A look inside Shein, the $45 billion retail enigma upending the global fashion industry

Business & Technology

China’s “most mysterious billion-dollar company,” as one investor put it, has perfected the art of trend-setting through trial and error. But Shein’s tactics and tight lips are not without risk. Here’s what we know about the rising Chinese retail giant intent on taking down Zara.

chinese company shein
Illustration by Derek Zheng

On TikTok, the short-form video app, teenagers show off their latest “Shein haul” to a bouncy bassline: a lacy tan dress, a bright red tank top, a glittery leopard-patterned bikini. The resulting eight-seconds is a mishmash of fabric and color, a crossover between a rave and a suburban living room, Gatsby mixed with quirky Gen Z subculture.

“Shein” (pronounced Shee-in) is the largest fast-fashion retailer that many have never heard of. In just a few years, the Chinese brand has become a one-stop shop for impossibly cheap, variegated, and high quality women’s apparel. On their mobile app, $3 miniskirts appear next to $17 blouses, and near-identical pieces sell for less than half the price of leading competitors Zara and H&M. Every day, over 5,000 new items appear on their site, which serves as a wellspring of content on platforms like TikTok, Snapchat, and Instagram. An army of influencers — along with high-profile celebrities such as Katy Perry and Lil Nas X — have come to be a core piece of Shein’s ecosystem, pushing out its latest fads, or “hauls,” for millions of users to enjoy (see hashtags #shein and #sheinhaul).

China’s biggest mystery box: Who is behind Shein?

Unlike its video cousin TikTok, however, Chinese-owned Shein has gone to great pains to remain out of the limelight. Even as it’s taken off in the Gen Z and fashion space, it is practically a black box for media and investors. After its latest funding round, last week, a Chinese tech blog reported (in Chinese) the company’s worth to be around 300 billion yuan ($47 billion) — roughly the valuation of Twitter — and posited IPO plans. The article was promptly wiped from all Chinese media sites at the company’s behest. In 2019, Chinese media got a hold of a journalist who was asked to do a similar act of self-censorship: “The company told me they wanted to keep a low profile,” he said. “I have almost never encountered such a situation — and the piece was not anything negative.”

Venture capitalists seem as perplexed by the company’s ascent as those in the media. “This is China’s most mysterious billion-dollar company,” said one investor (in Chinese). Many in the investment world recalled being too late to be involved in the funding rounds. Though Shein refuses to publicize its investors, some industry veterans — JAFCO Asia and IDG Capital along with private equity titans Sequoia and Tiger Global — are all confirmed backers. Yet none have come forward about the company, citing an oath of secrecy they committed to upon investing.

Nevertheless, Shein is reaching astronomical heights in the fashion world. In May, the company surpassed Amazon as the most popular app in the shopping category, ahead of Nike, Zara, H&M, and Uniqlo, on iPhone and Android. Last year, it sold nearly $10 billion worth of apparel according to 36Kr (in Chinese), nearly half of Inditex, Zara’s parent company. Regardless of its mysterious ownership, the Chinese app is already a global force with over 22 million users shopping daily.

So who exactly is behind Shein? A collage of Chinese media reports and interviews helped stitch together a picture of the company’s elusive rise to global stardom.

Origin story

In 2008, Xǔ Yǎngtiān 许仰天 (Chris Xu), a native of Qingdao, moved to Nanjing to work at a digital marketing company specializing in SEO (search engine optimization). In what would become his life’s work, Xu specialized in exports: helping domestic firms sell their products to overseas customers. After a brief stint running his own IT business, he decided to try his luck at his own export venture. He decided to specialize in wedding gowns and tried several domain names before landing on one that had particular success on search result pages: SheInside.com.

In 2012, Xu began selling all types of women’s apparel. But, back then, SheInside.com was still just an online platform; there was no factory and no inventory. The team uploaded pictures of whatever designs they could find, waited for orders to pile up on their site, then bought them wholesale. At the same time, China’s ecommerce market was in full throttle: Alibaba had listed on the Hong Kong Stock Exchange in 2007 and had just recently launched Taobao Mall, which would soon become China’s largest online business-to-customer exchange. Xu had the chance to follow suit, as he could have invited merchants to access his overseas clientele and become a cross-border ecommerce platform for women’s fashion.

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But Xu was not interested. His SEO strategy had been working: he was receiving a heavy influx of orders and was struggling to fill them. And in his successful attempt to stand out on a Google search page, he realized he was achieving something that no Chinese company in the 2000s could have reasonably expected: he was developing a global brand.

“Changing the brand didn’t happen overnight; Shein had to put in a tremendous amount of effort,” said Xu to Chinese media in 2018 (in Chinese). Branding, for Xu, was an “intangible asset of the company and an integral part of [Shein’s] overall strategy.”

Three years after SheInside expanded its offerings to include all women’s apparel, Xu shortened the company name to Shein. He hired designers. He placed his own factory orders, and built up his own clothing and production line. The rebranding marked the transformation of the company from a website with a focus on fashion to a fully fledged fashion brand with a website.

Shein’s customer to manufacture model

“I don’t even know what this is,” says an automated voice as a TikTok user inspects a pink rabbit toy he purchased on Shein. On social media, the fast fashion brand has sometimes become an object of ridicule, selling items with no clear thought behind them.

