Shein – Business Model & Supply Chain Model Evolution

  • Private Equity
  • Consumer
  • Greater China
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Executive at Shein Supply Chain Management Co Ltd


  • Shein – business model, evolution of merchandising model and changes in supply chain
  • Product design principles, primary customer groups and consumer scenarios
  • Requirements for suppliers’ hard capabilities and soft capabilities, supplier profiles and production capacity changes
  • Scale and depth of SKUs and SPUs (standard product units), plus control of production cost and production quality
  • Stability of cooperation with suppliers, supplier elimination rate, plus suppliers’ dependence on Shein



Shein’s customers are mainly middle- and low-income people in western countries. Can you introduce to us Shein’s products and product positioning? What are its consumers’ consumption scenarios and psychology?

Specialist (SP): Shein positions itself as a world-class fast fashion e-commerce platform. As for its customer profiles, it mainly targets consumers aged 18-35, including women, young people and those who like sexy clothes and pursue the Y2K fashion style, with consumption scenarios including street photography, staged photography, parties and clubs.

Shein has two e-commerce websites, namely Shein and Romwe; the latter was a stand-alone website acquired by Shein in South America in 2015. Shein had boasted a considerable market share back then. Shein enriches its customer profiles by taking advantage of the commodity calendar, including Ramadan in the Middle East, Black Friday, music festivals, graduation seasons, Valentine’s Day and weddings, to acquire more accurate customer positioning and lifestyle. Via big data, it has delved deep into customers’ colour, pattern and style preferences and the proportions of various product styles purchased. Such data can help it accurately cater to customers’ preferences.

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What are the proportions of Shein’s apparel and non-apparel products? If we subdivide apparel into men’s, women’s and children’s wear and non-apparel products into footwear, bags, accessories and household goods. What about the sales revenues and proportions of these products on Shein?

SP: Shein has standard and non-standard products. As for non-standard products, which have different sizes, Shein focuses on apparel, such as men’s, women’s and children’s wear. Among them, women’s wear accounts for at least 60-70% while men’s and children’s wear less than 10-20%. Shein uses its customer traffic from its apparel to attract customers to buy its standard products, including accessories, cosmetics and mascara and the like.

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What are the sizes of Shein’s designer and buyer teams? What about its annual new product launches and product lifecycle?

SP: Each year, the number of new products launched by Shein increases exponentially. Around 2020, it launched over 5,000-8,000 SKUs daily and was mainly benchmarked against Zara. Shein’s products designed by the designers and buyers under its design and development department according to the merchandising plan adopt the FOB (free on board) model. These products are original or semi-original, accounting for 50-60%. In addition, its buyers also develop some products by generating derivative styles of some best-selling products with reference to shapes, elements and floral patterns, which take up 40% or so. Shein has 500-600 designers and much more buyers.

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What are Shein’s new product development KPI and incentive mechanisms for its designers and buyers?

SP: Shein mainly takes the GMP (good manufacturing practice) of its designers and buyers and the GMV of their products into consideration. Besides, it also considers the proportion of their products selected for launching, the proportion of their best-selling products and the proportion of products developed by its buyers according to the product planning. Besides, buyers take some responsibilities regarding suppliers and product development. But product design focuses more on the results of GMV and GMP.

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What are the scale and depth of Shein’s SKUs, SKCs (stock keeping colours) and SPUs (standard product units) in recent years? What about the order volumes of these products?

SP: Shein has two product development models. First, its designers develop SKUs according to the product plan. Supposing they are asked to develop a product category, they can divide the category into several sub-categories and allocate the sub-category development tasks to several groups. Then, these groups can develop the sub-category from the perspective of SKCs and SKUs, such as patterns, floral patterns and colours. You see, Shein can develop abundant products under this model.

Second, its buyers can develop products based on the massive data accumulated from the downstream market. After these products pass the tests, they may want to attract more traffic and build them into best-selling products, and they can develop more product extensions under those sub-categories. Currently, its buyers are suffering from development fatigue. This situation exists sometimes.

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How does Shein help its designer and buyer teams with product development and design with information or internet technologies? How do its designer and buyer teams collect, acquire and analyse market data and integrate the analysis results into their product development and design? What are the roles of Shein’s related systems and technological instruments?

SP: I’ll start with its buyers. Its buyers first need to know the culture and political beliefs prevalent in the countries where it is to sell its products and local people’s lifestyle there. They learn about design-related information by some means such as browsing the websites of some competitors by using some technologies such as web crawler technology. They also research some surrounding apparel markets, say, the surrounding markets of Guangzhou or the Yangtze River Delta to update themselves on local fashion-related information.

