Nordic Case House

NORDIC CASE HOUSE
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CBS009
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SHEIN DISRUPTS FAST FASHION
AND CONFRONTS SUSTAINABILITY
Andrew Inkpen, Kannan Ramaswamy
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In 2022 Shein had sales of close to USD 24 billion, shipped clothing to over 150 countries, and was
one of the most famous clothing brands in the world. Its shopping app was the world’s most used,
reaching roughly 17.5 million screens, more than twice the downloads for e-commerce giant Amazon.
Shoppers had access to more than 6,000 new designs every day and 1.3 million SKUs (stock keeping
units denoting design and color variations) over a 12-month period.1 This contrasted sharply with H&M’s
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offer of 25,000 items, Zara’s 35,000, and Gap’s 12,000. Shein described itself as an “international B2C
fast fashion ecommerce platform.” With Shein worth an estimated USD 65-85 billion, an IPO was being
considered.2 If the IPO went forward, many questions would be raised about Shein’s strategy, the viability
of its business model, and the future of fast fashion.
THE FAST FASHION INDUSTRY

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According to the Wall Street Journal,3 in 2019, Americans bought more than five times the amount
of clothing they bought in 1980-roughly 68 new garments every year. Globally, this added up to 80
billion new garments that were, on average, worn only seven times before being discarded. Chinese
consumers typically threw out a garment after just three uses. Over the years, the global appetite for
clothing distinctly shifted in favor of cheaper items that were available faster. Notably, five of the world’s
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55 richest people featured in the a recent Forbes ranking of billionaires made their fortune in fashion.
The apparel industry encompassed a wide spectrum of players across a value chain extending
from producers of cotton, polyester, and other man-made fabric components to textile mills, apparel
designers, manufacturers, distributors, and retailers. A segment of the overall apparel ecosystem was
defined by companies like Zara, Uniqlo, Forever 21, Asos, Primark, H&M, boohoo, and Shein, all of
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which had portfolios of fast fashion brands. “Fast fashion” was defined as “a design, manufacturing, and
marketing method focused on rapidly producing high volumes of clothing…. [utilizing] trend replication
and low-quality materials in order to bring inexpensive styles to the public.”4 The goal of fast fashion
was frequent store visits by customers looking for trendy items that will not stay on the shelves for long.
Fast fashion companies were able to design and produce new styles in just a few weeks.
The fortunes of fast fashion companies depended on three factors: the ability to accurately forecast
trends in clothing that will appeal to their core target segments; the acumen required to manage the
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international sourcing of garments from low-cost production centers; and the orchestration of complex
© 2023 Copenhagen Business School. Professors Andrew Inkpen and Kannan Ramaswamy, Thunderbird School
of Global Management, wrote this case solely to provide material for class discussion. Cases are not intended to
serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. The
material in this case may not be digitized, copied, or otherwise reproduced, posted, or transmitted without the
permission of Copenhagen Business School.
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This document is authorized for educator review use only by MAINAK MAZUMDAR, NITIE - National Institute of Industrial Engineering until May 2025. Copying or posting is an
infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860
logistics related to the distribution and retailing of time-sensitive products that lose value as fashion cycles
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change. The fast fashion phenomenon was driven by two key consumer trends: the need for instant
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gratification among shoppers, and the desire for low-cost but trendy and fashionable clothing. Zara, one
of the original trailblazers in this industry, belonged to the Inditex group, a Spanish company that owned
multiple fashion brands, including Massimo and Stradivarius. Zara was one of the first companies to
disrupt the seasonal cycles in the clothing business in its pursuit of novelty across all seasons. Persuaded
by the appeal of such positioning and the profits that followed, other companies soon launched their
own versions of the business model, which heralded the onset of fast fashion. The number of garments
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produced doubled from 50 billion in 2000 to 100 billion in 2014, while prices declined.5
A NEW GUARD EMERGES

The 2010s saw the arrival of a new guard in the industry. Online companies, such as Asos, boohoo,
Fashion Nova, and Shein, challenged brick-and-mortar fast fashion companies. By leveraging the online
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e-commerce infrastructure, these firms further disaggregated the industry’s value chain, breaking it
up into specialists that were previously only found inside large clothing companies (e.g., companies
that offered design, sourcing, logistics, marketing, and distribution). The new companies operated like
orchestra conductors-they commissioned new designs from both internal studios and external freelance
designers; sourced garment production across a wide range of countries that spanned the globe; and
relied on logistics specialists, such as warehousing and fulfillment companies, to help them reach their
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customers.
The disaggregation of the industry accelerated further in the 2020s with the advent of storefronts on
e-commerce sites, such as Amazon and Shopify, that allowed individual entrepreneurs to offer products
of their own design. In the clothing sector, independent freelancers could design clothing, brand their
products, and offer them for sale through these storefronts. Many of these smaller companies were
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part of a new breed of sole proprietors known as “influencers”-individuals with a large social-media
following on such platforms as Instagram and TikTok who used their media presence to pitch their own
merchandise, co-brand with larger established brands, or promote existing brands in return for a fee or
product access. These individual brand ambassadors were able to generate substantial income through
endorsements on their social-media pages. An ecosystem of firms emerged to serve the specialized needs
of these budding entrepreneurial ventures, including companies that could help an aspiring entrepreneur
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design, label, manufacture, and warehouse their clothing lines in a “soup-to-nuts” model, allowing the
entrepreneur to focus on strategy and branding. Influencers such as Danielle Bernstein, Aimee Song,
Rumi Dawson, and Chiara Ferragni leveraged their millions of followers to successfully launch clothing
lines. The advent of standalone entrepreneurial brands hinted at the intense competitive pressures on
companies to stay on top, a feat that had become increasingly difficult with the democratization of fashion.
PRODUCT DIFFERENTIATION
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Differentiation in fast fashion revolved around the constant flow of innovative designs and the ability
to attract and hold a loyal audience of buyers who had their pick of online e-commerce companies
eager to satisfy their sartorial aspirations. Variety was a prerequisite for maintaining customer loyalty.
Many of the ultra-fast brands had their own apps and produced new content to encourage daily visits
and impulse buying, especially among young, digitally savvy consumers. This entailed unveiling new
designs almost every day. Although most of the leading brands in the fashion business employed large
CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 2

