Fast fashion was invented by companies such as Zara, and to a lesser extent H&M, in the late 1990s, when the companies took the latest styles seen on the catwalk and brought similar products to market. For companies such as Zara, it took 3-4 weeks to bring a simple T-shirt from design to the stores and 6-8 weeks for a jacket or a dress. But the category fell out of favor in recent years as consumers became more critical of the apparel industry’s impact on the environment.
If what Zara did in the ’90s was fast fashion, Shein’s version is “ultrafast fashion,” reports The Wall Street Journal (May 31, 2023). Shein’s inventory on average takes around 40 days to turn over. That is about half of what it takes for Zara. The quick-turn strategy goes against industry trends. In general, apparel companies’ inventory turnover has lengthened over the past two decades. (Last year Shein accounted for 1.7% of apparel-industry sales in North America, making it the fourth-largest clothing seller behind Nike, Old Navy and Lululemon).
With its supply base in China, Shein has a well-oiled test-and-scale model: It produces 100 to 200 pieces of any given product at launch and then increases production only if demand is strong. That results in little excess inventory, which in turn helps its bottom line. On the supply side, it milks efficiencies by using a digital manufacturing system. The system asks Shein’s extensive supplier base to share real-time capacity and tags each of them based on category strengths and weaknesses. To minimize costs, Shein selects master fabrics and requires designers to choose from the pool.
Shein’s meteoric rise shows that trendy and cheap have enduring appeal. While Gen Z cares about sustainability, it also values self-expression. Even though the company has said it has no suppliers in Xinjiang, China, where there are allegations of forced labor, the company is hedging its bets with plans to source more fabric from India.
Environmentally friendly resale platforms such as ThredUp and The RealReal made their debuts to great fanfare, but their appeal among shoppers has proven transitory. Allbirds, a footwear brand that boasts environmentally friendly practices, has seen its popularity fizzle, too. Shoppers like to see green credentials, but Shein’s popularity has shown that cash always looks greener.
Classroom discussion questions:
- What is Shein’s inventory advantage?
- Describe the firm’s production strategy.