Shein’s designers learn about design- and fashion-related information by travelling to other countries and communicating with some top B2B designers or suppliers in the industry. They may make some adjustments to products based on the information and the product planning. Previously, they also referred to the design elements of Shein’s competitors displayed on their websites.

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Shein mainly cooperates with small and medium-sized factories. What quantities does Shein order from its cooperative factories for a single SKU? How does the order quantity affect the production or procurement cost?

SP: It is hard for me to give you the quantitative data, but I can talk about this from another point of view. The common practice in the market is that the minimum order quantity of clothes is calculated based on the minimum order quantity of fabrics used. During its rapid development, Shein adopted the ODM (original design manufacturer) model. To be specific, it selected some products on and some offline channels and tried to sell them on its own platforms. If having succeeded on the first try, it would attract traffic to create them into best-selling products.

The minimum order quantity of such products is small, say 20, 30 or 50 pieces. By contrast, its design and development department asks for a higher minimum order quantity, say 200-600 pieces. This is because the department develops products based on massive accurate data including the customer profiles accumulated by Shein. In theory, the department basically develops products on the basis of the existing hot-selling products to create them into best-selling ones.

The download volume of its mobile and PC apps keeps increasing annually and has reached 300 million downloads. It is said that Shein surpassed in the shopping app field last year. It is also hard for me to quantify the lifecycle of Shein’s best-selling products. Its new products feature a lifecycle of around 28 days. If there’s no big change in various data on a new SKU within 28 days, Shein may label the SKU as a product to be removed off the shelves or others.

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What data does Shein’s design and development department mainly analyse? How does it create some hot-selling products into best-selling ones?

SP: It first establishes a stand-alone website and launches SKUs on the website on a large scale. After that, it goes to learn about customers’ preferences based on search engine marketing data and the data acquired from marketing and promotion activities, which are held according to the commodity calendar such as Christmas. Its product planning department can more accurately break down the product development demand based on such data, for example, what web pages customers stay on and how long they stay on these product pages and whether there’s an action to transfer to the payment interface and whether they are looking for identical or similar products.

If successfully sold on the website, these SKUs will be copied. If the sales reach a certain level, they will be defined as average-selling or hot-selling products. Shein markets and promotes hot-selling products by cooperating with online celebrities for fission marketing. To some extent, this model is similar to that of Pinduoduo, but there are some differences. For instance, online celebrities may get a reward for sharing its products on social platforms. This model can help promote products widely and quickly.

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Which products does Shein define as average-selling products, hot-selling products and products to be removed off the shelves? In what dimensions does it divide products?

SP: I think there’s a need to talk about the naming and usage rules of SKUs. They are the basis of Shein’s SKU stocking logic, namely, it updates and adjusts SKU labels according to the commodity calendar. As I just said, Shein’s new product lifecycle is about 28 days. It defines products as average-selling products, hot-selling products and products to be removed off the shelves according to the daily sales volume. For instance, hot-selling products refer to those with a daily sales volume of three, five or 10 pieces, and those with a daily sales volume of 10 pieces are best-selling products. Of course, the definition standard varies according to its operational strategy.

The SKU usage rules cover content about how to sub-divide SKUs into SKCs, assign orders, drive the downstream supply chain and design more labels. Label management is very important to the supply chain. Specifically, we can know how to enhance the delivery efficiency of the supply chain in a more targeted and strategic way according to the data of the whole supply chain system, including various product categories, sub-categories and suppliers, thereby improving customer experience.

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How does Shein name and use SKUs at different stages? How does it collaborate with suppliers in this regard?

SP: Shein started to make internal adjustments in 2016. It adopted a standard third-party system back then. In 2017, it decided to customise internal systems for different channels. The business scenario-, procurement procedure- and procurement pathway- related systems involve the naming and usage rules of SKUs. These systems drove Shein to establish a supply chain system. The Shein and Romwe websites may have some same SKUs that use the same warehouse. The warehouse allocates the inventory of the SKUs to the two websites mainly according to the SKUs’ sales time on the websites.

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What systems and software does Shein use internally in different links?

SP: The most basic system is the SIM (supplier information management) system, which is used for storing and maintaining suppliers’ information and profiles, supplier training and assessment, as well as their account information and account receivable collection period. In addition, it has the functions of procurement agreement signing and electronic signature. The system is usually used on business invitation occasions. Mass data on suppliers’ labels and channels needs to be maintained in the system.