numbers of in-house designers, some augmented internal talent with external collaboration with other
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established brands (i.e., non-competing but complementary brands) to pursue co-branding opportunities.
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For example, H&M, the Swedish fast fashion brand, collaborated on special collections with Karl
Lagerfeld, Comme des Garçons, Balmain, Kenzo, Sabyasachi, and Versace. This was sometimes called
“masstige” (short for mass prestige). The multi-brand fast fashion company Inditex employed more than
700 experienced designers to keep up with its customers appetite for new designs.6
Designers typically worked in teams along with a variety of experts in distinct areas, such as fabric,
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tailoring, or dresses. After the design-ideation process was complete, the team explored fabrics from
an array of global suppliers before identifying the best fit for each project. The designs were converted
into patterns, after which they are modeled and tested for commercial production. Higher-end brands,
such as Zara, had their own studios in which models were photographed wearing the new collections.
The pictures then formed part of the release materials and web promotions that accompanied the
collections’ arrival in stores and online. The average price points for fast fashion brands such as H&M
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and Zara were not ultracheap at USD 32.28 and USD 54.13, respectively.7
PRODUCTION
The production of garments was perhaps the most controversial part of the industry’s value chain.
Driven by the need to keep costs down, most brands relied on production facilities in low-labor-cost
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countries. The tailoring of garments was a labor-intensive process and most brands focused on gaining
cost efficiencies by shifting production to low-wage countries. There were a few exceptions-Zara’s owner
Inditex, H&M, Asos, and Uniqlo sourced their offerings from some higher-wage countries. Sourcing
garments from low-wage countries posed a challenge for companies because of the many issues they
contended with, such as plant safety, the treatment of employees, working conditions, and human-rights
protections.
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Although many of these issues were addressed through local audits and contractual stipulations requiring
suppliers to abide by codes of conduct, problems continued. For example, the collapse of a building at
Rana Plaza, a textile factory in Dhaka, Bangladesh, killed over 1,000 employees who worked in multiple
garment-production facilities located in the eight-story building. At the time of the accident, the factories
in the building were allegedly producing clothes for such well-known brands as Walmart and Asos.
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Wage-exploitation claims were also quite common and not solely in low-wage countries. Fashion Nova, a
brand headquartered in Los Angeles, sourced some of its garments from Los Angeles-based producers,
where employees, typically immigrants, were paid less than the federal minimum wage. According to a
New York Times story that described Fashion Nova’s suppliers as sweatshops, “Ms. Cortes, 56, sewed
Fashion Nova clothes for several months at Coco Love, a dusty factory close to Fashion Nova’s offices
in Vernon, California:. ‘There were cockroaches. There were rats,’ she said. “The conditions weren’t
good. … Ms. Cortes was paid for each piece of a shirt she sewed together – about 4 cents to sew on
each sleeve, 5 cents for each of the side seams, 8 cents for the seam on the neckline. On average, she
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earned $270 in a week, the equivalent of $4.66 an hour.”8
THE COMPETITIVE LANDSCAPE

In 2022 the fast fashion industry was dominated by companies such as Zara, H&M, Forever 21, Primark,
Uniqlo, all of which had had both a retail and an e-commerce presence (Primark launched its first online

trial in 2022), and by Shein, Fashion Nova, Asos, and boohoo, which were online only brands. Exhibit
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1 shows the estimated US market shares of the leading players in the industry and Exhibit 2 provides
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some financial data for the publicly traded companies.
EXHIBIT 1: US MARKET SHARES FOR EXHIBIT 2: NUMBER OF NEW ITEMS

LEADING COMPANIES INTRODUCED BY SHEIN AND ITS PEERS
(JAN 2022 - APRIL 2022)
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314,87
H&M 20%
Shein 28%
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Zara 11%
Others 23% Forever 21

10%
Fashion 18,343
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4414 6849
Nova 8%
H&M Zara Boohoo Shein
Group
Source: earnestresearch.com. Source: edited. www.businessoffashion.com/articles/retail/

earnestanalytics.com/shein-leads-fast-fashion/ why-shein-might-be-worth-100-billion-in-four-charts
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The traditional fast fashion brands, such as H&M, Zara, and Primark, operated their own brick-and-mortar
stores, which were typically located in highly trafficked shopping centers across the globe. In contrast,
the ultra-fast fashion brands capitalized on e-commerce as their primary (sometimes only) distribution
channel, and eschewed brick-and-mortar stores owing to the costs of acquiring/leasing and operating
them. Fashion Nova, the Los Angeles based ultra-fast fashion company, was an exception, as it operated
some physical stores in its home region of southern California.
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Zara
Zara’s owner, Inditex, was one of the world’s largest fashion retailers and was widely believed to have
started the fast fashion revolution in Spain, where the company was headquartered. It defined the original
business model, which relied on rapid experimentation, flexible production runs, and astute supply chain
management. Inditex managed seven brands in its portfolio, of which Zara was the most widely known
and largest revenue earner. Zara had more than 2,200 stores in almost 100 countries. The stores were
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typically located in upscale retail areas that attracted wealthy customers.
When Zara was founded in 1975, the goal was to “shrink the gap between fashion creation and the
customer.” Its strategy was predicated on vertical integration from design to manufacturing to retail
stores. Although it manufactured only 50% of the clothes it sold, it controlled the entire value chain, with
oversight of all design, manufacturing, distribution, and retails segments. Zara employed more than 300
designers. When discussing sources of inspiration for new clothing lines, one of Zara’s designers said:

