Shein: a new eCommerce model



It is not very frequent to see new brands coming out of nowhere and growing at lightspeed. Shein is an example of a brand that went afire the past three years in the US. When looking deeper at the business model, it is clear that they are redefining eCommerce and are a big disruptor in the field.


What are the components of this new eCommerce model?



Tik tok

They leveraged influencers and especially Tik Tok. They are all over Tik Tok to a level where it is impossible not to come across a video showing their products. They target all segments: fashion, curvy, makeup, middle age…Their marketing is extensive in social media before all, but the way their leverage of Tik Tok is unlike anything. Their success spread literally thanks to their heavy Tik Tok presence. Their community is very strong and active. They are also very generous with their influencers, pushing them to talk even more about the brand.



On-demand production

Their strength is that they constantly watch what is making the buzz and immediately produce a version of it. They introduce thousands of products everyday. Thanks to very close relationships with manufacturers, they can produce quickly and in quantity. They are the liaison between manufacturers and consumers, bypassing all the middle steps. They connect directly with the factories in China and produce the products that consumers need.



Price

Shein’s competitive advantage has also been their prices. Since they have direct relationships with manufacturers, they can offer very competitive prices. Others, such as Italic, offer the exact same products that customers can get from a known/luxury brand but at a much lower price because they buy from the same manufacturer as the brand and they do not stick a name brand on the product.


The very low prices proposed by Shein remove a significant barrier of entry. Customers buy multiple products of acceptable quality, for cheap, so they really have the feeling that it is worth it, giving them more interest in buying again.


E-tailer as a brand

Shein, more than an e-tailer, is a brand. They carry their own products, labeled Shein or Sheglam for their makeup category. The brand Shein is also available on Amazon, simply because today every brand needs to be present on Amazon from a search perspective.


Private labels are the only way for retailers to be able to differentiate and keep some control. This is why we can see a lot of new brands popping up; very niche, offering small quantities, with a social purpose. With the democratization of technologies and eCommerce platforms, brands are learning to sell their products directly to consumers online and feel less obligated to set a distribution network through big box retailers. Some more established brands are now even making the decision to remove themselves from big retailers and to sell only via their own website.


The need for establishing a brand is also justified by the fact that the same products are sold in many different places, diluting the shopper’s faith in receiving an authentic product. Who has never wondered if they were going to receive the original brand, when buying from Amazon for example, knowing how much the counterfeit industry has taken over all the channels? Buying directly from the brand’s website gives the consumer the peace of mind that the product they order is the real one from the brand.



Marketplace

If new brands only want to test the waters or get under the wing of an operation structure capable of providing them with the support they need to sell online, marketplaces are the way to go. Ssense is presenting a lot of products from emerging designers. In a different price range, Shein also launched their designers’ marketplace Shein X. Some marketplaces like Amazon, are allowing the brands to go further by completely managing their online store and doing their marketing themselves, while Shein is currently taking care of all the aspects for the brand (nothing says that they might not open up their platform anymore in the future).


New brands like VintageStreetwear, which started on Etsy, are now setting up their direct channel. Others, like Viori, that started direct, are now also making their product available via Amazon in order to get more exposure and more sales opportunities.



Recommendation Engine

Shein is also equipped with a very strong recommendation engine. They strategically use AI to create relevancy without overwhelming customers with non-ending pages of recommendations. Their search criteria are also extensive as they allow customers to search products based on a very large number of details of the product (ex: bow, draped, geometric, galaxy…), which is not an option offered on Amazon.



All these elements are demonstrating where eCommerce is going. As a summary, eCommerce is now social, a brand, direct from manufacturers and AI powered. We will see the era of a large number of new brands making a heavy push back on Amazon.




To go further: The Future of Retail

 

Author:

Dr. Vanina Delobelle

Vanina is an innovation and transformation leader in Digital. She has been leading digital transformation in retail for over 15 years. She is Principal at Method.