Introduction
Shein is a fast fashion company with headquarters in Guangzhou, China. The company was formed in 2012 by Chris Xu. The company is estimated to produce roughly 7,512 new cloth items per day with a production time of 30 days (Rajvanshi et al., 2023). The company enjoys roughly 28% of the US market share of fast fashion and is estimated to be worth over $40 billion (Matsakis et al., 2021). The company’s leading investors are JAFCO Asia, Sequoia China, Tiger Global, and IDG Capital.
Ability to Lower Costs
Shein has leveraged manufacturing efficiencies to their advantage to lower costs. These include lean manufacturing, bulk purchasing, scales of economy, and real-time and just-in-time stock inventory. Shein’s business model has no middlemen, as they sell directly to customers (Rajvanshi et al., 2023). similarly, the company has put more emphasis on data and technology to keep up with the trends. By focusing on customer preferences, they can minimize wastage and focus on mass production according to fashion trends. Additionally, Shein uses cheap labor to cut production costs.
External Analysis
Direct and Indirect Competitors in the Industry
Shein, a fashion company, faces direct competition from companies such as H&M, Boohoo, Zara, Dolce & Gabbana, Temu, ASOS, and Zara. Similarly, distinct fast fashion brands are direct competitors of Shein. These companies include Pretty Little Thing, Uniqlo, Primark, and Forever 21. The company faces indirect competition from online marketplaces that offer various products and services, such as Amazon, Wish, AliExpress, Alibaba, and eBay.
PESTEL Framework Providing the Most Opportunity
Technological Factors
Shein has utilized technology to its advantage in recent years. The company, directed by a former search optimization engine, has leveraged mobile and internet optimization to increase its visibility to the outside world. Previously, Shein has used Amazon’s activities in China to gain an advantage in the market and become famous. The company reports investing heavily in IT support, technology, and training to help its supply chain network become more profitable and efficient.
Since going and gaining foot in the online marketplace, the company has used celebrities on Instagram, Twitter, and Facebook to attract more customers and build a strong brand, overtaking the Likes of H&M (Li, 2022). With the emergence of artificial intelligence and data analytics, the company can continue to enjoy the benefits of technology in gaining more customers and becoming more competitive. Finally, there is internal management software leveraged by Shein to collect real-time data on selling items and those that are not selling. This software boosts the visibility of selling products to more customers.
Social Factors
Social factors are another aspect of the PESTEL analysis that provides the company with opportunities. The company targets middle-class customers, mainly young women and teens, using renowned socialites like Khloe Kardashian to market their products (Matsakis et al., 2021; Chin, 2021). Using social media influencers through the #SHEINhaul seems to pay off in creating a sense of belonging. Such hashtags in TikTok have created an atmosphere of diversity and inclusivity in their products (Chin, 2021). Through the company’s active involvement in fashion and producing low-priced clothes, they can create a sense of fast fashion, challenging their customers to keep up with the ever-evolving fashion trends.
PESTEL Framework That Is the Biggest Threat
Political Factors
As a Chinese multinational company, Shein is affected by the political tension and relationship between the countries in which it operates. Trade agreements affect the company as it exports its products to countries like the United States. For example, if the United States increases its taxes, restrictions, and tariffs, Shein’s supply chain will also be affected (Liu, 2022).
Recently, there has been tension between the government of the United States and the Republic of China, which will affect the company’s operations in the United States. Additionally, political instability that has been seen in today’s world, such as the Ukraine-Russia crisis, can affect the company’s operation and threaten its profits. Such instabilities can result in shipping delays, sales disruptions, and store destruction and closure.
Legal Factors
Legal factors are one of the elements that threaten Shein’s advancement in the fashion industry. The company has been in the limelight for violating intellectual property rights. Several designers have raised concerns and filed lawsuits against the company for stealing their brands (Shen, 2022). Known brands such as Dolce, Gabbana, and Levi Strauss have complained that the company infringes on their trademark. Similarly, in meeting their supply and demand, the company has opted for a poor working environment with a poor payment rate, violating the labor laws (Rajvanshi et al., 2023). The company is accused of lacking a good code of conduct and does not care for its workers (Toh, 2023). Additionally, there are instances where the company has violated the advertisement by using misleading advertisements to purchase their clothes.
