Since the middle of last year, the clothing supply chain in the Pearl River Delta region has ushered in a new wave of reshuffle due to the strong growth of SHEIN. Some people even jokingly said , “About one-third of domestic clothing production capacity is 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 ability to undertake 100 to 500 small items. Quick return capability for large-scale orders. 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.
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The high standard entry threshold presents two separate sides in the supply chain. .
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 In the past few 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.
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The disturbed clothing factory
“Almost all our knitting factories here have gone to OEM for SHEIN, and 80% of the production capacity of my own woven factory has also been given to SHEIN.”
Shan Lin owns a women’s clothing tatting factory in Guangzhou with more than 300 employees. He entered SHEIN’s supplier system at the end of last year and has been doing OEM work for several months. The factory has been operating at almost overload and has been continuously The massive influx of orders 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.” Lin Xiangbaoge analyzed that the current supplier assessment system of SHEIN is very simple, and only calculates the monthly production capacity of the factory, without taking into account the differences in the production process 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 can produce 700,000 pieces per month. 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. The latter’s equipment area and manpower investment are higher. Much smaller too. 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.”
From 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 products that SHEIN has won the popularity of young Americans. Favored by the group, relying on the social fission brought by KOC marketing to attract huge 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. For Europeans and Americans, the price is only 5 yuan for a piece of clothing. Many women like to buy such low-priced products.
The massive influx of orders has piled up. Unparalleled competitive advantage. According to data from App Annie and Sensor Tower, 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 has a minimum order quantity. There are 5 pieces, and many small factories admire them.
SHEIN’s ultra-low price also creates extremely low profits for factory processing.
Shan Lin made a calculation with Brother Bao. Calculated based on the annual sales, the profit for SHEIN processing was not the same.The supplier told LatePost that it only takes 5 days from receiving SHEIN’s order and fabric to delivering the ready-made garments to SHEIN’s warehouse: 1 day for fabric production, 3 days for cutting, sewing and finishing, and secondary process ( Embroidery and printing) 1 day.
SHEIN determines product performance faster and at lower cost. There are no 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 hits. 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.
Small batches of 100 pieces mean less failure costs when trying different fabrics and color combinations. This is why compared to Zara, SHEIN’s clothes are more energetic and younger, with bright colors, various fabrics and patterns, and you can’t see too many basic black and white gray styles.
With the increasing environmental awareness of overseas consumer groups, how can SHEIN get rid of the name of “disposable” clothing and further build SHEIN’s long-term future as a Chinese overseas brand? To achieve value, certain measures must be taken in this regard. This will be the core factor that determines whether SHEIN can continue to expand.
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