Challenging Zara and H&M

That name doesn't ring a bell? Ask a teenage girl. She’ll probably show you her jacket, her trousers or an accessory bought for a ridiculous price on the app of her smartphone. Barely known a year ago, Shein has conquered the wardrobes of young fashionistas across Europe and the United States at lightning speed. It's been enough to make "fast fashion" giants like Zara and H&M shake.

Last May, Shein overtook Amazon to become the most downloaded shopping app in the United States. The brand is even leading the American fast fashion sector with over a quarter of the market, as much as H&M and Zara combined.

Shein is now one of the few Chinese consumer brands to make a name for itself in the West. Yet oddly, no one in China is aware. Why? Because the brand does not exist in its native country. Shein exclusively focuses the sales on foreign markets.

Mysterious founder

By offering an online-only shopping experience, the brand has largely benefited from the COVID-19 pandemic while Zara and H&M stores remained closed. Its sales reportedly exploded by 250% in 2020, exceeding 10 billion dollars or half of the turnover of Spanish clothing giant Inditex, the parent company of Zara. Its social media accounts gather tens of million followers, and shein.com had 126 million visits back in January 2022, a third more than Zara, according to Similarweb.

Rumor now has it that the company, which counts some 10,000 employees and a presence in more than 150 countries, is preparing for a record IPO on Wall Street.

Though Shein is experiencing global success, not much public information about the company and its enigmatic founder, Xu Yangtian, can be found. Specialized in online marketing and SEO, he launched his wedding dress business in 2008, before extending to all types of women's clothing in 2012. The company had neither a factory nor stock and had the articles manufactured according to the orders received.

The turning point happened in 2015 when Xu Yangtian decided to turn his company into a "fast fashion" brand: he hired designers, seized Chinese competitors, set up his own supply chain, shortened his company name to Shein and established its headquarters in Guangzhou, the epicenter of a China which remains the world's largest supplier of clothing despite the increase in the labor cost.

Recipe for success

The concept of "fast fashion" is nothing new, but Shein found a way to reproduce it even faster and much cheaper than the competition. The Shein website is full of $4 dresses, $10 shoes and accessories costing less than a dollar. And when Zara was making the headlines by releasing 10,000 new products a year, with a production cycle of less than four weeks, Shein posted up to 6,000 new items a day and reduced the time from design to packaging to 1-2 weeks.

Shein’s successful strategy mainly relies exclusively on online sales, revenue from Chinese e-commerce (the strong use of influencers and "social-commerce", permanent rewards and special offers to encourage more purchases, etc.), a few tax advantages but also the massive use of algorithms and artificial intelligence.

Shein responds in real time to new trends by using customer data, analyzing searches on the web and social networks and scrutinizing competitors' sites. "The data collected is fed to Shein's in-house design and prototyping team, which develops items based on demand trends and forecasts," says research and advisory firm Coresight Research. Shein starts by producing small quantities. If the design sells quickly, the company orders it again in larger quantities. If it doesn’t, remaining items get discarded and the design is abandoned for good.

Questionable production methods

But this would not be possible without an extremely well-run production chain. Over time, Shein has forged a close relationship with thousands of Guangzhou suppliers, providing them with on-time payments — which is rare in the industry. In return, the workshops are required to use the management software developed by Shein. “This tool allows Shein and its designers to quickly communicate sales data as well as new styles and market trends to manufacturers. Meanwhile, data on manufacturing processes are quickly sent back to Shein,” says Lili Cui, associate professor at Shanghai University of Finance and Economics.

There is not a minute to spare on the fourth floor of the sewing workshops building Les Echos is visiting. “Here, 20,000 items are produced per day. We handle everything, from the purchase of fabrics to the packaging of the items, including cutting. Shein wants us to go fast and gives us fines if we don't meet deadlines,” a foreman says. The conversation ends there. Shein prohibits any visits and comments from its official suppliers, explains the director.