Shein also has a PLM (product lifecycle management) system. This system can store and maintain the information about the products developed by its designers and buyers, including product weight, size, pictures and logistics. Besides, it has different systems geared to different channels, such as the GMP product delivery system for the ODM model, the system for the FOB model and the NAS (network attached storage) system developed by the design department. Shein’s internal systems are connected to each other. Its procurement pathway, procurement procedure, closed-loop account receivable collection period and order assignment systems are also connected with its warehousing management system. In addition, it has also incubated a string of internal management systems.

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Are these systems developed by Shein itself? Does it also use software of third-party suppliers such as Hangzhou Zhiyi Technology?

SP: Shein used Kingdee’s system, a third-party system. The system was designed for standard products, non-standard products or 3C (computer, communication and consumer electronics) products, so it could not meet Shein’s business requirements. As a result, Shein delivered the prototypes of its basic systems at the end of 2016 or at the beginning of 2017. During their development, these systems gradually matched up with third-party systems such as third-party logistics and warehousing systems of Kuayue Express and Yimidida Logistics (壹米滴答). Shein also matched its systems with systems including Wangshang Guanjiapo (网上管家婆) and Jushuitan (聚水潭) to manage the inventory of its suppliers. It only uses customised systems now, which are fully suitable for the current business scenarios, with very mature routes and processes.

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Its suppliers mainly include small and medium-sized factories. What is the level of Shein’s production cost compared with that of big factories? What are its indicators for assessing the cost of making a piece of clothing? Is there a difference between Shein and SPA (specialty retailers of private label apparel) brands or other large-scale apparel brands? How big is the difference?

SP: The difference is huge. Shein usually breaks down the cost structure, including the wastage of fabric and supporting materials. Shein and other cross-border e-commerce platforms use cost-effective fabric and support materials. There are many fabric types.

The cost difference may reach 100% or even 200%. Shein adopts the cost-effective model to the extreme. It is strict about its cost structure, wastage of fabric and supporting materials, secondary processing and the cost of its workshops. As for different channels or models, it gives a profit margin of around 20% to ODMs and a profit margin of 10-15% to the FOB model with CMT (cut, make and trim) production, so there is a difference. The market is very transparent, and the material loss can be calculated.

Next, I will talk about its requirements for product quality. In 2018, it improved its product processes including threads, stitch length, patterns and sizes, but it has not made adjustments to support materials because the adjustments will raise the product cost by 5-10% or even higher. The company has two platforms, namely Shein and Romwe. The two platforms are upgrading brands. It has launched a new line called Motf that uses high-end fabric, support materials and processes.

In terms of internal management, Shein makes price trajectories for various product categories in its PLM system and procurement management system. It also controls prices by controlling costs and profits according to procurement agreements. Of course, its price checking department is authoritative and independent. The profit differences come mainly from product processes and process quotations. It still uses the IE algorithm that it began using five years ago to offer prices based on processes.

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Shein works with small and medium-sized factories to achieve the best cost performance. Its cost includes the wastage cost of fabric and supporting materials, the material selection cost, the secondary processing cost and the workshop cost. How does it control costs in different links? How does the quantified data show that it may not be able to further reduce its cost?

SP: Its channels include OEM, ODM and FOB. Under the FOB mode, suppliers complete the production by contracting labour and materials. It is strict about the production capacity of the supply chain and the size of workshops. The profit from the processing is 10-15%, which is very low because it has neither the cost of design and development nor the cost of operating patternmaking studios.

In the ODM channel, suppliers develop patterns independently and bear the cost of the inventory of spot goods. The profit is 15-20%, which is slightly higher. The OBM (original brand manufacturer) channel is different from the former two channels. It may need to directly bear the after-sales cost such as the cost of returned goods and the cost of complaints.

The FOB, ODM and OEM channels don’t have the right to set prices, which means Shein has a small say in setting prices. However, the OBM channel has a great say in setting prices. It has a high profit, but it must accurately follow the policy for VMI (vendor-managed inventory) projects to synchronise inventory, thus ensuring good user experience, which has high standards. This is the overview of the quantification part.

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What have been the changes to the number of factories that Shein works with over the past few years? What are its considerations when it assesses and chooses factories to work with?

SP: I have to talk about different channels. ODMs offer products which are divided into two types, namely standard and non-standard products. There are around 20,000-30,000 ODMs, which is a huge amount, with women’s wear ODMs in the majority. The number of ODMs for standard products may be smaller than 5,000 or 8,000, and the rest are apparel ODMs.