Other Forces Making the Industry Less/More Attractive
In the fashion industry, the buyers have extremely high bargaining power. This has been created with many fashion houses and the availability of these products in physical stores and online marketplaces. The buyer can compare prices, choose the best deals, and decide from an informed point of view when making clothes purchases (Ghemawat & Rivkin, 2006). Social media also contribute to spreading fashion thrift shops and sharing pricing and product information.
Internal Analysis
VRIO Framework
Access to the international market’s advanced marketing strategy puts the company at a competitive edge. Similarly, the company has used this marketing strategy to create a brand name that can compete against well-established fashion houses such as H&M. All the other capabilities and resources are also crucial in the competitive fashion industry.
Strategic Weaknesses
Shein’s strategic weakness is having only one warehouse in the United States, where most of its online customers are based. A close comparison with its close rival, Zara, shows that Zara has over 90 physical stores in the United States (Liu, 2022). Similarly, H&M has more than 500 stores in the United States despite not being a US company like Shein. Another close rival, ASOS, has partnered with Nordstrom in the Untitled State to have the Nordstrom stores have their products. ASOS will use ten Nordstrom stores as they plan to have more stores.
Having only one warehouse in Los Angeles has made Shein’s delivery services poorer than its competitors. Shein products take three to two weeks to be delivered from China, which is typically very long. Fast delivery is one key selling point for eCommerce businesses such as Shein. Shein lacks the facilities to enable fast delivery like its competitors (Liu, 2022). A product from Shien must be delivered to the warehouse in Los Angeles and then to other parts of the United States. Only the customers in LA can enjoy a relatively fast delivery.
Performance Triple Bottom Line
Prioritization
Shein prioritizes the triple bottom line in its performance. The company aims to create a change that will impact global business, particularly the fashion industry. The company has invested in financial resources, technology, and training to boost the business growth and development of the manufacturing companies it is working with, including medium and small businesses, designers, and illustrators (Shein, 2023). The company has an incubator program bent toward offering financial and operational support to independent artists and designers (Shein, 2023). The company is also active in protecting the environment by investing in modern production techniques that are more environmentally friendly and reducing supply chain waste. Additionally, the company has a track record of aiding the course of some charitable organizations before and during the COVID-19 period.
Ethicality/Sustainability
The fast fashion industry is unethical due to the disadvantages that outweigh the advantages. The fast fashion industry depends on cheap labor and excess overtime to meet its vast supply demand. Unsafe labor conditions drive the industry. As seen in the case of Shein, the company has been accused of subjecting its workers to long hours and low wages. Manufacturing places are sweatshops that expose workers to adverse conditions that affect their overall health in the long run. Workers’ reports report forced overtime, and the code of conduct is not adhered to (Toh, 2023). Designers and illustrators complain of infringement of their intellectual property rights on designs made by companies they do not work for.
Conclusion
Shein has aggressively maneuvered through the fast-fashion industry to be among its top competitors. Facing competition from H&M and Amazon, severe allegations of copyright issues, and its workers’ poor working environment, the company has utilized social media and publicity to grow its business base. The company understands the power of technology and the benefits of adequately integrating technology into the business.
References
Chin, J. (2021). How Shein became the Chinese apparel maker American Teens Love. The Wall Street Journal. Web.
Ghemawat, P., & Rivkin, J. W. (2006). Creating competitive advantage. Harvard Business School. Web.
Li, Y. (2022). The analysis of the marketing strategy of Shein and accompanying word of mouth on social media. BCP Business & Management, 34, 1078–1085. Web.
Liu, J. (2022). Research on the Business Strategy and Deficiency of the Fast Fashion Industry to Enhance Development Case Study of Shein. In 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022), pp. 1794-1801. Web.
Matsakis, L., Tobin, M., & Chen, W. (2021). How Shein beat Amazon at its own game – and reinvented fast fashion. The Guardian. Web.
Rajvanshi, A., Caldwell, V. by J., & Johnson, A. D. (2023). Shein is the world’s most popular fashion brand—At a huge cost to us all. Time. Web.
Shein. (2023). Sustainability & social impact. Shein USA. Web.
Shen, J. (2022). Analyzing the going global marketing strategy–Taking Shein as an Example. In 2022 International Conference on Creative Industry and Knowledge Economy (CIKE 2022), pp. 225-229. Web.
Toh, M. (2023). Shein and Temu’s battle for us bargain shoppers is getting nasty. CNN. Web.
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