June 13, 2024

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The rise and rise of a fashion giant

The rise and rise of a fashion giant

by Daniel Thomas, Laura Jones and Lucy Hooker, Business correspondents, BBC News

Getty Images A model walks the runway at Shein's fashion show wearing an orange shirtGetty Images

Michaela, 17, says the biggest order she made on Shein was for £150, when she bought “an extra 16 items”.

Like millions of others, she’s a big fan of the ultra-fast fashion giant, mostly because of how affordable it is.

She also loves how she sees YouTube influencers offering SheIn discount coupons, which makes her “buy more.”

Over the past decade, Shein has transformed from a little-known brand among older shoppers into one of the world’s largest fast fashion retailers.

The China-founded company – which also sells a wide range of beauty and household products – Its profits doubled to more than $2 billion (£1.6 billion) last year, which is more than what Swedish fashion group H&M and Primark and Next made in the UK.

Today, it ships to customers in 150 countries around the world.

However, while the company is considering a plan to list its shares on the London Stock Exchange, it is still plagued by controversy over its environmental impact and risks. Work practices – included Forced labor allegations in its supply chain.

Michaela is aware of the backlash and is particularly concerned about the amount of plastic Shein uses in its packaging.

But she feels that most fashion brands face similar criticism, and that “not everyone can afford high-end clothes.”

She told the BBC: “So, deep down, I feel very bad when I buy things, but at the same time it’s a relief.”

Getty Images Natalia Zuba poses in front of a Sheen signGetty Images

Shein collaborates with influencers and reality TV stars, such as Natalia Zoppa, to promote the brand

Shen, pronounced “she-in,” was founded in China in 2008 by businessman Xu Yangtian and began selling wedding dresses online.

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Since then, it has grown into a global giant, best known for selling fashion-forward clothing, mostly to its Generation Z customer base.

A big part of the appeal? the price.

The average cost of a Shein-branded piece of clothing is just £7.90, and at any given time, it has up to 600,000 items for sale on its online platform, dwarfing rivals such as Zara or Boohoo.

It has also taken on rivals such as Missguided, while Xu Yangtian, who rarely gives interviews, is now said to be one of the richest men in China.

The real turning point for the brand came during the pandemic, when online shopping took off and Shein’s sales soared, says GlobalData analyst Louise Deglis Favre.

The company has also made smart use of social media, enlisting popular influencers and college students to promote its clothes on TikTok and Instagram.

“The brand’s success coincided with a boom in the use of TikTok in Europe and the United States,” says Ms. Deglis Favre. “The Chinese social media platform has been heavily involved in spreading awareness about Shein’s extremely affordable offer.”

It has attracted shoppers by bringing in pop stars like Rita Ora and Katy Perry to perform its virtual concerts, but it also attracts a significant amount of organic, user-generated content.

You may have come across so-called “long-form” videos of young women unpacking their newly arrived packages and offering their candid reviews of crop tops, dresses or beauty blenders from the site.

“They keep coming back and making purchases.”

Shein’s business model is similar to Amazon’s, in that it partners with thousands of third-party suppliers — many of them in China, Brazil and Turkey — to manufacture its clothes and then ship them from giant central warehouses.

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It also accelerated the “test and iterate” model popularized by other fast fashion giants including H&M and Zara owner Inditex.

This causes Shein suppliers to produce items in small numbers, ranging from 100 to 200 pieces, and then produce more of whatever style is a hit.

The brand can manufacture a new product in just 25 days – something that can take other retailers months.

It also uses “gamification” strategies to boost customer engagement in its shopping app, which is used by millions of people around the world.

Users earn points and discounts for logging in daily, sharing purchases on social media and referring friends.

“This encourages users to repeat such behaviors to earn more rewards, and as a result, they keep coming back, interacting with the app and making purchases,” says Vilma Todry, associate professor at Goizueta Business School at Emory University in the US.

Getty Images A line of shoppers line up outside the Shein pop-up storeGetty Images

But the criticism Sheen has faced over its operating practices has been difficult to shake off.

These concerns are back in the spotlight again, as the Chinese company explores listing its shares in London in a public offering that could value it at about $50 billion.

There are concerns about the environmental impact of mass production of low-cost clothing, and the waste it produces.

Last year, a group of US lawmakers also called Shen is being investigated over allegations that forced labor of Uighurs in China is used to make some of the clothing it sells.

“We have zero tolerance for forced labour,” Sheen told the BBC at the time.

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The company has promised to investigate such cases and says it strictly enforces a code of conduct that all its suppliers must sign.

It has also launched a resale platform for shoppers in the US and France to boost its green credentials, while saying that producing clothes in smaller quantities means that very little material will go to waste.

But some say it’s not enough.

Jess Gavin Jess GavinJess Gavin

Jess Gavin has stopped buying clothes from Shein

Student Jess Gavin, 21, has certainly gotten used to shopping on Shein, having caught the bug during the pandemic when online fashion shopping was a fun way to pass the time.

I found the site to be good for t-shirts and swimwear and was impressed by its low prices. But ethical issues began to worry her, and now she won’t shop there at all, opting instead for second-hand sites Vinted and Depop.

She told the BBC: “I think you don’t care about these things when you’re younger, of course. But I think we are now more aware of these issues and feel more responsible.”

According to reports, Shein initially wanted to list its shares in the US, but those plans were derailed by political tensions.

It is now facing concerns in the UK, where some say concerns over environmental, social and governance standards could put off investors.

Others say such a large listing in London could be very beneficial. It may bring more attention to the company’s operations and provide a boost to the UK economy, especially as the London Stock Exchange struggles to attract fast-growing companies.

Michaela tentatively welcomes the idea of ​​making the British fast fashion company her financial home.

“I think that’s a good thing, as long as they show they’re making an effort to improve their environmental and labor practices.”