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Inside the rapid rise of Shein and Temu
Air cargo space, speed to market, designer dupes, and Brandy Hellville. The impacts of ultra-fast fashion seep into the vast majority of modern culture, but the rising e-commerce giants and low-price DTC marketplaces have no intention of slowing down.
Here we investigate the explosion of China’s fast fashion takeover and analyze customer insights and trend data to uncover why consumers are hooked — and how brands can compete with the changing landscape.
Everything all at once
For every other ‘core’, trend, vibe, or aesthetic waiting to happen, the current ones are already in decline.
Social media has squeezed the 20-year trend cycle into a matter of weeks, with brands and retailers struggling to keep up. Unless you’re Chinese-based fast fashion retailer Shein.
Today’s fashion customer journey typically begins on social platforms, but no more so than on TikTok, whose addictive short-form videos roll from one ‘get ready with me’ to the next.
Where Shein gets its gains is the TikTok algorithm, which not only scrapes for and boosts organic influencer videos based on fashion trends, but also what Shein is selling - catapulting views and sending consumers right into the belly of the beast.
Shein’s bottom-tier prices have pushed the online mega-store to make up one-fifth of the global fast-fashion market.
The retailer has upwards of 5000 warehouses predominantly in China, producing clothing via a “real-time fashion” model — a direct-to-consumer approach that detects and produces based on customer demand.
Shein uses this method to allow the store to keep its prices low and reduce production waste. With in-house design teams and lightning-fast manufacturing cycles, Shein releases 500-2,000 new pieces daily.
This approach has seen Shein doubling its profits over the past year to $2 billion, as it currently awaits approval for a stock market listing in New York or London.
Similarly, the set-up of Chinese online marketplace Temu — which hosts millions of brands and manufacturers across endless categories — enables the e-commerce platform to cut out the middleman and sell products at wholesale prices that can get to as low as 30 cents.
These DTC models generate billions of dollars for their retailers, so it's little wonder Shein recently announced its plans to offer its supply-chain infrastructure and technology to external brands and designers.
These third parties will be able to access Shein’s systems and networks to experiment with new fashion products in limited quantities.
Land, sea and sky
The speed-to-consumer strategy Shein and Temu employs is becoming just as detrimental as speed-to-market.
Fast fashion now accounts for half of China’s total cross-border e-commerce shipments and takes up about one-third of global long-distance cargo aircraft.
As Shein and Temu battle to keep customers happy with fast delivery, together they send almost 600,000 packages to the United States every day, according to a June 2023 report by the US Congress. A practice that all but eliminates off-peak periods and causes capacity shortages.
And they're not the only ones. While Temu and Shein ship around a total of 9,000 tonnes per day, Alibaba and TikTok Shop add 1,000 tonnes and 800 tonnes respectively to the problem. This equals around 108 Boeing 777 freighters a day.
And, it’s been revealed that Temu is currently eager to purchase more aircraft. According to major air cargo carriers, it's the e-commerce companies that are going directly to the logistics companies to secure more capacity.
Meanwhile, Shein is considering more sea freight due to the high cost of air freight as well as opening warehouses outside of China to shorten transport times to other regions.
Supersized marketing
Fast-fashion companies adopt an increasingly aggressive marketing strategy to capture, and recapture customers. But nothing has quite topped Temu’s 90-second Super Bowl ad that cost the business an estimated $21 million.
However, this was just another day at the office for the global marketing team at Temu, whose “Shop like a billionaire” campaign sits within an estimated $3 billion 2024 strategy that will indulge brand awareness with television ads, digital marketing, and influencer partnerships.
Along with big-name celebrities like Katy Perry and Hailey Bieber, Shein has long lured customers with an army of micro-influencers on YouTube, TikTok and Instagram where, in exchange for their posts, influencers receive free products every month and can get up to 10 to 20% commission from the app’s referral sales.
Shoppers are bombarded by these micro-influencers offering constant coupons and discount codes, sending customers all the way to the checkout.