We’re often inspired from all over the place-a lot of us love contemporary art, architec-
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ture, sculpture, Instagram, street style, and of course important moments in costume
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history. … We are of course no strangers to Vogue and what people are wearing on
the streets and on Instagram, but I have to say, it depends designer to designer.10
Zara was one of the first companies to abandon the traditional seasonal emphasis in the introduction
of new product designs. Instead, it relied on a continuous stream of new products that were launched
throughout the year. The company was finely tuned to market trends and it used its stores for selective
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product launches to assess customers’ reactions before ramping up production of garments that
seemed popular. One of its designers said, “We are product obsessed. We want to see what worked
yesterday, what didn’t work so much so that the buyers can be as accurate as possible in placing their
buys for the future.” Zara used sophisticated inventory management and ordered small quantities at
the time of launch in order to minimize inventory risk. It also created an appearance of scarcity for
desirable products, which drove more traffic through its stores. Zara shoppers visited a store 17 times
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each year, on average. Given the limited production runs, the company seldom held sales, unlike its
peers. Zara introduced a message of sustainability in its offerings and bristled at being labeled a “fast
fashion” purveyor. Zara’s parent company, Inditex, was named the most sustainable fashion retailer
for consecutive three years by the Dow Jones Sustainability index. It committed to using only organic,
sustainable, or recycled source materials for its cotton, linen, and polyester fabrics by 2025.
H&M
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H&M, part of H&M Group, was founded in Sweden in 1947. H&M started with a single store called
Hennes (Swedish for “hers”). In 1968, Hennes acquired the Stockholm-based hunting apparel and
fishing equipment retailer, Mauritz Widforss, and the name was changed to Hennes & Mauritz, which
was shortened to H&M a few years later. In the 1980s and 1990s, the company expanded to several
European countries. In 2000, H&M opened its first store outside Europe in New York City, and it opened
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stores in Shanghai and Hong Kong in in 2007. H&M Group’s 4,950 stores included eight brands focused
mainly on clothing and fashion. H&M operated 4,300 stores in 74 countries and 52 online markets.
H&M described its brand of “cheap chic” as follows:
H&M is a fashion brand, offering the latest styles and inspiration for all - always.
Customers will find everything from fashion pieces and unique designer collaborations
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to affordable wardrobe essentials, complete-the-look accessories, and motivational

workout wear. All seasons, all styles, all welcome! But H&M is more than just fashion.
With price, quality and sustainability deeply rooted in its DNA, H&M is not only a
possibility for everyone to explore their personal style, but it also offers a chance to
create a more sustainable fashion future.13
H&M operated 21 production offices in Europe, Asia, and Ethiopia, and those offices supported about
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700 tier-one suppliers on a regular basis. China and Bangladesh were the two largest production
markets. H&M’s Supplier Relationship Management system helped H&M Group provide suppliers with
production plans well in advance. For the best-performing suppliers, order capacity was planned as
long as three to five years in advance.
Primark
Primark, based in Dublin, operated 380 stores in 13 countries. The company was owned by Associated

British Foods, a diversified company with businesses in the food, sugar, agriculture, ingredients, and
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retail sectors. Primark was the largest clothing retailer in the United Kingdom and one of the largest in
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Europe. Everyday affordability was key to the brand. Primark’s US website described the company as
“the destination store for keeping up with the latest looks without breaking the bank.”14
Primark sourced its clothing from more than 900 suppliers in 26 countries. None of the suppliers were
owned by Primark. The main supplier countries were Bangladesh, China, India, and Turkey. In 2013,
Primark started the Primark Sustainable Cotton Programme to help farmers grow cotton using more
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environmentally friendly farming methods. In 2021, the company launched Primark Cares, which was
designed to reduce fashion waste and halve carbon emissions across its value chain.
Primark had long maintained that it would never enter the world of online commerce because it found
the economics of operating such a model to be cost prohibitive. However, the company launched a new
website in 2022 that allowed customers to view the latest collections. It also announced a click-and-collect
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trial for about 2,000 goods in 25 stores in northwest England, where customers could order online and
collect their purchases at the store. Primark said it did not offer home delivery because “[delivery] was
complex, not good for the environment and a really expensive way of fulfilling someone’s order.”15
Uniqlo
Originally founded as a textile manufacturer, Uniqlo opened its first store in 1984 in Japan. It then built
a devoted following among fashion shoppers who wanted good-quality garments at affordable prices.
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Like its peers, the company emphasized novelty and newness in its collections, and it emphasized
simple designs that challenged established conventions. Unlike most of its peers, Uniqlo marketed the
uniqueness and quality of its in-house developed fabrics, and its designs were the result of extensive
collaborations with the world’s leading designers rather than an in-house team. This, the company
believed, gave it an edge in creativity. As of 2021, it operated 2,358 stores worldwide, one-third of which
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were located in Japan.
Forever 21
Founded in Los Angeles by a Korean immigrant husband-and-wife team in 1984, Forever 21 originated
in a single 900 square feet store that generated revenues of USD 700,000 its first year. It was originally
called Fashion 21, but was renamed Forever 21 as it started its climb toward success. The company
reached its peak in 2015 when it generated sales of USD 4.4 billion across a network of 600 stores
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and employed 43,000 worldwide. By then, it had developed a reputation for fashionable yet affordable
clothing. The company opened flagship stores in expensive mall locations. However, the success was
short lived. As Linda Chang, the founders’ daughter, said: “Having to fill those boxes on top of having
to deal with the complexities of expanding internationally did stress our merchant organization.”16 This
challenging period was made worse by the rising popularity of e-commerce alternatives and a marked
decline in mall shopping. The entrance of new competitors, such as H&M, sounded the death knell for
the company, which was unable to grow beyond the confines of its own core family. Forever 21 filed for
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bankruptcy in September 2019. In February 2020, it was sold to a group of buyers for USD 81 million.
The new owners set about reviving the brand and developed a hybrid model that included 540 stores
globally along with an e-commerce offering. In 2021, the reborn brand reported sales of USD 511 million.
Online Retailers
The established e-commerce infrastructure combined with the increasing acceptance of ordering
clothes online gave rise to a large number of clothing retailers with online-only business models. Like