But the apparent randomness of the product line is not an accident. More than any other fast-fashion outlet, Shein has perfected the art of trend-setting through trial and error. In 2019, the company launched an average of 10,000 new products a month. Shein adds as many new designs in two months as Zara, the current industry leader, puts out in a whole year. The strategy is one that inverts the way the industry has traditionally worked: In the past, fashion designers would mull over how customers would react to a design before pushing it out — a hit or miss exercise. By contrast, companies like Shein are flipping the script: they push anything and everything out, then analyze the buying patterns to tailor their subsequent products.

This trial-and-error tactic has revolutionized several industries in China already, and many experts see it as one of the more distinctive innovations of the Chinese economy. In China’s ecommerce sector, this tactic is widely known as the customer-to-manufacture model (C2M), as popularized by Pinduoduo. The ecommerce giant analyzes spending patterns of hundreds of millions on its platform and passes the results onto manufacturers, who then produce products that are a better fit to market demand. C2M removes the guesswork in the market, resulting in a virtuous cycle that leads to a more efficient market.

The model has even been applied in traditional brick-and-mortar businesses. Luckin Coffee, China’s embattled rival to Starbucks, was known for applying the C2M model to storefronts: it built shops at a dizzying pace, and then used the resulting customer heat maps to decide which shops should close and which should stay open.

At the core of Shein’s business is a data-centric approach that afforded the company an edge in a cutthroat industry. Its geographic location also helps buttress its C2M strategy. Besides its headquarters in Nanjing, the company has an office in Guangzhou, the southern industrial hub known for garment manufacturing. Proximity to the industrial heartland allows Shein to spot trends and source them faster than most overseas competitors. It has even swallowed its local competition such as Romwe, a youth-focused fast-fashion retailer based in China, to ensure its dominance within the country.

The dark side of Shein

But the company’s tactic of flooding the market with mountains of new products at rock-bottom prices is not without risk. For the past few years, cultural insensitivity and allegedly unethical practices have also become taglines for the Chinese company amid its ascent to the highest ranks of the fashion world. In July 2020, the retailer landed in hot water for hawking Islamic prayer mats labelled as “fringe trim” or “tassel trim” Greek carpets on its website. After being called out by Nabela Noor, an American Muslim fashion influencer and inclusivity activist, whose complaint went viral on Twitter, Shein swiftly removed the rug from its site and apologized for what it described as “a serious mistake.”

“We understand this was a highly offensive oversight and we are truly sorry,” the company wrote on Instagram, adding that it had assembled a “product review committee” to improve oversight. But days after the rug blunder, Shein stoked outrage again for selling a $2.50 pendant necklace that appeared to be in the shape of a swastika. Facing an avalanche of criticism for promoting anti-Semitism, the brand said, through a six-slide apology on Instagram, that it had pulled the product and expressed regret over its failure to be “more considerate of the symbol’s hurtful connotations to so many people around the world.”

Even after the two high-profile gaffes, Shein seems unable to avoid controversy. Last month, the company faced boycott calls again for hawking a phone case that depicted a design of a handcuffed Black person being outlined in chalk. The illustration was also the proprietary artwork of French cartoonist Jean Jullien, who first posted the image on social media in 2014, in the wake of the police killing of Michael Brown. Noting that he didn’t give Shein permission to use his work, the artist later asked the company to donate any profits made from the item to the Black Lives Matter movement.

Jullien is not the only artist who has fallen victim to Shein’s plagiarism. Back in 2018, indie brand Valfré filed a complaint against Shein for selling identical copies of its products. In the years that ensued, a string of designers have come forward with evidence suggesting that the company has a habit of creating knock-offs of others’ work, including prints, pins, and garment patterns.

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But beyond the intellectual property infringement lies the most chilling and pressing question surrounding Shein’s success story: whether its attractive price tags come at a human cost — namely, child labor, hazardous working environments, and other abusive labor practices. According to Good On You, a brand ethics rating site, Shein is deliberately opaque about its supply chain and its factory working conditions, except that it “sources its final stage of production from countries with extreme risk of labor abuse.”

Shein’s lack of transparency is particularly disconcerting given rumors that it has been utilizing child labor to manufacture clothes. Although the company affirms on its website that it strictly abides by “child labor laws in each of the countries” that it operates in, skeptics have continued to call for verifiable evidence and more transparency. So far, neither have been forthcoming.

Is Shein destined for greatness?

In recent years, the company has been preoccupied by a singular ambition, best captured (in Chinese) by Shein’s general manager Péi Yáng 裴旸 in 2016: “Take Zara out.” And despite the ethical hiccups, Shein is not too far off from achieving that goal. Since the pandemic, offline retail giants like Zara were forced into a retreat, while online-only stores like Shein flourished. Through a combination of skillful advertising, low-cost shipping, and data-driven trend-spotting, Shein — along with similar models such as the U.S.’s Fashion Nova and the U.K’s Boohoo — are displacing legacy retailers like Zara, H&M, and Uniqlo.

The company today remains a jumble of juxtapositions: it’s controversial and innovative; it’s mysterious and ubiquitous. It’s a clothing brand, but also — starting from its SEO roots — a tech outfit. Shein has long hoped to disassociate itself from the low quality image of “Made in China” goods. But as Shein becomes better known overseas, the brand’s core characteristics — a knack for innovation, propensity for controversy, and unbridled ambition — cannot help but bear the imprint of its home country.