What: A review of the business model which is dominating the US fast fashion market.

Why it is important: Shein is a key player on a growing market, which is also threatening department stores. Knowing the base of their business model and its limitations can be helpful to design an alternative product proposal.

Coresight reviews the Shein business model and compares it with Boohoo and Asos to draw some conclusions.

Shein represented a turnover of USD 15.7bn in 2021 (most of this revenue having been performed in the US), with a growth of +57%, which outpaced Asos (+19.8%, USD 5.4bn turnover) and Boohoo (+28.1%, USD 1.9 bn turnover). All 3 players target Gen 2 customers by using influencers and celebs on social media channels (Shein is the 7th most-shopped retailer or apparel platform, capturing 22% of all 18-29 years old customers).

Thanks to its business model, the cost of business failure due to colours or fabrics remains lower for Shein (6,000 new items are launched every day), than for Asos (1.500 new items every week) or Boohoo (500 new items every week).

Coresight predicts that Shein’s advance in the US is going to consolidate in 2022, but also identifies the following challenges:

• A competitive disadvantage when it comes to delivery leadtime to final customers (12 days vs. 1-2 days for its competitors),
• Questions about the sustainability of its business model, even though its customers do not seem to be concerned so far.

Coresight also tries to draw some lessons from their model, that could be useful for other companies:

• Instead of relying on one source of customer data, the goal is to analyse a variety of sources, to understand customer psychology and propose a unique experience,
• Automation at scale is key to sustainable personalization in fast fashion,
• Artificial intelligence comes as a complemente to human judgment.

Shein multi billion business