their peers in the world of brick-and-mortar retailing, these companies obsessed over such factors as
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customer engagement, fashion trends, and global sourcing. Beside Shein, some of the more well-known
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companies were Missguided, Fashion Nova, Zaful, and Princess Polly. Missguided, a store focused on
women’s fashion, operated in United States, Canada, Australia, the UK, and the EU. The brand “create[d]
looks designed by in-house talent that [are] made to equip millennial women with the fashion they need
for all elements of their life.”17
Fashion Nova, based in Los Angeles, operated five retail stores in southern California. It offered collections
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for women, men, and children, and most of its sales occurred online. The brand had 25 million followers
across a number of social-media platforms, and influencers like Cardi B and the Kardashians could be
seeing wearing Fashion Nova clothing. In 2022, Fashion Nova’s founder, Richard Saghian, paid USD
141 million for the largest house in Los Angeles. Like Missguided, Fashion Nova released 1,000 or more
new styles per week.
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Zaful, based in Hong Kong, offered clothing for men and women, and targeted customers around the
world. Princess Polly, Australia’s largest online clothing store, sourced almost all of its clothes from
China and sold globally.
The online companies generally targeted younger customers who were keen followers of fashion trends,
which was where influencers had the most impact. Online brands relied heavily on influencers to promote
their brands. Social-media strategies were crucial for these companies and they constantly searched
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for winning online combinations of influencers, garments, brand stories, and brand placements.
SHEIN
Shein was founded by four people: Xu Yangtian (CEO), Molly Miao (COO), Maggie Gu (merchandising
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development) and Tony Ren (supply chain)-now in their mid-to-late 30s-who previously worked for a
small digital-marketing company in the eastern city of Nanjing. The plan was to sell made-in-China
products to customers outside China using their skills in online marketing. They tried various products,
including teapots, glasses, and wedding dresses, eventually focusing on fashion. In 2015, the company’s
name was changed from SheInside.com to Shein.com and the headquarters were moved from Nanjing
to Guangzhou-China’s leading manufacturing hub for clothing. By 2022, the company, now based in
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Singapore, had customers in more than 150 countries (but not China) and more than 10,000 employees.
Notably, during the first year of the COVID-19 pandemic (2019-2020), Shein’s sales rose by an estimated
250%.19
Shein had a reputation for extreme secrecy. The company did not talk to the press and did not disclose
demographic information about its customer base. In the 2021 Fashion Transparency Index, compiled
by the non-profit Fashion Revolution, Shein scored 1 out of 100. On supply chain traceability, it scored
zero (along with many other companies). However, Shein’s actions clearly supported its intent to become
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the dominant fashion company in ultra-fast fashion and beyond.
In January 2021, Shein made an offer for UK-based Topshop. Although the offer was rejected, the move
showed that Shein was intent on growing. In June 2021, Shein overtook Amazon for the first time as the
leading US shopping app on the iOS App Store, a title it held in over 50 countries. The ascent of Shein
was almost complete, with its popularity rising above that of many of the more established fast fashion
companies with longer histories. In 2022, Bloomberg BusinessWeek reported that Shein’s estimated

market value exceeded that of H&M and Inditex combined, and it was twice as valuable as Uniqlo. In fact,
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it was more valuable than Elon Musk’s Space X.20 Analysts focused on Shein’s value-creation process
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along traditional lines, from its design and creative activities to its supply chain management skills and
e-commerce prowess. In this spectrum of value creation, the aspect that attracted most attention was
the design process that enabled Shein to introduce about 6,000 new SKUs every day on its app, a
number that dwarfed every other retailer on the planet. Exhibit 3 provides a snapshot of the number of
new items added by Shein and its rivals to their websites each day.
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EXHIBIT 3: FINANCIAL PERFORMANCE OF PUBLICLY TRADED COMPANIES
ASOS Boohoo H&M Inditex Primark
Revenue 3910.5 1982.8 198967 11129 5593
COGS 2134.1 941.7 39961 7207 -
Distribution expense 509.5 488.1 80535 - -
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Administrative expense 1076.8 507.9 9216 - -
Operation Profit 190.1 45.2 15255 1473 321
Profit Margin 4.9% 2.3% 7.7% 13.2% 5.7%
Source: Company annual reports for 2021

