunyue Capital team connects more than 3,000 institutions around the world and provides strategic consulting, financing, M&A and other industrial investment banking services for nearly 200 enterprises, covering technology, new energy, healthcare, consumption and other fields.