Possibly, 1,000-2,000 of OBMs of children’s wear, Motf and high-end brands are trying to undertake transformation. In addition, the number of top-tier B2B suppliers of the FOB channel, which have huge production capacity, is 500-800.

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What have been the changes over the past few years? Among the factories working with Shein, how many have been eliminated? How many of them maintain stable cooperation with Shein? How many of them cooperate with Shein on a larger scale? What about the soft and hard capabilities of these factories?

SP: I have to talk about different channels as well. ODMs used to launch customer-oriented products in the beginning. Around 2018, Shein proposed high requirements for ODMs responsible for product design and development. It requires the latter to have independent patternmaking studios and full-time designers or buyers, so ODMs can have a clear understanding of Shein’s needs for design and development and can break down Shein’s product plan. It set qualification requirements for suppliers according to product design and development capabilities.

OEMs are able to support the production processes and focus more on leveraging colours, elements and patterns of existing templates as long as they have rich relevant experience. As for the FOB and OEM channels, Shein is stricter about factories’ qualifications, hardware, personnel structure and quick response capabilities. Around 2018, it required a total workshop area of 1,000-2,000 square metres and 50-80 production units for such factories. But, it is hard to estimate the daily production capacities of different products and channels.

Shein has strict requirements on the production and processing capabilities of the FOB channel. The area it required rose from 500 square metres in 2017 to 1,200-1,500 square metres in 2018. In 2019, it required a daily production capacity of at least 6,000 pieces of clothing, which has risen to more than 10,000. The area it requires has risen to 2,000-5,000 square metres. The requirements are very strict, as it has a very mature organisational structure and rich operational experience. Besides, it asks for full-time workers in core positions. Every year, it is strict about fabric and supporting material procurement, quality control, fabric shrinkage, cloth checking, factory directors, workers, outward processing management, warehousing and delivering, system operations of production and order supervision, the understanding of data and quality maintenance and control.

Some suppliers didn’t accept the strict requirements and were eliminated. More and more suppliers accept the strict requirements, especially those in the FOB channel. The number of suppliers in the FOB channel doubles every year, so Shein has a big market size and a mature structure. Suppliers rejected the systematic management in the beginning, but they depend on the systematic management and match up with the personnel structure very well now.

I engage in supplier management and assessment. As for the management of suppliers in the ODM channel, Shein mainly focuses on products. It always assesses the success rate of launching new products, sample-making, the rate of getting selected to produce, the passing rate of first-version samples, timeliness and delivery quality, and it adjusts the weighting of each part.

The whole assessment structure is divided into two types of assessment. The first type is the KPI-centred assessment, and the other type is the procurement amount assessment. Suppliers can get data from the weekly, monthly and quarterly assessment of the procurement amount, so they assume more responsibilities. If their data is good, Shein divides them into different levels based on environmental impact assessment (EIA). The levels include S, A, B, C and D. S-level suppliers are strategic partners. A-level suppliers are core partners. B-level suppliers are key partners. C-level and D-level suppliers are remained to be observed or eliminated. According to the data and qualified indicators, Shein cooperates more with good suppliers. The assessment promotes good operations.

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How many suppliers are there at each level from S to D? How big is the difference between suppliers at different levels in terms of production capacities or soft and hard capabilities?

SP: It divides suppliers into different levels according to quantified data. A supplier that meets 90-95% of the EIA assessment indicators is defined as an S-level supplier. A supplier that meets 85-90% of the EIA assessment indicators is defined as a core (A-level) or key (B-level) supplier. The scores are also influenced by the delivery timeliness and product quality. Besides, Shein asks suppliers to divide sub-categories’ first orders, reorders, success rates of launching new products and passing rates of first-version samples in different phases. The structure and weightings vary with business scenarios. These are its core assessment aims.

What will happen to the factories? The factories were a bit reluctant at first because the data doesn’t have much impact on them. However, if the factories are stimulated by the assessment of rights and interests, they will serve Shein wholeheartedly because they no longer worry about funds. For example, Shein’s account receivable collection period has changed from a fixed time to providing corresponding support based on factories’ assessment results. Shein can give factories the right to settle accounts every half month. As a result, the factories’ stickiness with Shein will be improved and their internal management will be more mature. The production cost and quick response capability will change significantly.

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How many suppliers does each tier have?

