Since the middle of last year, the apparel supply chain in the Pearl River Delta region has ushered in a new wave of reshuffles due to the strong growth of SHEIN. Some people even jokingly said that “about one-third of the domestic All the clothing production capacity has been given to SHEIN.”
On May 10, SHEIN was once again listed among the top 50 global brands in China.
SHEIN kept a low profile as always and did not make any comments even on the podium at Google.
According to the latest 2021 supplier recruitment plan released by SHEIN, “FOB suppliers” need to deliver goods within 7 to 11 days and have the speed to undertake small-scale orders of 100 to 500 pieces. return ability. The “FOB model” refers to the SHEIN platform designing and producing the first sample garment, and then the supplier’s contractor outsources the materials to complete production.
1 The high standard of entry threshold presents two separate sides in the supply chain.
The factory that cooperates with SHEIN revealed to Baoge that orders for rapid mass production have put considerable pressure on the factory, and blindly pursuing low prices and volume is overdrafting the factory’s production capacity; Foreign trade factories that have not been able to settle in SHEIN regard it as a good solution for business transformation, because SHEIN’s large orders and quick payment mechanism undoubtedly relieve the factory of worries about overproduction that may lead to slow sales. This problem has been solved for many years. It has become a chronic disease in the clothing market.
Therefore, behind the rapid development of SHEIN, clothing factories seem to be in a dilemma like a siege. Their perspective may allow us to see through the B side of SHEIN.
2 Disturbed Garment Factory
“Almost all of us here All the knitting factories have gone to OEM for SHEIN, and 80% of the production capacity of my own tatting factory has also been given to SHEIN.”
Shan Lin owns a women’s tatting factory in Guangzhou Weaving factory, with more than 300 employees, entered SHEIN’s supplier system at the end of last year. For several months, the factory has been operating at almost overload. The continuous influx of massive orders has put her in a completely non-stop working mode.
“Although I was tired in the past, I could at least take one day off a week. Now there is no possibility of rest at all. The order assessment is too stressful.” Shan Lin told Brother Bao According to the analysis, SHEIN’s current supplier assessment system is very simple. It only calculates the factory’s monthly production capacity and does not take into account the differences in the production processes of different styles.
For example, Shanlin’s factory is responsible for producing dresses, with a monthly production capacity of 300,000 pieces, and another factory that produces T-shirts has a monthly production capacity of 700,000 pieces. However, in the final assessment, Shanlin’s factories often score lower, but the fact is that the process links and staffing of producing dresses are far more complicated than producing T-shirts.
The reason is that the woven factory occupies a large area and has complex processes. The overall investment cost is relatively higher than that of the knitting factory, and the equipment area and manpower investment of the latter are also much smaller. . Therefore, factories that do complex processes have no advantage in production capacity competition.
Many suppliers have reported SHEIN’s unreasonable assessment mechanism, but SHEIN has not made any changes. “Maybe this is easier for them to manage, but if it is transmitted to our factory, it will only further intensify the involution, and gradually become only willing to produce simple styles. It is completely impossible for factories that want to make differentiation to survive in the SHEIN ecosystem.”
In the eyes of the outside world, it is a good thing that the factory can produce non-stop without having to consider order issues. However, Shan Lin, who is a designer, believes that SHEIN is letting the factory return to the trap of low-end manufacturing. Its choices of fabrics and accessories are all low-end. “The style design looks like that, but it feels completely different in the hand.” Same”.
Judging from SHEIN’s model, Shan Lin’s story is not difficult to understand. It is precisely by relying on extremely low prices and rapid new releases that SHEIN has won the favor of young people in the United States. Rely on the social fission brought about by KOC marketing to capture huge amounts of traffic.
Browsing the SHEIN page, you can find that its main products are about 15 US dollars, and products similar to Taobao Juhuasuan can even be as low as 3 to 5 US dollars. This price is not suitable for Europeans and Americans. For example, it only costs 5 yuan to buy a piece of clothing. Many women like to buy such low-priced products.
