What: A review of Shein’s competitive advantage over Zara and H&M.

Why it is important: Shein might have the advantage today, however, much might be at stake in case there is a global regulatory movement against it, as shown recently in Indonesia.

Investors are keenly observing how fast-fashion giants Zara (owned by Inditex) and H&M are responding to the market dominance of Shein, a major competitor in the fast-fashion industry. Shein, primarily an online retailer, achieved around $23 billion in global revenue in 2022, capturing nearly one-fifth of the global fast-fashion market. This growth has been propelled by its low pricing strategy, offering products like $5 t-shirts and $10 sweaters.

Shein’s strength lies in its rapid production capabilities, backed by a network of mainly China-based suppliers. Unlike Zara and H&M, which try to predict fashion trends months in advance, Shein operates with smaller initial orders that scale based on demand. This flexible approach, coupled with a direct-to-consumer model, allows Shein to introduce a significantly higher number of new products compared to its competitors.

Zara and H&M, despite pioneering fast-fashion, face challenges from Shein's model. Shein's rapid production cycle and heavy reliance on Chinese suppliers contrast with Zara and H&M's more geographically diverse manufacturing bases. Additionally, Shein's strategy has led to accusations of design plagiarism and intellectual property infringement.

Despite these challenges, Zara still holds an advantage in delivery speed, seen as crucial for customer retention and minimizing returns. Over a year, Shein introduced vastly more products in the U.S. market than Zara and H&M, highlighting the scale of its operations and the challenge it poses to the established fast-fashion players.

How Shein is winning the fast-fashion war by putting consumers in charge