Shein May Open Up ‘Supply Chain As a Service’ to Brands and Designers
Shein appears ready to share some of what makes its supply chain tick with other fashion brands.
According to a report from the Wall Street Journal, the fast-fashion giant will make its supply-chain infrastructure and technology available to outside brands and designers, letting them leverage Shein’s system for testing out new fashion merchandise in small batches and track how popular they are with consumers.
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In a letter to investors, executive chairman Donald Tang referred to the new initiative as “supply chain as a service,” the report said.
Sourcing Journal reached out to Shein.
The small-batch, on-demand manufacturing model has been the bread and butter for Shein’s rapid growth, with the e-commerce retailer reportedly making more than $30 billion in revenue in 2023.
Partnering with roughly 5,400 third-party contract manufacturers in China, Shein can churn out tens of thousands of new styles daily. The company places orders to suppliers to be delivered in days, shipping roughly 5,000 metric tons of goods via air freight per day, according to data from Cargo Facts Consulting.
The fashion firm also leverages real-time data to quickly analyze demand and replenishes orders as needed, while also allowing it to quickly boost production of popular items and drop products that do not sell as expected. Using this data, Shein can reduce storage costs and limit inventory waste—further allowing the company to maintain low prices in the form of $10 dresses and $5 shirts.
“This move is one of many that Shein will make to cement itself at the heart of the fashion ecosystem,” said Neil Saunders, managing director of retail consultancy GlobalData Retail. “Shein is moving beyond being a seller of low-price fashion to one that has many strings to its bow, including marketplaces, services for sellers and now services for designers and apparel brands.”
According to Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware, Shein’s move to open up supply chain infrastructure will be able to help them keep down costs while still allowing them to expand quickly.
“Under its current business model, Shein has consistently introduced millions of new clothing styles yearly to achieve sales growth,” Lu said. “However, this approach has exerted considerable pressure on Shein’s design and product development capabilities, depleting original ideas and increasing the likelihood of controversial copycat designs.”
Shein has faced a surge of lawsuits against it for copyright infringement based on its imitation of other fashion companies’ original designs, Lu told Sourcing Journal. Like some of the other criticisms lobbed against it, including allegations of dangerous working conditions and accusations that its manufacturing model produces excess waste, the lawsuits still pose a significant risk to Shein’s brand reputation and business operations.
“Therefore, seeking collaboration with outside brands and designers could potentially help Shein address resource constraint challenges and support the company’s further sales growth in the global marketplace,” Lu said. “Creating a promising business outlook is critical for Shein to achieve its IPO success, as investors always look for strong growth potential, sustainable profitability, and a solid competitive edge in the market.”
Shein’s looming IPO plans have been on shaky footing largely due to concerns of the company’s ties with China. Although the company moved its headquarters to Singapore in late 2021, it still produces its merchandise entirely in China. On top of that, lawmakers have voiced their apprehension over reports that Shein had approached regulators in Beijing to get approval for a U.S. IPO—suggesting that the fashion giant could be hiding information from U.S. regulators and investors.
Nevertheless, Shein has forged ahead with significant growth across its entire business on a global scale. Last year, Shein launched a marketplace model in the U.S., Mexico, Europe and Brazil, enabling third parties to sell through the company in an effort to compete further head on with Amazon and Temu. In Brazil, the retailer is investing $150 million in a partnership with more than 2,000 garment factories, bringing more local merchandise into its offerings.
The company also acquired the intellectual property of British fast-fashion seller Missguided and tied up with Authentic Brands Group to take a one-third stake in Forever 21.
And TikTok’s most-talked about brand has already established collaborations with independent designers as part of the Shein X incubator program, where more than 4,600 designers and artists worldwide have launched more than 41,000 original creations.
“In a sense, this is the same playbook as Amazon and some of the other Chinese e-commerce giants like Alibaba: it creates a flywheel with different parts of the business supporting each other to generate growth,” Saunders told Sourcing Journal. “Of course, all of this helps to push up the potential IPO valuation of the company as investors like a business that has multiple prongs of growth.”
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