Data are in reporting currency as reported. ASOS, boohoo and Primark in GBP millions; H&M in Swedish Kronor millions,
Inditex in euros millions
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DESIGN
Despite the enormous amount of attention that Shein received from admirers of its business model,
it was not the creator of the ultra-fast fashion model. boohoo, its UK rival, had already been using an
approach that focused on placing small orders that could be produced quickly. This allowed for rapid
experimentation online, which enabled the company to determine whether it wanted to place a bigger
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order or terminate the experiment. Shein built on the same idea but was able to weaponize the approach
given the location advantages it enjoyed in China. One analyst described the model as follows: “Compared
to its fast fashion competitors, Shein is able to take more bets, but at a lower risk. It’s able to place very
small initial orders with these factories, about 100 or even smaller.”21
Shein’s many new designs included old designs in new colors. Items were typically priced at USD 8
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to USD 30. Exhibit 4 provides price comparisons across Shein and its peers for specific categories of
garments. The Economist discussed the design process:
A team trawls the web for the latest trends using algorithms to determine what is grabbing
attention. One of its members told Chinese media last year that he visits thousands of
websites to come up with ideas. These concepts are sent to another group that draws
up designs, which are then manufactured in batches as small as 100 items, compared
with a typical order of thousands.
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Next, learning from Alibaba, Shein tests the new designs simultaneously on its app.
With all sales happening digitally, managers have a real-time view of the performance
of each item. If a new design is popular the company quickly orders more. If consumers
shrug at the new style, no more orders are placed. By centralising inventory in a small
number of large warehouses and then shipping directly to customers, Shein has pushed

inventory turnover down to just 30 days, compared with an industry average of 150
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days, according to a consultant who works with the company.22
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EXHIBIT 4: U.S. WOMENSWEAR PRICE POINTS FOR FAST FASHION RETAILERS (US$)
Boohoo Forever 21 H&M Shein Zara
Jeans 18.74 27.86 31.20 18.85 41.54
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Dresses 20.31 22.01 29.87 15.74 48.19
Tops 14.30 15.61 22.55 10.07 35.73
Outwear 33.44 35.15 51.22 19.72 96.05
Footwear 22.05 20.50 42.50 24.07 78.27
Accessories 8.91 7.58 15.45 6.56 43.53
Source: edited.com
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http://7971428.fs1.hubspotusercontent-na1.net/hubfs/7971428/SHEIN%20blog%202022.002.jpeg
In 2021, Shein employed about 200 in-house designers and paid USD 1 million in design fees to
independent designers. To complement its offerings, it ran design competitions to find young talent in
fashion institutes and design schools. The company also collaborated with well-known musicians (e.g.,
Katy Perry, Nick Jonas, Lil Nas X, Tinashe) on concerts and events, and sponsored influencers willing
to promote the brand. In addition, it launched an incubator program to identify and support new design
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talent. The program, called Shein X, included more than 500 independent, up-and-coming designers.
This program promised to help young designers curate their own collections, while Shein would handle
the manufacturing and marketing of their collections. This approach was intended to keep the design
pump well-primed for the future.
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A number of complaints were lodged against Shein regarding the provenance of its designs. Levi Strauss,
AirWar International (the maker of Doc Martens), and Ralph Lauren were among the large companies
that initiated legal action against Shein for intellectual property (IP) theft. Many independent designers
found Shein selling products with similar designs. The Wall Street Journal reported that, between 2019
and 2022, Shein had been named as a defendant in almost 10 times as many federal copyright or
trademark-infringement cases as H&M. In this regard, Shein stated that it “recognize[d] the importance
of intellectual property and supporting independent artisans. We have devoted substantial resources
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and developed strict policies against intellectual property infringement and continuously develop tools
that will assist us in identifying any possible violations prior to products being manufactured or uploaded
to the Shein platform. When legitimate complaints are raised by valid IP rights holders, Shein promptly
takes action to address the situation.”25
SOURCING
Shein primarily worked with small to medium-sized suppliers, and it had about 3,000 suppliers in total.
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It required each supplier to be located within a five-hour drive of Shein’s sourcing hub in Guangzhou.
Suppliers also had to be able to complete the design and production process in about 10 days. About
400 suppliers guaranteed on-time delivery to Shein in return for payment within 14 days rather than the
90 days that was typical for the industry. According to Shein:

We are committed to creating a sustainable business ecosystem where our suppliers
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thrive as a result of their partnership with Shein. Part of that work includes providing
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our contract manufacturers with technology and operational support that enables them
to be more competitive and profitable.
Shein contract manufacturers can see supply and demand for each style through
our tailored supplier platform, allowing them to have real-time insight into sales and
inventory. This helps them adopt modern best practices for planning and production,
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such as maximizing efficiency to grow profit and paying workers at or above the average
regional wage.27
According to Shein’s COO, the company maintained a sell-through rate of 98%, meaning that it sold 98
out of every 100 products it made. The sell-through rate is a key gauge of supply-chain efficiency. In
the clothing industry anything above 80% was considered excellent.
LOGISTICS
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Shein and many other Chinese companies used a direct-to-consumer (DTC) model. Companies
using DTC models sold directly to consumers without using brick-and-mortar stores, wholesalers, or
platforms like Amazon. One of DTC’s main advantages was that companies could develop a one-on-one
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relationship with their customers and capture valuable data that would not be available from traditional
retail sales. Although DTC companies often struggled to increase their scale because of their heavy
reliance on influencers and social media for marketing, Shein did not have that problem. Another
advantage for Chinese companies was that in 2018 China waived export taxes for DTC companies.
In addition to shipping goods directly to consumers from China, Shein had a warehouse network that
spanned the globe, including warehouses in the United States, Europe, Asia, and the Middle East. In
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2022, it announced a CNY 15 billion (USD 2.3 billion) investment in a global supply chain center in the
port city of Guangzhou in southern China.
Shein’s DTC model allowed it to avoid tariffs in the United States, the company’s largest market with
25% of sales. Prevailing de minimis rules in the United States allowed companies to ship goods valued
at up to USD 800 on a named customer basis without incurring tariffs. A typical cotton t-shirt from China
No
shipped by container and sold in a brick-and-mortar shop was subject to a 7.5% duty. However, DTC
shipments avoided the tariff. Companies like Shein could use various methods to ship products from
China and avoid US tariffs. For instance, goods could be shipped using the postal service. The Universal
Postal Union, a UN body that brings together the postal agencies of member countries, classified China
as an emerging economy. This meant that companies using Chinese postal channels qualified for lower
rates than in developed countries. Goods could be mailed from China to the United States for less than
the cost of shipping a package from coast to coast within the United States. Companies could also
use freight forwarders to pick up individually addressed packages, fly them to the United States, and
Do
hand them off to US couriers for delivery to customers, thereby avoiding the use of US warehouses or
fulfillment processing. A third alternative was to ship containers of goods to US ports and then transport
those goods to Mexico without incurring tariffs. In Mexico, the goods were separated into individual
packages and then shipped from Mexico to US customers tariff free. In 2022, the United States began
considering legislation that would prohibit goods from China from benefiting from de minimis rules.