SP: It depends on different channels. In terms of FOB, there are about 50-80 S-level suppliers, B-level suppliers are around 20% and A-level suppliers account for about 5-10%. Most suppliers’ levels are between A and B, those who remain to be seen may be eliminated after the next quarter. ODM channel also varies considerably from quarter to quarter. The logic of our assessment is determined by the system. There is no human intervention or subjective judgment. So Shein is ultimately result-oriented, while factors which are difficult to quantify, such as service and cooperation, are only for our reference.

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Why does the suppliers’ reliance on Shein’s system or business logic increase as the business grows? What are the main aspects of such reliance?

SP: It is mainly reflected in its order quantity growing exponentially as it develops along with Shein. However, if suppliers cannot keep up with Shein’s pace, they will be put under observation or face the risk of elimination. The production cost will remain high because of their existing business scale. For example, a 2,000-square-meter factory needs to pay rent and utilities every month, as well as the cost of personnel operation and team management. If the business volume drops sharply from next month, the impacts can be fatal to the factories.

However, if suppliers accurately understand and get in line with Shein’s internal management system, the policies in progress and training content, the work they have done will eventually bear on the supplier assessment results. The changes to themselves over half a year will prove to be significant. Maybe after merely two quarters, the factories will have to expand because the business volume is keeping increasing.

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Alibaba and ByteDance tried Shein’s model but failed. What are the reasons? What do you think are the main barriers?

SP: We have seen on other platforms some projects which also adopted the differentiation strategy and intended to offer the most attractive prices. Their differentiation may be reflected in the selection of product categories. However, Shein pursues to provide the extremely attractive, unmatched prices, so it may not be easy for these followers to copy Shein’s model completely. Replicating the same process and fabric to make the same products is highly dependent on the quick response capability of the supply chain. The processes involved are complex, while Shein’s products are characterised by simplicity. With different styles, Shein can present the outstanding process with better visual effects, and optimise the cost to the extreme.

Shein launches plenty of SKUs made from lower-tier fabrics and, meanwhile, purchases customised fabrics from upstream enterprises such as yarn factories. H&M, Zara and Uniqlo also control the fabric selection and adopt the differentiation strategy which is hard to copy. They have different views on the definition of product planning from Shein. The product category selection is of critical significance.

It’s not easy to copy the supply chain of Shein due to its quick response capability. Shein defines basic products as those with a production cycle of 5-7 days. Such cycles of other cross-border e-commerce platforms may be 10-12 days. Compared with Shein, many similar platforms have great difficulty in improving customer service experience and product quality.

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Some domestic cross-border e-commerce platforms are imitating Shein, including Chic Me which conducts overseas business and Cider which mainly offers women’s fashion products. What’s their performance in copying Shein’s supply chain system? Can they establish the same supply chain as Shein does?

SP: In my opinion, Cider is relatively mature and performs well. It has completed several rounds of financing. Supply chains of different platforms highly overlap. Some B2B suppliers have switched from exclusive customisation to semi-customisation and serve multiple clients, including Huanqiu Zhiying (寰球直营) and overseas platforms of ByteDance and Alibaba. Such clients are still in the sales ramp-up stage and thus have limited supplier stickiness.

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What kind of system does Shein use for product planning? It has established a dedicated product planning department. What’s its performance in inventory management?

SP: I’ll first talk about inventory management. Shein’s safety inventory is defined as 15-20 days. Moreover, it will invoke SKC and SKU stocking logic if its inventory reaches the critical point. When such logic is integrated with the operations department’s stocking logic and the production cycle data, orders will be placed automatically for goods replenishment. As a result, Shein offers excellent customer service experience and has high customer stickiness and loyalty.

Let’s look at Shein’s definition of product planning. Initially, it analysed its competitors, customer groups and customer profiles and shared ways to figure out its target customers and their preferences on forums. Back then, its product planning was driven by products. After developing the product plan, it will enrich its products continuously according to the plan.

I think that other cross-border e-commerce platforms need a perfect combination of their product planning determination and advertising and traffic acquisition means. Generally, they first develop a product plan for one product category and then launch relevant SKUs on 1-200 derivative websites. Many platforms implement this strategy. If the GMV of some SKUs is not high, they will conduct replacement immediately. A common problem facing them is that they initiate and terminate new projects frequently.

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Based on its inventory management, operations and supply chain, Shein defines its safety inventory as 15-20 days. What’s the reason behind this? How does it balance the customer experience and inventory?

