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Shein is planning to open up its supply chain to third-party brands, according to an internal letter from executive chairman Donald Tang referring to a new “supply chain as a service” initiative. The move, first reported by the Wall Street Journal last week, suggests the ultra-fast fashion company and marketplace provider is looking for growth beyond the low-margin business of selling inexpensive apparel — and could have widespread implications for the broader fashion industry.
Shein’s formidably fast production model and data-driven, demand-sensing prowess have made the Chinese-founded company among the most valuable names in apparel, leapfrogging global incumbents such as H&M and Inditex-owned Zara. This new service would allow third-party brands to deliver new styles in a matter of weeks instead of fashion’s typical 18-month lead time by using Shein’s speed to market and data feedback loop on early small-run sales.
A supply chain as a service platform segments the supply chain into components that can be outsourced to or accessed by third parties. Building a service-based platform could help Shein take over a larger footprint in America in the head-to-head battle with rival Temu, says Chana Rosenthal, founder of Redesign Consulting. Chinese shopping app Temu landed in the US 19 months ago and has been embroiled in competition with Shein since. It’s also a new way for Shein to assert its dominance. A valuation that once pegged Shein at $100 billion has shrivelled to somewhere in the neighbourhood of $45 billion amid stiff competition and regulatory concerns, says a January Bloomberg report. Every business is challenged to find growth in today’s environment — Shein included, says Marshal Cohen, chief retail advisor for Circana (formerly NPD Group).
Shein “basically wants to put itself at the heart of the fashion ecosystem”, says Neil Saunders, managing director of Globaldata’s retail practice, likening its efforts to remodel itself as a more well-rounded company to Amazon and Alibaba’s expansions.
Concerns over Shein’s manufacturing and labour practices loom large, however. Several factories that produce low-cost garments for the brand have been linked to labour abuses such as underpayment, which Shein addressed in the past, while traces of cotton from Xinjiang, the Chinese territory where evidence of forced labour is rife, have been found in the label’s clothing, according to a Bloomberg investigation.
In a statement to Vogue Business, a spokesperson for Shein said: “Shein takes visibility across its entire supply chain seriously, and is committed to respecting human rights and adhering to local laws in each market in which it operates. Our on-demand business model ensures our supplier partners make what customers want while minimising overproduction, resulting in affordable prices for our customers—and less waste.” The company has denied all allegations of forced labour and labour abuse.
While third-party brands may be tempted to benefit from Shein’s speed to market, the criticisms of its supply chain could lead to customer blowback.
“If other businesses buy into this service, they are buying into continued environmental destruction and declining value,” says Michelle Gabriel, programme director of sustainable fashion at Glasgow Caledonian University (GCU). “This should be a concern in any instance, but is even more so given how public the conversation has been about Shein’s ills. It’s insanely short-term thinking and really lose-lose — for everyone but Shein — in the middle and long terms.”
Shein also promotes its ability to reduce overproduction by testing styles and authorising bigger batches once data supports a larger run, but that’s far from a fix-all.
“While Shein’s supply chain model may lower production waste due to small batch runs and on-demand manufacturing, the push to offer cheaper apparel and rapid new styles combined with their marketing strategy increases the [impulse] buying and addictiveness, [and] may lead to more wastage due to overproduction,” says Aditya Vedantam, associate professor in the School of Management’s department of operations management and strategy at the University at Buffalo.
The IPO equation
Experts also question the timing of the news around Shein’s supply chain as a service plan.
The company’s effort to IPO in the US has been met with fierce resistance. Lawmakers who contest Shein’s potential links to forced labour have asked the Securities and Exchange Commission to fully vet the company before greenlighting a public-market debut. Critics also point to the slew of copyright and trademark infringement lawsuits against Shein, which has been accused of taking designs from rivals big and small. Most settle out of court; last year, Shein settled with one artist.
Consumers rarely bother to look at country-of-origin tags to understand where their clothing comes from, so even the anti-Shein shopper may not know if their purchases originated from the company’s supply chain, says Andrea Kennedy, Berkeley College’s fashion department lead. But consumers aren’t quick to forgive and forget today, Cohen says of the reputational risks involved with using Shein’s supply chain.
With research suggesting consumers who experience “shopping fatigue” from fast fashion turn to resale or rentals instead, Shein could use the supply chain business to showcase its potential for growth, profitability and a competitive edge, says Sheng Lu, director of graduate studies in the department of fashion and apparel at the University of Delaware, citing a recent Journal of Fashion Marketing and Management study. “Shein could use the new partnership to demonstrate its willingness to grow together with other business owners.”
GCU’s Gabriel believes Shein wants to use the supply chain as a service product to more deeply embed itself within the American and European markets, while thwarting policymakers who might want to kick it out.
The appeal of a proactive — not reactive — supply chain
Beyond adding a revenue stream that could impress investors behind a planned IPO, the supply chain business would work with designers and brands in a way that may support Shein’s marketplace efforts, Saunders says.
Rosenthal notes that H&M previously tried to create a supply chain business with Treadler, the short-lived garment production effort using Higg-approved facilities that shut down in 2022.
However, Shein’s well-established manufacturing success could give it an edge, luring brands looking for something akin to a one-stop-shop agent and who want to “chase trends rather than trying to hope for trends”, says Cohen. Given today’s geopolitical and socio-economic dynamics — like China tensions and Red Sea cargo disruption — brands require quick alternatives to some of their usual sourcing options. That’s what makes the timing of Shein’s supply chain launch so critical, he says.
Even if a service-based model takes off, Shein is unlikely to deviate from the formula of selling cheap clothes that made it a household name, says Cohen. “The key to success in fashion is longevity and diversification,” he continues. The supply chain business offers a way to ensure Shein isn’t overly reliant on the most fickle customer, by zooming in on value-oriented Gen Zs, he adds.
Because small designers and brands will be tempted by Shein’s services, Berkeley College’s Kennedy urges prospects to thoroughly interrogate the company before signing up.
“Ask to know all the material vendors, not just the tier-one manufacturing factory. Ask where the fabrics, yarn and fibres are coming from and the supply chain partner company names,” she says. “Request batch documentation including environmental and social material or facility certifications throughout the product chain, and require that on your POs.”
“If enough brands ask for that information, they will supply it,” adds Kennedy.
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