The projected (not always actual) delivery time after an order was placed depended on the country.
t
For example, Shein’s website indicated that the standard shipping time for orders placed from Canada
os
was 13 to 17 days, with free shipping for orders over CAD 49. For orders placed in Germany, economy
shipping was expected to take 23 to 26 days (cost: EUR 1.50 for orders less than EUR 25 and free for
orders of more than EUR 39), while the delivery time for standard shipping was 15 to 17 days . In the
United States, standard shipping was expected to take 12 to 14 days for a fee of USD 3.99, although
shipping was free for orders over USD 49.00. Express shipping in the United States was 8 to 10 days
at a cost of USD 12.90 (free for orders over USD 159).
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After an order was placed, it took Shein up to three days to prepare it for shipping. If a customer ordered
10 pieces, that could mean the pieces were coming from 10 different clothing suppliers in China. Although
most goods were shipped directly from China, some goods were already manufactured and sitting in
international warehouses operated by Shein. If Shein had to order an item from a Chinese supplier, that
could slow down the order. Goods coming from China to the United States and other countries were usually
yo
shipped as individual packages by air using China Post. Once in country, packages were processed by
local shipping companies. In the United States, packages were usually handled by the US Post Office
for standard shipping and FedEx for express deliveries. Only 6% of the company’s inventory remained
in stock for more than 90 days, a testament to Shein’s lean methods. Only 40% of its portfolio was older
than three months, compared to 30% and 28% for UK rivals Boohoo and PrettyLittleThing, respectively.30
In the United States Shein opened a distribution center in Indiana in 2022. Two additional centers were
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planned for California and the Northeast. With the new distribution centers, Shein could reduce shipping
times, which would be important as it tried to move into higher-priced clothing lines.
Shein’s customer-returns process also depended on the country. In some countries, returns were sent
to a processing center before the customer received a refund. From the processing center, goods could
tC
be donated to charity, sold by the kilo to traders who removed the labels and re-sold the clothes, or
destroyed. In the United States, Shein operated a service center for processing returns and refunds in
Los Angeles. Given the logistics costs of returns, Shein would sometimes refund the customer’s money
and tell them to keep the goods.
SHEIN’S DIGITAL STRATEGY

No
Shein’s website stated:

To meet demand, we have built a fully digital supply chain that seamlessly and quickly
delivers products to our customers worldwide. We use proprietary software to track
sales and communicate with our factories in real time to order in small batches. Our
digital supply chain is the core of our business model and empowers us to offer a
wide range of on-trend styles without creating excessive inventory waste or making
customers wait weeks for their orders to be fulfilled.31
Do
Shein had built enormous strengths in digital engagement and it had deployed a wide range of highly
sophisticated strategies via its mobile app-a channel that was one of the most popular apps in the digital
world. In 2021, it had an estimated 7 million active monthly users in the United States, while its TikTok
handle #Shein had 6.2 billion views worldwide.32 Shein was extremely popular among digitally savvy
teens. The typical customer was a Gen Z female looking for a balance between trendy and inexpensive

