SHEIN intensifies its smart supply chain efforts, advancing beyond ZARA

[Ebrun Original] Zhaoqing, a city in the central and western part of Guangdong Province, is not only a historical and cultural city, but also a modern industrial city—with manufacturing as its economic pillar, it excels in areas such as auto parts, home appliance manufacturing, and textile production. With the official commencement of the Xiyin Industrial Park in the Yong'an Industrial Park of Zhaoqing New Area, the city has welcomed its first new project tailored to the upgrading of the cross-border e-commerce industry.

Behind SHEIN, the operator of this project, is a company that started with its own clothing brand and has now developed into a "self-owned brand + platform" dual-engine. It innovates a digital flexible supply chain through its self-owned brand model, creating one of the most popular fashion brands among overseas consumers; and through the platform model, it drives more sellers and industrial belts to go global through digital trade platforms.

The newly launched industrial park will be a smart park that integrates intelligent sorting centers, order distribution centers, and more. With a total investment of approximately 3.5 billion yuan and a total land area of approximately 680 acres, it is expected to achieve an annual output value of 3.5 billion yuan and complete a service trade export volume of 3.5 billion yuan after reaching production. As an industry insider commented: "After the project is completed, it will drive more local industries such as clothing, warehousing, and service trade to develop synergistically, further solidifying the role of SHEIN's Guangdong supply chain base, and forming a supply chain system covering cities including Guangzhou, Foshan, Zhaoqing, and Jiangmen."

This is another important milestone in SHEIN's supply chain construction, and also a microcosm of SHEIN's continued empowerment of the upstream and downstream of the industrial chain, helping Chinese "smart manufacturing" go global once again.

01

A decade of deep cultivation: SHEIN's solid supply chain system

Established in 2012, SHEIN began focusing on creating its own brand and building a self-owned supply chain, setting up a supply chain center in Panyu, Guangzhou two years later. At that time, the cross-border e-commerce industry could be described as being in the era of brutal growth, with few players making heavy investments in supply chain construction like SHEIN.

In the years that followed, SHEIN continued to build a flexible supply chain, establishing a high-stickiness cooperative relationship with suppliers through software, hardware, organization, business, finances, and other capabilities. Those small and medium-sized factories who followed the "small order and quick feedback" innovative model and experienced the survival of the fittest not only laid the foundation for SHEIN's unification of fashion and high cost-performance, but also brought new opportunities for their own digital transformation.

It can be seen that over the past decade, SHEIN's construction of its supply chain has become even more profound. In a long chain that includes fabrics, designs, sampling, production, and warehousing and logistics, SHEIN has maximized efficiency in each link through a combination of independent and collaborative means.

In 2022, it was reported that SHEIN will invest billions of yuan in the "Xiyin Bay Supply Chain Project" in Zengcheng, accelerating its determination to promote the informatization and digital transformation of the entire cross-border e-commerce supply chain. This project will establish a supply chain warehousing and logistics center integrating operations, storage, picking, distribution, and delivery to enhance ecological synergy effects, and provide core support for the global sales of SHEIN brand suppliers and platform sellers.

In March of this year, SHEIN successfully bid for a plot of land in Zhongxin Town, Zengcheng District, Guangzhou, marking the acceleration of the Bay Area Supply Chain Project. The total investment for this first-phase project is no less than 3.69 billion yuan.

The Xiyin Bay West Smart Industrial Park project in Zhaoqing New District, Guangdong, is a continuous intensification of SHEIN's efforts in the field of supply chain, as well as a key project to explore the intelligent and lean construction of the supply chain.

The project officially commenced on December 12th of this year, and the total construction area of the base will exceed 600,000 square meters, including 14 two-story logistics warehouses, as well as facilities such as employee restaurants and office buildings, which will be built into a smart park integrating intelligent sorting centers, order distribution centers, and more upon completion. The project is expected to complete the main construction by the end of 2025 and start trial production in the first half of 2026, creating more than 20,000 job opportunities after reaching production.

In this way, SHEIN has established a supply chain matrix centered around Guangzhou, radiating to cities such as Foshan, Zhaoqing, and Jiangmen, continuously enhancing the ecological synergy and integration advantages of its entire smart supply chain.

02

Upgraded version of ZARA: the magic of "small order and quick feedback"

Some industry insiders have sighed that with its self-owned design team, self-developed supply chain management system, investment and support for factories, and involvement in warehousing and logistics, every step SHEIN has taken in supply chain construction reveals a comprehensive and long-term planning and consideration. And all of this is constantly raising the bar for its innovation as a practitioner of the "small order and quick feedback" model.

The so-called "small order and quick feedback" means testing styles with smaller orders. If the market feedback is good, production will be quickly increased, but if the market feedback is not good, production will be stopped immediately. In the past, factories had to produce tens of thousands or even hundreds of thousands of products for each order, which not only consumed more capital and resources but also carried a greater risk of inventory accumulation. Under the "small order and quick feedback" model (with single SKUs starting from 100 orders), products are produced based on real-time demand, and adjustments can be made in response to market changes, thereby reducing waste and costs from the source.