The massive influx of orders has accumulated an unparalleled competitive advantage. According to data from AppAnnie and SensorTower, fast fashion e-commerce application SHEIN has replaced Amazon as the most downloaded shopping application on iOS and Android platforms in the United States.
As of May 17, SHEIN ranks first among iOS shopping apps in 54 countries and among Android devices in 13 countries.
The huge traffic on the sales side gives SHEIN a strong voice on the supply side. Many traditional foreign trade factories are seeking to cooperate with SHEIN because SHEIN’s minimum order quantity is 5 pieces. Many small factories admire him very much.
SHEIN’s ultra-low price also creates extremely low profits for factory processing.
Shan Lin calculated an account with Brother Bao. Calculated based on the annual sales, the profit of processing for SHEIN is no higher than that of processing for small and medium-sized clothing brands in the past. , but the pressure they bear is not proportional.
In Shan Lin’s view, homogeneous and low-priced clothing is not conducive to the long-term development of the factory. She plans to slowly transfer production capacity from the SHEIN system in the future, but currently SHEIN occupies the nationalThe situation of large production capacity in domestic apparel supply chain will not change in the short term.
Therefore, there has been a wave of imitation of the SHEIN model in the industry, and more SHEIN competitors have realized the importance of integrating the supply chain. However, in the eyes of many people in the clothing industry, SHEIN is not an object worthy of imitation.
3 How to escape the “low price attraction”
For low-end brand image and the consequences it brings Of course, SHEIN is very aware of the supply chain issues.
SHEIN is trying to tear off the label of low price and high volume, and develop its development layout through multi-category expansion and platform model.
In terms of platform model, SHEIN is also opening up more manufacturing processes to clothing factories. In addition to the “FOB” model mentioned at the beginning, SHEIN also announced the recruitment requirements for three major suppliers: “ODM suppliers” and “secondary process plants.”
For ODM suppliers with design and manufacturing capabilities, SHEIN requires potential cooperative suppliers to have a factory area of no less than 1,000 square meters, a workshop parking space for at least 50 people, and a delivery cycle of 10 to 15 days, during which they need to complete all work from design, plate making, production, and delivery.
The potential cooperation “secondary process factory” also has several conditions for entry. For example, the area of washing and dyeing factories needs to be 1,000 square meters, the area of printing, embroidery, and laminating factories needs to be at least 500 square meters, and the area of other secondary processing factories such as quilting, cloth wrapping, and burning flowers must be at least 300 square meters.
“SHEIN’s idea of building a platform is actually very clear. They hope that domestic women’s clothing factories can go overseas through SHEIN.” An industry insider analyzed to Baoge that the core problem is , whether SHEIN’s brand can take on clothing factories that cater to different markets and different needs. SHEIN’s rise is due to the right time, place and people. It remains to be seen whether it can successfully build a platform in the future.
4 Fast fashion that is 7 days faster than Zara
SHEIN’s benchmark Zara is fast fashion The inventor of INDITEX, the market value of its parent company INDITEX still exceeds US$82 billion despite the impact of the epidemic.
The traditional fashion industry develops clothing seasonally. It takes three months for a piece of clothing to go from design to order and then to the shelves. Brands either create trends or guess what will be popular in the coming months.
Zara doesn’t guess, it responds to fashion. Designers and buyers find new popular elements based on the new products at big brand launches, and then combine them to form their own designs (there are no shortage of lawsuits for this). Relying on factories near its Spanish headquarters, Zara can complete the production of clothes and send them to stores in as fast as 14 days.
If the factory is overseas, “from the moment the order is placed and the contract is signed until the goods are delivered to the customer’s warehouse in China, the time is basically controlled for fast fashion brands such as Zara and INDITEX” Within 30 to 60 days, some may be completed within 20 days.” A source from a foreign trade company that cooperates with ZARA told LatePost.