clothing. The company had more than 250 million followers across all of its social-media platforms,
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including its mobile app.
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The app was easy to use and provided daily updates on new releases in addition to an easy ordering
interface. Shein incorporated elements of gamification into its app by offering users the potential to
gather points for frequent visits, cumulative logins, and writing mini-reviews of its clothing. This was
particularly relevant because members of the target audience primarily shopped through their smart-
phones. Outside the app, the company drove traffic through its astute deployment of influencers. Unlike
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some peer companies that preferred using influencers with the largest followings, Shein tended to use
influencers who were a tier or two lower-influencers who actively generated content. These influencers
were typically paid commissions of 10% to 20% for referrals. Traffic source data indicated that 10% of
Shein’s online and app-based traffic came via influencers, 45% via organic search, and more than 38%
through direct-access traffic (i.e., already enrolled users).33 Social media, displays, and mail accounted
for the rest. Shein entered into a partnership with Google Trends to develop a customized tool to capture
yo
information about popular fashion items, which it used to guide some of its decisions related to designs
and production runs. The increasing use of its mobile app also allowed Shein to harvest user data that
it shared with its designers and suppliers in order to increase the effectiveness of product design and
launches as well as the targeted messaging on social-media platforms.
Shein fine-tuned its merchandising approach based on the nuanced information it constantly collected
and analyzed. Its portfolio was geared towards women (77% of products available at its US site), followed
op
by children (15%) and men (8%). It adopted a multi-brand strategy with each brand carefully targeting
particular segments based on ability to pay and the need for superior quality. For example, Shein not
only offered more plus size clothing than peers in both the United States and UK (19% of the overall
assortment portfolio compared to 15% at boohoo and 14% at Forever 21) but also priced its products
much lower than equivalent choices available from peers. Its product portfolio emphasized smaller
tC
items and accessories that required more frequent replacement (e.g., not coats and jeans). Accessories
accounted for 20% of its offerings, compared to 15% at rival Zara and 7% at H&M. This sharply defined
merchandising strategy was complemented by targeted discounting and couponing based on customer
behavior, all made possible by Shein’s prowess in data analytics and predictive modeling.
As a sign of potential headwinds, the company was singled out by consumer-protection groups for its
web practices, which utilized behavioral insights to drive customers to adopt certain purchase patterns.
No
Referred to as “dark patterns,” these online techniques were believed to deceive users into engaging in
certain behaviors. A branding agency described dark patterns as: “From feeling pressured by time-limited
deals, going round in circles trying to cancel a subscription, and being tempted to add recommended
products to your basket, online retailers have an arsenal of tactics to get people to spend more … and
keep coming back.”34
SOCIAL IMPACT AND SUSTAINABILITY

Do
Fast fashion’s procurement practices raised social-impact and sustainability concerns among industry
watchers. Some argued that consumers turned a blind eye to the working conditions at fast fashion
clothing factories and the low wages because they liked the low prices. However, awareness among
consumers was increasing about the consequences of “use and throw” clothing and the enormous
waste this business model produced. Clothing accounted for about 20% of the 300 million tons of plastic
waste produced globally. Only a small fraction of that total was recycled. Most discarded clothing was

incinerated or sent to landfills.35 As polyester, the dominant fiber used in clothing, was often blended
t
with other fibers, the recycling of clothing was difficult.
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In the quest for novelty and newness, many fashion brands were accused of downplaying the environ-
mental costs of their business and the waste of precious resources. At the same time, sustainability
became a major focus of fashion brands starting in 2010. Most of the leading brands, such as H&M
and Zara, started recycling and reuse campaigns to reduce the negative environmental consequences
of their business. These campaigns received a prominent focus at the point of sale where buyers
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shopped for their clothing. Many companies also announced initiatives to reduce emissions and source
cotton more sustainably. For its part, Shein said that its business model minimized waste because it
only produced a small number of items in each style to determine how well they would perform before
mass-producing them.
The use of toxic chemicals was another notable environmental issue in the clothing industry. In an
yo
investigation carried out by the Canadian television program Marketplace in 2021, the program’s producers
ordered 38 samples of clothing from 6 online-only retailers, including Shein, and carried out chemical
tests. The study found that 20% of the items contained elevated amounts of toxic chemicals. The study
identified the apparel sold by Shein as toxic because of excessive lead content.
The source of cotton was also a controversial issue. Cotton from Xinjiang, China, was widely used in
the global industry. According to an industry study, about 16% of cotton clothes on store shelves in the
op
United States had fiber from Xinjiang.36 In 2020, the Australian Strategic Policy Institute released its
“Uyghurs for sale” report, which alleged that thousands of Uyghurs had been sent to factories around
China to work as forced laborers from 2017 to 2019. The report also claimed that these factories were
part of the supply chains of more than 80 global brands, including Apple, Gap, H&M, Nike, Samsung,
Sony, and Volkswagen.37 In the United States, a regulation called the Uyghur Forced Labor Prevention Act
tC
was passed in 2021. The act allowed customs officers to seize shipments of any goods made in Xinjiang
unless companies could prove their supply chains did not involve forced labor. The challenge was that
many clothing companies were not certain about the sourcing of the products in their supply chains.
THE CHALLENGES AHEAD

No
As Shein’s continued ascent dominated news stories in the fashion press, dark clouds emerged on the
horizon. The economic conditions for an IPO seemed unfavorable in 2022, especially as many expected
the onset of a global economic recession. The World Bank had announced a downward revision in
growth rates for the United States, Shein’s largest market. China had ended its pandemic lockdown in
Shanghai but questions about Chinese supply chains lingered.
On a more micro level, Shein had withstood headwinds related to its sourcing of designs and managed
to launch more than 17 times the number of new designs as its closest rivel, boohoo, in the first few
Do
months of 2022. However, there were questions about its ability to maintain its design edge in light
of the growing controversy. Would Shein be able to leverage the full potential of Shein X, its fashion
incubator, to maintain the extreme pace of new product launches? Would it have to increase its own staff
of in-house designers? Shein had launched a premium label called MOTF, which included silk dresses
priced at more than USD 100, and garments made from cotton and wool. Were customers willing to
pay higher prices?

