How supply chain advantage has helped Shein dominate cross border e-commerce and fashion

Cross-border e-commerce has been around for nearly as long as e-commerce. Once brands and companies were no longer reliant on a physical store presence to sell goods, the world became their oyster as customers from around the world would go to the companies’ and brands’ websites to make purchases. These companies would fulfill these orders from their existing warehouses in their own countries using international courier or postal services.

Simply put, these transactions were termed as cross-border e-commerce. As e-com grew, even marketplace platforms such as Amazon added numerous overseas sellers. 카지노사이트

This seemingly simple model was very effective to capture additional revenue and customers without the need for stores in every market. Nowhere was this more effective than in fashion where local demand rapidly transformed into global demand for top selling styles.

What’s the next leg here?
Recently, the innovation to this model came from building a connected supply chain that has the shortest distances between the manufacturer and the final customer. This has given birth to multiple fast-growing startups focused solely on cross border ecommerce.

These include Shein, which per Crunchbase Unicorn Board, has reached a valuation that exceeds $100 billion in the same league as Ant Group, ByteDance (owner of Tik Tok) and SpaceX. This valuation of Shein is in excess of the sum of valuations of the top two industry leaders in fashion—Inditex (parent co. of Zara) and H&M. Shein’s revenue growth in 2020 was 250% and in 2021 it was 60%.

While this may look like a comparative slower growth to previous years, it leads every other company in the industry, and that’s with $16 billion in revenue in 2021. For 2022, estimates put Shein’s revenue close to $24 billion, with a majority of this coming from the US. Last year, Shein’s mobile app already leap frogged over Amazon’s to become the most downloaded app in the U.S.

An incredible performance, especially by a company that was almost unknown a few years ago, is based in China and is still relatively less well known – except to its customers. 안전한카지노사이트

How did Shein do it?
In a nutshell, Shein benefits greatly from influencer marketing, search engine optimization, good value/price offers and ease of returns to capture the hearts and minds of young fashion shoppers.

However, at the center of Shein’s success is its ability to improve upon a “cookie cutter” supply chain and customize it to offer: wide choice, better value, lower prices and speed in translating trends to products , all the while carrying minimal inventory.

Shein has built and leveraged its supply chain and moved it from a supportive function to a core driver and enabler of their business model. This they then applied to an industry – fashion—that disproportionately values supply chain speed and supply chain enabled innovation to achieve this unmatched success.

Here are a few ways that Shein leveraged its supply chain differently than other fashion companies and turned it into a strategic advantage.

Strategically located vendors
Traditional fashion supply chains, as we know them, are structured to accommodate global sourcing across many countries. Goods from those countries are then moved by sea, truck and air to in-country distribution centers to be then either shipped as parcels to customers or sent further to stores to be sold. The whole process can take months. Even Zara which has been one of the faster traditional fashion companies has a heavy reliance on an in-country consolidation before shipping.

Shein strategically located itself from Nanjing near Shanghai where it started, to Guangdong in South China in the heart of garment manufacturing district in the Pearl River Delta which has about 25,000 apparel enterprises. The Pearl River Delta, despite being a small region, accounts for roughly 40% of all Chinese exports. Furthermore, it is located next to best-in-class shipping ports of Yantian and Hong Kong and the airports of Hong Kong and Guangzhou. As a result, it takes Shein days, and in some cases just hours, to get the goods from vendors into its distribution facility and then pack and ship directly to its global customers.

Vendor enabled product development
Traditional fashion companies collaborate in varying degrees with their vendors to develop products. But for the most part, design and product direction comes from the company itself. 카지노사이트 추천

Shein empowers its vendors to curate, develop and present product collections with minimal direction from the company. Now take a co-located apparel ecosystem of 28,000 companies that can produce a wide range of products and empower them and what you get is an incomparable offer of choice to customers of Shein.

As per Business of Fashion estimates, in a comparable period in the U.S., Shein churned out 45 times more product choices than Zara and 71 times mora than H&M giving it a considerable advantage over its rivals.

Rapid order fulfillment and service
Speed and cost are key components of order fulfillment and service. For instance, typical package times from China to North America have ranged between 7-10 days to a few weeks, depending on the type of shipping selected at time of sale.

Shein has invested heavily in distribution infrastructure to process and ship packages from Guangzhou to customers around the world. It has also been able to leverage its scale along with other direct-to-customer shipping companies in Guangzhou and China lower costs and increase speed to customers.

Solving for the cost differential
While shipping direct to customers and mostly by air typically would mean that Shein would have to charge a higher retail price. However, a few factors have helped offset this challenge. These include zero store presence, low or no import duties paid at the counties of sales and direct sourcing from factories.

Unlike traditional retailers, Shein does not operate any full time stores in any country except for a few pop ups that come and go in major cities for market visibility. This helps it save on store rents and other associated operational costs compared to a traditional brick and mortar retailer.

We know that goods for retailers are custom cleared at ports only after paying applicable duties and taxes which can add up to a lot of money. As Shein ships individual packages direct to customer, a majority of them fall within the customs de-minimus amount limits. And, in most cases, are cleared without paying any custom duties including the U.S. which has additional tariffs on goods originating from China (under Section 301 of the U.S. Tariff Act).

Section 321 of that same Act provides for an exemption from duties for certain shipments imported by one person on one day having an aggregate retail value in the country of shipment of not more than $800. It will not need a huge stretch of estimation to presume that almost all packages from Shein fall under this amount in the U.S.

And finally, there’s the matter of direct sourcing from factories. Many traditional retailers use agents, traders and middlemen to source their products from vendors. Even those that may work directly with manufacturers still have a network of sourcing offices with a significant overhead to aid their buying operations.

Being co-located with their vendor base in Guangzhou, Shein has been able to work directly with the manufacturers without the need for any agent, traders or middlemen. This reduces their overall product costs and offers direct and immediate access to any innovation coming through their supply chain with fast decision making from its teams.

While Shein has been a cross border e-com success story, the future – even for them is not a given. Competition is fierce, and Shein’s model can be easily replicated making it vulnerable to new competition and rapid adoption by brick-and-mortar competitors . In fact, this competition has made Shein invest in global distribution centers located in Poland (Europe), the greater Toronto area (Canada) and Los Angeles and Whitestown, Indiana (United States) to stay ahead and offer better service levels to their customers.

How this plays out and what innovation other retailers do to catch up is still to unfold. However, there is no denying that the simplistic but strategic leverage of their supply chain has given Shein a massive competitive advantage that has disrupted the fashion industry and has lessons for multiple industries and companies.

Roit Kathiala has held executive roles in leading retailers across Europe, Asia and North America and is a leading architect and advisor to consumer and retail companies on their business, digital, supply chain and assortment strategies.

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