SP: Shein’s SKUs have introduction, maturity and decline stages. In the introduction stage of a product, Shein and Romwe, which have accumulated a huge customer base, will first test customers’ recognition of it. Later, Shein will release publicity materials and videos about SKUs that pass the test via SES and SEN. Besides, it will cooperate with online celebrities for fission marketing to popularise those SKUs and then launch them on its main website for further promotion. Shein promotes all SKUs through this model. On the contrary, other cross-border e-commerce platforms first popularise SKUs on third-party platforms and then introduce them to their main websites because their own websites have few customers or low customer loyalty.

Shein defines the safety inventory according to the three tiers of SKCs. It has accumulated plenty of customers. Therefore, its safety inventory only has something to do with its GMV target fulfilment or its willingness to retain products on shelves for a long time, lead traffic to new products and accelerate product iteration.

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How does Shein define the sell-through rate? What’s its discount strategy? What’s the sell-through rate of its full-price products?

SP: I don’t have quantitative data about the sell-through rate. Shein attaches its SKUs with labels such as clearance, removing off the shelves and promotion according to its commodity calendar that varies with market changes. For example, the incident of Shinzo Abe may give rise to a new trending topic. Under such circumstances, Shein will add special labels to its SKUs immediately and adjust its procurement procedures and channels synchronously to avoid the overstocking of products.

With huge traffic, Shein has no unsellable SKU. However, its SKUs are different in the on-shelf time. If it doesn’t remove standard products off the shelves timely, some ODMs will hold small inventories. Such inventories impact the gross margin and inventory conversion and will only be considered when Shein develops the stocking plan through data analysis and controls the overall inventory. Supposing its sell-through rate is 80%, it can operate 20% of the products flexibly. For example, when training and empowering suppliers, it will make some adjustments based on the design or buyer department’s demand.

Shein applies the VMI model to standard products. In addition, it adopts the just-in-time inventory model that is on an as-needed basis. Supposing Shein plans to order 1,000 products, it may place orders in batches and thus will bear a low cost. Meanwhile, its cooperative factories will also face a low production cost and hold small inventories. If a new SKU brings about poor customer experience, the product will enter the decline stage soon. Due to this, Shein strives to achieve a sell-through rate of 100%. Otherwise, it will need to manage suppliers strictly and develop some regulatory policies.

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What’s the inventory replenishment or reorder mechanism of Shein? How does it place orders in batches? What’s its dynamic adjustment mechanism?

SP: Shein will consider the various labels of suppliers displayed in its SIM and PLM systems, including whether the supplier focuses on the primary, secondary, tertiary or quaternary category, namely what product type it specialises in, what secondary processing work it can do, what styles, floral patterns and elements it can produce. With such systems, the platform will attach labels to suppliers and precisely match them with its channels and product categories based on the name and application scenario of SKUs. After the systems match suppliers with Shein’s internal organisational structure and procurement and production businesses, they will assign orders automatically.

Shein also gives a variety of labels to orders such as the order of new SKUs and SKUs in preparation, first order and reorder. The first order and reorder usually involve different order quantities. Shein’s systems have been equipped with the stocking mechanism that triggers order placing automatically and only match decentralised or centralised procurement channels or new suppliers with spot goods. The platform will carry out effective control and remove some SKUs off the shelves or update the real inventory on B2C websites timely. However, it sells most SKUs by virtual inventory.

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What’s the order assignment logic of Shein? How does it estimate the sales volume and the order volume given to factories and arrange the first order and reorders?

SP: Shein arranges the first order according to the consumption of fabric for producing different product categories. Under the FOB model, the first order may involve 200-600 products because they are relatively mature and are the extension of best-selling products.

The reorder quantity will fluctuate with the inventory and the daily, semi-monthly and monthly sales volumes. Supposing Shein sees a daily sales volume of 10 and wants to stock up on products for 15 days, 150 products will be reordered automatically and will be subdivided into certain SKUs and SKCs. The SKC can be further divided by size and is related to the proportion of customers’ orders. Generally, medium and large sizes sell better than small and extra large ones. Furthermore, the sales volumes of large sizes are different. Shein will set the safety inventory based on the sales volume.

The production cycle is also a crucial factor. T-shirts and hoodies can be produced in a period of 3-5 days. Their inventories will be low because their delivery is stable with a low cost and a short cycle. The production cycle of SKUs with complex processes may be 20 days or even longer. When stocking up on such SKUs, Shein will consider the daily, weekly and monthly sales volumes, production cycles and estimated sales volumes.

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