Why is Shein so Cheap?
Ever browsed Shein’s website and wondered how they manage to sell stylish clothes at such jaw-dropping prices?
I had the same question when I first stumbled upon the site. From chic dresses to casual tees, it’s hard not to be amazed by the variety and affordability.
Intrigued, I decided to dig deeper into their business model to uncover what makes Shein so cheap—and wildly popular.
In a Nutshell, Shein exposes the underbelly of the fashion industry. Most of the products that you buy in terms of clothing are marked up very high. Your levi's jeans that you buy would have cost a fraction of the amount that you actually paid for it. All the other costs are costs of marketing it, branding it etc. The cost of clothing is actually very cheap. Shein lets their price do the marketing.
How is Shein So Cheap? Reddit Explains
Shein is Cheap because
- They manufacture in bulk
- They get the raw materials i huge quantities which reduces their cost of items
Shein has been around for a while now and they have always been able to deliver good quality clothes for cheap. One of the main reasons why the company is able to do so is because Shein does not invest a lot of money on advertisements and retail stores, rather they depend on word of mouth and social media influencers to get their products out into the market.
Shein has a high social media presence on apps like Tik Tok and Instagram with famous celebrities and even influencers swearing by the brand, so ultimately the company is bound to see an increase in sales when someone famous is wearing their clothes.
In order for you to fully understand how Shein is able to price their products so low, take a look at their business model and learn how they function.
How are Shein Products so Cheap : Shein Business Model Explained
While clothes that are manufactured and sold in your home country might be expensive, those that are made and sold by Chinese retailers generally tend to be much cheaper and at times lower than half the price.
Shein is no different and they have actually managed to ace the same business model that another Chinese superpower has been following for a while now and that is none other than Xiaomi.
So if you’re unaware about how the brand is able to stay afloat without investing much, then read on.
Low Manufacturing Costs
Since Shein is based in China, their products are affordable because the overall manufacturing cost is low.
Raw materials are much lower in China because they are readily available and manufacturing costs tend to be lower because the labor laws in China are so relaxed that some factories tend to overwork and underpay their employees, leading to profits for the company.
Shein has Fewer Intermediaries
Yes, Shein does not depend on anyone when it comes to manufacturing, sale or even logistics and storage of their products. Reducing the middlemen has helped the brand save a lot of money.
Moreover, Shein has their own warehouses situated in countries around the world and it is from these warehouses that orders get shipped.
So if you order anything from Shein then you can rest assured that the product will be sent straight from the factory to one of the closest warehouses and then shipped to your home address which is much more economical for the company.
There are No Physical Stores
You read that right, Shein does not have any retail stores in any of the countries they sell to. While owning a retail store might be convenient for the end user as we can get to try on the clothes and check a variety of products first-hand, it’s not economically feasible considering the amount the company will have to spend on rent, electricity, maintenance and staff as well.
In order for us, the buyers, to have a clear understanding of what we’re buying, Shein has made it a habit to have important information about each product available on their respective pages.
Also, taking into consideration that they don’t have any physical stores, Shein offers free returns and shipping in most of the countries they service. And in some places such as the UK or the USA, where there are hundreds of thousands of buyers, Shein hosts pop-up stalls over a period of a day or two where buyers can actually get the feel of the products before buying them.
This is way cheaper than a regular store and so far Shein has managed to dominate the market with such a basic business model in place.
Flash Sales and Smaller Warehouses
Flash sales and owning smaller warehouses actually help Shein save money and not lose out in the market at the same time. Shein believes that by offering discounts to their customers on a daily basis that they can get rid of their current stock so a new batch can be brought in.
Since Shein manufactures products in bulk, this approach is good as it not only helps them move out hundreds of products with each flash sale, but it has helped them gain popularity for their frequent stock rotation as well. Talk about a win-win situation.
Low Advertising Costs
Digital marketing is the new trend and Shein has the upper hand as they rely solely on online marketing of their products. Not only is it cheaper, but there is a larger outreach when using platforms like Instagram, Tik Tok and Facebook to market their goods.
Brands generally tend to price their goods at a premium when they rely on TV advertising, billboards and even in the newspapers. This is done to cover the expenses so they can make a profit.
Shein on the other hand doesn’t mind relying on influencers and paid digital advertising to boost their sales. Here they save money on advertising costs and are able to price their products so low. It’s a smart move if you really sit and think about it. Shein, quite like Xiaomi, has tapped into an unexplored market and have surprisingly managed to dominate it.
High Volume Sales
Shein’s end goal is to have a lot of clothes sold and they do not focus on quality, but quantity.
The brand has been known to base their profit margins off of how many clothes they end up selling in a particular season and it’s because of this that they are able to provide clothes for cheap and below the market price.
So what they do here is, they manufacture slightly less than a 100 units of any new item and only if there’s demand will they manufacture more, this is done so there’s no wastage. It also helps the company learn whether the item is trending or not and they don’t have to waste manufacturing costs or storage costs on products that don’t sell.
Even as a retailer, if the company is able to provide the lowest wholesale rates possible for a single unit, and still make a profit, then they must be doing something right.
How did Shein Get so Popular?
There are a number of factors that helped Shein gain popularity over the years. With little to no investment in marketing, you must be wondering just how did the brand become so popular in such a short span of time?
Well the answer to that question is with the help of brand ambassadors, social influencers and word of mouth. For example, Shein was able to cap their revenue for the fiscal year of 2021 at $15.7 billion dollars which is a rough increase of 66% when compared to their earnings from 2020.
Here are some of the tricks Shein has pulled off over the years to get to where they are - The Largest Online-Only Fashion Company in the World.
Algorithm Based Targeting System
The first and main reason why Shein has been able to become so popular is because they run algorithms to determine what styles are trending. Thanks to this approach, the brand has been able to add more and more new styles of clothes to their inventory on a daily basis, resulting in users flocking to the site to get their hands on cheap and affordable clothing.
Obviously if you tap into an ever changing market and manage to please the customers, you’re bound to have your customer base grow with minimal effort. Based on recent findings, the company adds on average 3000+ new styles of clothes every week.
Fast Delivery Timelines
Shein delivers orders in a short period of time leaving customers wanting more and thanks to the reliable supply-chain management software used by Shein, you will get notified about your order every step of the way, giving you a peace of mind that the order will be delivered soon.
Using Brand Ambassadors and Influencers
A majority of the brand's popularity is solely thanks to social media influencers and online social apps. Shein likes marketing their new range of products with the help of brand ambassadors or social media influencers who normally have thousands and thousands of followers.
When a prominent figure wears and markets their products to their followers, the marketbase for the company grows and the number of orders increases.
This not only has helped the company save money, but also boost their sales and become one of the most popular brands in the world.
FAQ’s
Is Shein worth your money?
Remember that not everything you buy on Shein is worth your money. In fact most of the products might not even look the same as they do in the photographs and you will have to rely on the buyer reviews to know what’s good and what’s not.
Is Shein low quality?
Well, when shopping from Shein, you’re not buying something that’s the best quality. Rather, most of the products are made from cheap and affordable materials that can last for a couple of wears. However, there are some items such as swimwear and some dresses that you can only use once as they can tend to get distorted or stretched out after a couple of washes.
Is it safe to buy Shein to resell?
This is a tough one as Shein does not permit redistribution of their products. However, under very specific circumstances, Shein does allow redistribution, but only when you reach out to them personally with your requirements and if the products you select fall in their redistribution category.
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