Chinese billionaire Chris Xu founded Shein in 2008. It was originally named ZZKKO and was initially a drop shipping business that connected customers with products obtained from the wholesale clothing market in Guangzhou. The company started its transition to become a fashion retailer in 2014 after building its own supply chain system. It is now one of the leading fashion retailers in the world that serve customers across 200 countries. This article analyzes the business standing of Shein using the SWOT framework.
Situational Analysis of Shein Based on the SWOT Framework: A Look Into its Notable Strengths, Weaknesses, Opportunities, and Threats
The growing popularity of Shein threatens other fast-fashion retailers such as Zara and H&M, as well as traditional clothing and apparel companies such as Nike and Adidas. It even poses a threat to fashion houses to include Louis Vuitton and Gucci.
Below are the specific strengths of Shein:
• Fast-Fashion Business Model: The fast-fashion model is one of the notable advantages of Shein similar to other fast-fashion brands including Zara and H&M. This enables the company to mass produce up-to-the-minute and fashion-forward products with less cost than traditional clothing and apparel brands.
• Focus on Electronic Commerce: What sets the company apart from other fast-fashion retailers is that it sells its products through its online storefront. It does not operate physical stores but instead, keeps warehouses in critical geographic markets while depending on local couriers for shipment and order fulfillment.
• Small-Batch Production Strategy: Another strength of Shein is its small-batch production which involves producing a small number of a particular design for market testing. This strategy enables it to keep its inventory cost low while also reducing waste and losses from unsold and unwanted products.
• Close Collaboration with Suppliers: The small-bath strategy works because the company has strong relationships with its outsourced manufacturers. Remember that Shein is a Chinese company and its proximity to Chinese suppliers gives it a competitive advantage over other clothing and apparel brands.
• Advantage of Penetration Pricing: Clothing and apparel products under the brand are cheaper than popular casualwear brands. These products are even more inexpensive than the products from fast-fashion giants such as Zara and H&M. Its penetration pricing strategy has helped it acquire and retain customers.
• Maximizing Digital Marketing: Shein also uses novel marketing tactics to create brand awareness and reach its target customers. It maximizes online and social media advertising, influencer marketing, and moment marketing using online platforms such as Facebook, X, Instagram, and TikTok.
A retailer that depends on electronic commerce has limitations unique to online-enabled and logistics-dependent businesses. Shein has notable disadvantages compared with its competitors and these center on the absence of traditional physical retail operations.
Below are the specific weaknesses of Shein:
• Delays and Slowdowns in Delivery: The company has experienced complaints about delays in its order fulfillment processes. This can stem from a lack of warehouses in other countries or geographic markets or from situations that are beyond its control such as problems with its logistic partners or local couriers.
• Limitations of Online Shopping: Another weakness of Shein stems from the problems with purchasing things online. Some customers are not too keen on purchasing products that they have seen. Most of them prefer trying out a particular clothing item first to see if it fits them perfectly or if the style looks good on them.
• Issues with the Fast-Fashion Model: The source of its competitive advantage has also been a source of some of its problems. The company has been criticized for its negative impacts on the environment and issues of labor rights violations. It was also sued for copyright infringement by fashion designers and fashion brands.
• Relatively Short Lifespan of Products: Another criticism of the company is the quality of its products. Some consumers have noted that its clothing and apparel items have poor quality. This is common across the fast-fashion market. Products from fast-fashion retailers are intended to be discarded faster.
Tapping the different opportunities available to Shein can help its business succeed further and reach newer milestones. The company can gain further market share and surpass fast-fashion retailers in terms of sales, reach, and revenues.
Below are the specific opportunities for Shein:
• Collaboration with Designers: One of the opportunities for Shein to attract more customers and improve the quality of its products involves collaborating with known fashion designers and even celebrities. Tapping these individuals can help with producing clothing and apparel items with one-off and trendy designs.
• Endorsements from Celebrities: It can also take advantage of using international celebrities and even local celebrities as brand endorsers. These can help attract customers, create further brand awareness, and improve its brand image. Celebrities can elevate its brand reputation while they tap or reach their respective followers.
• Partnerships with Other Brands: Another opportunity comes from partnerships with other brands. For example, as part of its product strategy, it can partner with notable brands such as Marvel Studios and even celebrities such as music groups and music bands to produce limited and exclusive merchandise.
• Capitalizing Further on Technology: The company can improve its online storefront further through the use of tech trends. These include artificial intelligence and machine learning for personalized online experiences. There is also an opportunity from using augmented reality or metaverse for a more immersive experience.
Shein operates in a highly competitive environment. Rivalry is intense because of the low barriers to entry and the threat of new entrants, the high bargaining power of customers, and the presence of alternative and even substitute products.
• Other Fast-Fashion Retailers: Competitors such as Zara and H&M pose a serious threat to the Chinese online fast-fashion retailer. These companies have existing e-commerce platforms on top of their established business models. They can easily push their online storefronts using resources available to them.
• Substitutes to Fast-Fashion Products: The substitutes for fast-fashion products are clothing and apparel products from traditional brands and even fashion houses. There is an established market for premium products. More people are also becoming more aware of the problems within the fast-fashion industry.
• Widespread Disruptions in Logistics: Another threat to Shein is the disruptions in its direct and indirect logistics that can affect its production, order fulfillment, and customer satisfaction. This can include global disruptions in the supply chain or issues with shipments due to external events such as calamities or social turmoil.
• Cyberattacks and Cybercrime: Online-enabled businesses remain vulnerable to online threats such as cyberattacks and other online criminal activities. These threats and attacks can leave its online storefront unavailable or inaccessible, render its user data and information leaked, and endanger online payment processes.