On a roll: Shein has revolutionized fast fashion in Europe and the US, its largest market
As fast fashion giant Shein moves closer to a £60bn IPO in London rather than New York, scrutiny is growing over the controversial business’s strategies.
Other retailers are wondering: How does Shein do it? They are less interested in the reasons for seeking to go public than in the marketing, ordering and other strategies that have fueled their growth.
In 2023, Shein, which was founded in China but is now based in Singapore, sold $45bn (£35bn) worth of clothing for a profit of $2bn.
This question is also of interest to British investors, as they can become indirect shareholders of the business through passive or index-tracking funds, in whichever market it makes its debut this summer.
A company of this size would be an automatic participation in such funds. Shein has revolutionized fast fashion in Europe and the United States, its largest market. Its UK rivals – Asos, Boohoo and Primark – are said to be baffled. But Shein has also caused anxiety in the mid-market.
This week, the Japanese group Fast Retailing, owner of the Uniqlo chain, announced that it would launch a low-price Gu brand in the United States to attract younger and cash-strapped consumers who shop at Shein.
Swedish-owned H&M has already taken action by moving upmarket and appointing a new boss.
Shein, which does not sell products in China, owes its success to a combination of geography and the use of algorithms to indicate customer interests and preferences.
The company is able to produce new items quickly thanks to the concentration of button, garment and textile manufacturers in China’s Pearl River Delta, the area around the cities of Dongguan, Guangzhou and Shenzhen.
These supply chains allow Shein to order more immediately if a garment starts selling, rather than pre-ordering large quantities in the hope that there will be demand.
Shein says this limits waste: incineration of unsold clothing is common practice in the sector. But the environmental impact of production in the Pearl River Delta will deter ethical investors.
The retailer used to rely on social media influencers, but can now engage customers more directly with targeted marketing thanks to its IT systems.
Skeptics wonder how the company can retain the Gen Z clientele that has fueled its expansion as they reach age 30, progress in the workplace and begin to require smarter, timeless pieces.
Shein takes care of this with its premium brand Motf. A Motf cocktail dress can cost £94.99, well above their usual prices.
But questions about how and why any garment can be made and sold at a profit of £3.39, no matter how efficient the process, will continue to swirl around Shein after its IPO, whether in New York or London.