Shein stays very evasive about its supply chain. The retailer relies heavily on small workshops, unlike other international brands who order large volumes from large factories. Shein tells Les Échos it works with 6,000 suppliers but does not publish their names and contact details. That is enough to fuel questions about its production methods.

The lunch break is an opportunity to talk to several workers in the canteen or the eateries adjoining the workshop buildings. Rice and boiled vegetables are quickly swallowed. Everyone rinses their bowl and chopsticks before putting them on the shelf until the next day. Some go to rest in the dormitories or others linger in the workshops.

74 hours a week

They all tell us about their extended working hours: “I work from 8 a.m. until noon, then from 1:30 p.m. until 5:30 p.m. and, after dinner, from 7 p.m. to 10 p.m.,” a seamstress says. The evening is free once a week, either on Saturday or on Sunday. That's a total of 74 hours of work per week.

Under Chinese Labor Law, weekly working hours are limited to a maximum of 44 hours, with 36 additional hours allowed per month. In reality, the textile industry often goes beyond that. What about holidays at Shein? One Sunday per month. "If I need more, I can ask my boss but it means I won't earn anything," explains a worker, specifying that she has no contract or social benefits.

I earn about 5,000 yuan a month because I'm not very efficient.

All the workers here are migrants coming from other Chinese provinces who came to find a job or a better salary. “I earn a little more than in Jiangxi [an adjoining province, north of Guangzhou],” says this 50-year-old worker. Like all the employees Les Échos met, she is paid by the piece, which encourages her to increase her hours to produce more. “The more complex the piece is, the higher the pay,” she explains. “To keep it as fair as possible, tasks get distributed by our team leader to amount roughly the same value per worker,” says another seamstress.

A young seamstress talks about 1 yuan per item (15 cents), a woman in charge of packaging mentions 0.3 yuan (5 cents). It is hard to have an idea of the monthly wage. “I earn about 5,000 yuan a month [750 dollars] because I'm not very efficient,” says Hongxia, 19. Others say it is rather around 7,000 to 8,000 yuan per month (1,100 to 1,250 dollars). It all depends on how many tasks were performed, their complexity and the backlog of the workshop.

Company in the spotlight

Most of the workshops are located near Shein's large warehouse in Foshan, a suburb of Guangzhou, from where orders are shipped. "Shein regularly conducts strict and comprehensive audits of its suppliers, and we also partner with third-party auditing companies to closely monitor and audit our suppliers," the company tells Les Échos.

On its U.S. website, the retailer briefly addressed modern slavery in a short statement and published a code of conduct reminding suppliers of their obligation to comply with all applicable laws, including child labor laws. But it is not uncommon in the textile industry for suppliers to subcontract part of the orders to small workshops with no direct link to the retailer, which makes controls difficult.

It takes a simple visit to the residential area of Nancun, where many small workshops are located, to confirm this. Across an alley, our gaze meets hundreds of bags stamped with the Shein logo. The manager, busy ironing long black dresses, says the order comes from “a friend”.

I arrive around 9 a.m. and leave around 10 p.m. depending on overtime.

The presence of a very young girl among the three workers soon catches the eye. “I sort out the clothes according to their size then I put labels on them,” she explains. “I arrive around 9 a.m. and leave around 10 p.m. depending on overtime.” She says she earns 0.30 yuan per piece (5 cents) and has worked here since she left middle school last summer. How old is she? “My daughter is 16 and just comes to give me a hand,” her mother, who packs blouses on the side, quickly intervenes to end the discussion. Work is allowed for minors aged 16 and over in China, but night work and overtime is prohibited for those who are still students.

Shein tells Les Échos they conducted 700 audits in 2021, a figure relatively low given the number of suppliers. "It is impossible for Shein to control all the workshops and its code of conduct mainly aims at responding to the concerns of foreign media and consumers," explains Huang Yan, professor at the University of Technology of South China, in Guangzhou. More generally, the requirements in terms of production speed and the use of small workshops do not make the protection of workers any easier.

Having achieved its first levels of success in complete secrecy, its sudden global popularity on the back of its very low prices has now put the company in the spotlight. There's no going back.