Shein: Disrupting Fast Fashion

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Let's discuss Shein's supply chain at a high level. How does Shein's supply chain philosophy differ from Zara's?

Shein operates on four key principles. Two of these are beneficial for production personnel, while the other two are somewhat different. These four principles are unchanging. The first principle is that the initial order quantity is always small. They divide orders into two categories; first order and then the repeat order. First order is always, if it is stock, it's 100 pieces. If it is production, it's 200 or 300 pieces. Even if they feel that this is best seller and it will sell, they still do this model. They don't change this idea. The second thing is, the lead time is 14 days. Whenever they give you an order, you have to deliver in 14 days. And 14 days include the weekend. They don't count weekend. Every day is a workday. That's the first two things. The third thing is, they pay four days after delivery.

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I would like to order 100 pieces. If they don't have them in stock, they will need to manufacture them.

I forgot to mention, if the garment is in stock, the delivery time is four days. The delivery time is four days. If the garment is in stock, the buying and delivery time is four days. If it's a production order, it takes 14 days. For instance, if I see a shirt I like and you confirm it's in stock, I can order it today and you will ship it in four days. This is why the cash flow is very interesting for suppliers. Even with a small margin, or no margin on the first order, the cash flow is beneficial. For example, when you order from Zara, you wait for about 120 days.

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What's the real long-term advantage that Shein has over these many other competitors that are going to come and try and replicate it? If they can build software, digitize the supply chain, and pay on time, what advantage does Shein have?

Shein has the advantage of scale. The others don't have that, and it's not easy to achieve in a low price point world. When you're working with Shein, you can easily reach 300,000 pieces a month in four to five months. A healthy business model is roughly 30% to 35% first order and 70% or 65% repeat order. So, if I'm a 300,000 pieces supplier for Shein, and I get there in four to five months, I do about 50,000 to 60,000 pieces of first order, which means a new order, and then the rest is the repeat order.

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