t
In addition, given the increasing concerns about the environment and the throwaway economy that
os
Shein and its fast-fashion peers were accused of fostering, should it decrease its rate of new product
introductions? Would its track record of labor management at its supplier factories stain its reputation
in the world of ultra-fast fashion? In another important development, the tariff arbitrage that Shein had
been able to leverage between China and the United States appeared to be coming to an end. What
impact would this have on Shein’s ability to move its products from China using its DTC model? These
were just a few of the questions the Shein had to ponder as it looked to its future.
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yo
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No
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ENDNOTES
t
1. Fast, cheap, and out of control: Inside Shein’s sudden rise. https://www.wired.com/story/fast-cheap-out-of-control-
os
inside-rise-of-shein/
2. Einhorn, B. 2022. Shein’s $100 Billion Value Would Top H&M and Zara Combined. April 3. https://www.bloomberg.com/
news/articles/2022-04-04/shein-s-100-billion-valuation-would-top-h-m-and-zara-combined
3. Thomas, D. 2019. The high price of fast fashion. The Wall Street Journal, August 29.
4. https://www.thegoodtrade.com/features/what-is-fast-fashion
5. https://www.vox.com/the-goods/2021/7/19/22535050/gen-z-relationship-fast-fashion
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6. https://www.inditex.com/how-we-do-business/our-model/design
7. Marci, K.2020. H&M and Zara: The differences between the two successful brands. https://blog.edited.com/blog/
resources/zara-vs-hm-whos-in-the-global-lead
8. Kitroeff, N.. Fashion Nova’s secret: Underpaid workers in Los Angeles factories. The New York Times, December 16,
2019. https://www.nytimes.com/2019/12/16/business/fashion-nova-underpaid-workers.html
9. https://www.whowhatwear.com/zara-headquarters-press-trip
10. Eggersten, L. All the secrets I learned while visiting the brand’s headquarters. October 23, 2019, https://www.whowhat-
yo
wear.com/zara-headquarters-press-trip.
11. Eggersten, L. 2019.
12. Ibid
13. https://hmgroup.com/brands/hm/
14. https://www.primark.com/en-us/aboutus
15. https://www.bbc.com/news/business-61863413
16. Maheshwari, S. One family built Forever 21, and fueled its collapse. The New York Times, October 23, 2019.
17. https://www.missguidedus.com/about
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18. https://www.wsj.com/articles/fast-fashion-juggernaut-sheins-sales-close-in-on-zara-h-m-11666949403?page=1
19. CEO, Shein, Guanzhou, China: Xu Yangtian.” Business Week., no. 4722, Bloomberg
20. Einhorn, B. 2022. Shein’s $100 Billion Value Would Top H&M and Zara Combined. April 3. https://www.bloomberg.com/
news/articles/2022-04-04/shein-s-100-billion-valuation-would-top-h-m-and-zara-combined
21. https://www.vox.com/the-goods/22573682/shein-future-of-fast-fashion-explained
22. A new Chinese supermodel Shein exemplifies a new style of Chinese multinational, The Economist, October 9, 2021.
tC
23. Jones, L. 2021. Shein: The secretive Chinese brand dressing Gen Z. https://www.bbc.com/news/business-59163278
24. https://www.wsj.com/articles/chinas-fast-fashion-giant-shein-faces-dozens-of-lawsuits-alleging-design-theft-
11656840601?page=1
25. https://www.sheingroup.com/how-we-do-business/
26. The Economist, October 9, 2021.
27. https://www.sheingroup.com/how-we-do-business/
28. https://www.wsj.com/articles/fast-fashion-juggernaut-sheins-sales-close-in-on-zara-h-m-11666949403?page=1
29. L. Schlesinger, M. Higgins, & S. Roseman, Reinventing the Direct-to-Consumer Business Model,
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Harvard Business Review, March 31, 2020.

30. With Fashion Nova, Zara and H&M’s long-standing reigns as the darlings of affordable, trend-led apparel, the fast fashion
market appeared to be untouchable. Now enter SHEIN, the Chinese-based super retailer that’s leaving even Amazon
trembling in its wake. https://blog.edited.com/blog/resources/fashion-nova-success
31. https://us.shein.com/About-Us-a-117.html
32. Shein’s marketing strategy: How the Chinese fashion brand is conquering the West. https://daxueconsulting.com/
shein-market-strategy/ February 16, 2022.
33. Ibid
34. Jasmin Malik Chua, Forget ‘Dark Academia.’ Shein Is Guilty of This Dark Deed, Sourcing Journal (Online),
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New York, October 27, 2021.

35. https://www.bloomberg.com/graphics/2022-fashion-industry-environmental-impact/
36. A. Stevenson & S. Maheshwari, Escalation of Secrecy: Global Brands Seek Clarity on Xinjiang, New York Times, May 29,
2022 https://www.nytimes.com/2022/05/27/business/cotton-xinjiang-forced-labor-retailers.html
37. https://www.aspi.org.au/report/uyghurs-sale


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THE FAST FASHION INDUSTRY

A NEW GUARD EMERGES

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 2

earned $270 in a week, the equivalent of $4.66 an hour.”8

THE COMPETITIVE LANDSCAPE

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 3

EXHIBIT 1: US MARKET SHARES FOR EXHIBIT 2: NUMBER OF NEW ITEMS

Others 23% Forever 21

Source: earnestresearch.com. Source: edited. www.businessoffashion.com/articles/retail/

typically located in upscale retail areas that attracted wealthy customers.

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 4

H&M described its brand of “cheap chic” as follows:

to affordable wardrobe essentials, complete-the-look accessories, and motivational

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 5

were located in Japan.

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 6

the dominant fashion company in ultra-fast fashion and beyond.

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 7

Source: Company annual reports for 2021

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 8

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 9

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 10

SHEIN’S DIGITAL STRATEGY

Shein’s website stated:

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 11

SOCIAL IMPACT AND SUSTAINABILITY

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 12

THE CHALLENGES AHEAD

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 13

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 14

Harvard Business Review, March 31, 2020.

New York, October 27, 2021.

CBS009 SHEIN DISRUPTS FAST FASHION AND CONFRONTS SUSTAINABILITY 15

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