Customers high and low
With Temu relatively new to the e-commerce space, and Shein known for their hit-and-miss quality and dodgy designer knockoffs — who exactly is buying into the hype?
Though the Shein boom was initially driven by low-income, digitally-tuned Gen Z shoppers, the tides are turning on their customer base. In 2023, while Gen Z still ushers in the most Shein sales, Millennials and Gen X showed up as the fastest-growing segment of buyers according to Circana, a company that tracks and calibrates point-of-sale (POS) data.
Cricana’s data also revealed households with annual incomes over $100K were Shein’s fastest-growing income segment. Similarly, high-income earners make up Temu’s biggest customer segment, accounting for over 44 percent of Temu’s sales.
They are also growing at a faster pace than those in lower-earning segments.
With economic downturns and the increasing cost of living, despite sustainability awareness, higher-income earners can be more flexible with their money on such marketplaces with lower price points.
They indulge in convenience and versatility, rather than Gen Z’s affinity for trend clout and content.
Shopping’s gamification
Why do customers keep coming back to shop on the Shein and Temu platforms?
The chaotic interface, clashing products on thousands of pages, and confusing amount of offers and discounts are enough to drive any consumer away.
The one thing customers can’t ignore, however, is the low, low pricing and the algorithm-trained, endless product recommendations that cater to the browsing habits of individual shoppers.
Alongside the persistent promotions and constant retargeting, customers become more addicted to the experience the more time they spend on the sites.
The gamification comes down to flash sales and loyalty programs.
Being rewarded, or finding the product you’re searching for at a discount is akin to the feeling of winning or reaching another level in a computer game.
Additionally, Temu’s addictive reward system allows large credit incentives when customers spend a certain amount in a price range.
These kinds of rewards are considered more attractive than competitors, as they bear no expiry and the value of the reward incites customers to spend more.
Staying competitive
Though Temu generated sales of $346 million in January and February alone, JP Morgan revealed Temu is currently operating at a loss.
This ultimately means Temu must rise as a brand beyond its cheap prices; a starting point for established brands with robust brand identities and values to compete with, and keep customers from jumping ship.
To remain competitive in the Chinese market, Zara recently launched a refreshed weekly livestream experience on TikTok’s sister app Douyin.
The livestream runs for five hours and includes catwalks and behind-the-scenes coverage, an entertainment tool that positions the clothing as more high-end. Similarly, H&M Group has changed tact on its market strategy by introducing a premium SoHo New York store location, where they offer their first second-hand collection, “offering a curated selection of second-hand pieces that are ready to be loved” as promoted on their website.
As for rising above Shein’s habit of designer duping, Bailey Prado, an independent knitwear designer told the Business of Fashion she found more than 40 of her crochet designs imitated on Shein, however, her sales were not affected.
The incident encouraged Prado to lead with her brand value, with made-to-order products and premium price points.
In this vein, many brands will be able to remain competitive through desirability, exclusivity, and by creating a loyal, engaged community.
Effective digital marketing and branding strategies play a crucial role in differentiating stores — and Shein and Temu are not exactly aspirational.
The more a brand or retailer can tap into their unique DNA and market it as such will help cut through the TikTok noise.
Neither are these e-tailers known for their quality, and today’s economic conditions don’t support the wear-once ethos; consumers want their pieces to last.
For example, with the rise of the “Rule of Five” anti-trend trend, where consumers are only allowed to purchase 5 new items per year, brands will push to be known for quality, wearability, and versatility.
Customer care, a seamless user experience, and ethics around sustainability are several more aspects of online shopping where ultra-fast fashion brands are not seen to rise to standard.
Not only has consumer awareness around green-washing and workers' rights increased, but consumers want guilt-free, easy shopping experiences with timely access to customer services.
Lastly, innovation and technology around inventory management and merchandise planning are key to ensuring brands and retailers have in-demand products available in the right sizes, in the right stores.
This way, fashion businesses won’t have to rely as heavily on product recommendation algorithms as Shein and Temu, instead, they can enhance customer satisfaction with availability and increase customer loyalty with efficient checkouts and delivery.