Customer demands and sales data collected every day from more than 7,000 stores around the world are transmitted to the data center at Zara headquarters on the same day. Zara first quickly produces small batches of clothes in Spain, with a minimum of 500 pieces, but usually 1,500, 3,000 or more. These clothes were put into market testing, and if the results were good, orders were quickly added. So far, 54% of Zara’s suppliers are still in Spain.
Trends change very quickly, and companies that are slow to respond, such as H&M, have 70% of their products in basic styles, and more than 30% of their products must be discounted and heavily promoted before they can be sold. Zara can keep up with the trend in time, and only 40% of basic models and 85% of products can be sold at original prices.
SHEIN, which has no stores and sells completely online, is basically faster than Zara in every aspect.
Pei Yang, the former general manager of SHEIN Mobile, demonstrated the company’s tracking system at an event. SHEIN captures products from various large and small clothing retail websites and summarizes the current popular colors, price changes, and what patterns to use.
Designers and buyers combine elements to design new clothes based on clues collected from various channels, or contact factories to see if there are suitable clothing styles that can be produced directly. A SHEIN men’s clothing buyer told LatePost that he would check the 1688 website on a daily basis, watch videos of fashion weeks and major brand press conferences, and also conduct offline research on similar style stores. , because it can take photos, so general brand stores are more sensitive.”
It is also a major customer of Google. SHEIN uses GoogleTrendsFinder (search trend finder) to discover the search volume and rising trends of hot words in different countries, such as what colors, fabrics, and styles are popular. For example, it accurately predicted the popular lace in the United States and the popular cotton materials in India in the summer of 2018.
SHEIN has shortened the process from proofing to production to 7 days at the fastest, which is 7 days shorter than Zara’s fastest time. One of SHEIN’s top suppliers told LatePost that it only takes 5 days from receiving orders and fabrics from SHEIN to delivering garments to the SHEIN warehouse: 1 day for fabric production and 3 days for cutting, sewing and finishing. Secondary crafts (embroidery and printing) 1 day.
SHEIN can judge product performance faster and at lower cost. Without offline stores, SHEIN can produce at least 100 pieces of a piece of clothing at a time, and decides which styles to place additional orders based on consumer purchase feedback.
Similarly produce 3,000 pieces of clothing to test market response. Zara can only test one to six styles, while SHEIN can test 30 styles. This means that SHEIN has a higher probability of hitting a hit. A 2018 SHEIN business plan obtained by “LatePost” shows that SHEIN’s hit rate is 50% and its unsaleable rate is around 10%. After you hit the hit model, you can significantly reduce the cost per piece by adding subsequent orders.
The small batch size of 100 pieces means that the failure cost of trying different fabrics and color combinations is lower. This is why compared to Zara, SHEIN’s clothes are more energetic and youthful, with bright colors, various fabrics and patterns, and you can’t see too many basic black and white and gray styles.
With the increasing environmental awareness of overseas consumer groups, how SHEIN can get rid of the name of “disposable” clothing and further build SHEIN’s long-term value as a Chinese overseas brand must be determined. Taking certain measures in this regard will be the core factor that determines whether SHEIN can continue to expand.
Higher efficiency. A 2018 SHEIN business plan obtained by “LatePost” shows that SHEIN’s hit rate is 50% and its unsaleable rate is around 10%. After you hit the hit model, you can significantly reduce the cost per piece by adding subsequent orders.
The small batch size of 100 pieces means that the failure cost of trying different fabrics and color combinations is lower. This is why compared to Zara, SHEIN’s clothes are more energetic and youthful, with bright colors, various fabrics and patterns, and you can’t see too many basic black and white and gray styles.
With the increasing environmental awareness of overseas consumer groups, how SHEIN can get rid of the name of “disposable” clothing and further build SHEIN’s long-term value as a Chinese overseas brand must be determined. Taking certain measures in this regard will be the core factor that determines whether SHEIN can continue to expand. </p