The challenges of this model are also obvious—it is not easy to make thousands of suppliers and a large number of small orders operate quickly and adapt to rapid changes. However, this is exactly what SHEIN has innovatively implemented with this model.

In order to achieve this agile supply chain that produces on demand and reacts quickly, SHEIN has digitally transformed the upstream and downstream of the industrial chain by leveraging its industry experience and technological advantages: from capturing fashion trends and user demands, to product design and development, as well as raw materials, production, warehousing and logistics, all aspects can utilize its IT system to achieve real-time information flow and efficient business collaboration.

For example, in the production process, SHEIN provides production and manufacturing process management systems for free to suppliers, empowering these small and medium-sized factories comprehensively. Before working with SHEIN, most of these factories relied on manual processes for order placement, cost estimation, and statistics, which were cumbersome and had a high error rate, resulting in overall inefficiency. After working with SHEIN, they transformed into digital factories, tracking production conditions in real time, down to every style, process, and machine, enabling them to quickly identify abnormalities and make rapid adjustments.

According to industry sources, under this efficient "small order and quick feedback" model, SHEIN has even reduced brand inventory levels to single-digit percentages, less than one-tenth of the industry average.

It can be said that while this model is not unique to SHEIN, it has been widely and innovatively implemented at SHEIN and played to the fullest, driving the industry's innovation and overall development.

03

China's manufacturing is rising at both ends of the smile curve

China has the most complete industrial chain in the world and is the only country with all categories of industries. Among them, textiles, home appliances, steel, petrochemicals, and building materials are the five traditional advantageous industries. However, most industrial belt enterprises are concentrated in low-value links.

With regard to the clothing and textile industry, many overseas clothing brands have previously come to China's industrial belt, hoping to meet their supply chain needs for "small order and quick feedback," but most of them viewed Chinese suppliers only from the perspective of buyers. SHEIN, on the other hand, entered as an industrial enabler, investing a large amount of effort and cost to optimize the supply capabilities of suppliers, enabling them to grow together, and ultimately building a huge flexible supply chain system to continuously empower the upgrade of traditional manufacturing industries.

And with innovative supply chain management, SHEIN's brand has become more competitive, with products that are instantly in tune with the latest trends and offer high cost performance. In the latest survey of American teenagers, SHEIN surpassed ZARA and H&M to become their fourth favorite clothing brand, ranking behind Nike and Lululemon.

Very few of our brands have independently mastered branding, marketing, and direct access to global consumers overseas. This is a good model for the rise of high-value sectors of Chinese manufacturing along the smile curve—through deep innovative integration of the upstream industrial chain, fully leveraging production advantages, and efficiently building product and brand barriers.

Driven by the core competitive strength of a flexible supply chain, SHEIN has established a position for its own brand in the global market, giving Chinese manufacturing greater influence and more say in the international fashion field. Recently, SHEIN has successively achieved strategic cooperation with the well-established American fashion brand Forever21, using its flexible supply chain to design, produce, and sell a portion of Forever21 products and achieve online and offline linkage; it has also acquired the well-known British fashion brand Missguided. All of these are manifestations of SHEIN's innovative supply chain and its strong product and brand strength, which further contribute to and participate in the global fashion industry.

Meanwhile, with the massive traffic accumulated by its own brand, and based on its extensive overseas sales network, mature marketing experience, and increasingly robust supply chain system, SHEIN has begun to introduce products and brands from third-party merchants on a larger scale.

For example, in June of this year, SHEIN announced the "Rare Gravity" million-seller plan, which will help 10,000 global sellers achieve annual sales exceeding one million dollars, and assist 100,000 small and medium-sized sellers in achieving annual sales exceeding 100,000 dollars. In September of this year, SHEIN announced the launch of the National 500 Cities Industrial Belt Plan, which will deeply enter the industrial belts of 500 cities nationwide, and empower enterprises in the industrial belts with production, sales to global branding within the fabric.

This means that SHEIN's unique flexible and agile supply chain model, which has been built over the past decade, will rapidly expand and be applied to more industries. Sellers from industries such as home and beauty are learning from and borrowing the flexible on-demand model in the clothing sector on the SHEIN platform. Sellers are also starting to build flexible supply chains or transform their digital factories, and SHEIN has evolved from a clothing industry platform to an enabler that drives more industries to continuously improve their added value.

Returning to the ongoing construction phase of the Shein Bay Area West Smart Industrial Park project, SHEIN's role as an industrial enabler is becoming more clear and specific. It represents SHEIN's continuous improvement in the field of supply chain ecological synergy, and will continue to have a positive impact on the upstream and downstream of the cross-border e-commerce industry.