How Shein Became a $100B Brand By Leveraging Direct from China Fulfillment

Shein is an online fashion store based out of China that is widely known as a leader in fast fashion. While they began as a simple online store that sold wedding dresses, they have grown to sell all types of fashionable clothing, home decor, and even party supplies, with impressive numbers to boot. In 2022, Shein grossed $30 billion in revenue and is estimated to be valued at $68 billion. 

fast fashion shipping clothing warehouse direct from china fulfillment

One of the reasons Shein has grown so quickly and continues to remain a dominant player in ecommerce is because they average 2,000 new SKUs a day, and they’ve kept this average every day since 2021. That constant stream of new products has attracted an enormous following, with Shein boasting million app downloads in 2022 and 13.7 million daily users in the U.S. alone, and 74.7 million users worldwide. 

What may be most surprising is how fast Shein has grown. Shein launched in 2008, and as recently as 2017, they only had 2.8 million daily users, with $1.5billion in revenue. In 2019 they were only valued at $5 billion, which is in stark contrast to the $68 billion they’re estimated value is now.

How did Shein grow so fast, so quickly, and how are they able to continue to offer so many new products without the typical risks? In short, it was because they left behind the traditional retail model and leveraged direct-to-customer (DTC) China fulfillment. DTC China fulfillment provides advantages and growth opportunities that traditional, local fulfillment and traditional brick-and-mortar retail channels can’t match. 

In this article, we’ll examine how Shein used DTC China fulfillment to grow their business at incredible speed to dominate the fast-fashion market, and we’ll also show how EcommOps has used the same strategies to help our clients overcome common logistical challenges that come with ecommerce. 

Shein Used DTC China Fulfillment to Mitigate Risk

Traditional retail requires extensive inventory to support sales, which has a lot of drawbacks. It requires space for businesses to store inventory and the upfront capital to buy large amounts of inventory. Since freight lead times are long, businesses feel pressured to buy a large volume of inventory to avoid the risk of selling out if demand is high. 

Clothes in warehouse china fulfillment DTC

Why does traditional retail need a lot of upfront inventory and space to store it? This is because when you’re purchasing large orders from China suppliers with long lead times, businesses have to purchase inventory so far in advance that demand prediction is nearly impossible. 

That means businesses tend to overstock to avoid selling out if demand is high. Overstocking ties up money in inventory, and it requires the space to hold the inventory while it’s being sold, which requires large amounts of warehousing space (and it ties up money in inventory that’s not guaranteed to sell, or might not sell for several months). 

Shein saw the issues with traditional retail, so they turned to something new: DTC China fulfillment.  

Shein Chose DTC China Fulfillment Instead of Traditional Retail

Shein opted to use a DTC China fulfillment model to meet the needs of their customers instead of traditional retail. They avoided the issue of unsteady inventory supply and overstocking by leveraging the short lead times of DTC China fulfillment. Specifically, Shein keeps an eye on what’s selling well and orders stock replenishments in small batches and in real-time

Just-In-Time Inventory Management Supports Small Batch Orders

The small-batch style of fulfillment is known as just-in-time inventory management, which requires less warehouse storage and avoids under or overstocking inventory. In fact, all SKUs are made in small batches until specific inventory has proven itself to be successful. Once certain products have proven to be successful, Shein then invests the resources into scaling supply to meet demand. 

Small batch of clothing inventory

Using small-batch orders and just-in-time inventory management also makes it easy for Shein to create a large variety of products at incredible speeds. The speed of their supply chain, along with how effectively they reduce risk by using small-batch orders, and only investing in products that have proven themselves, has been such a successful business model that other competitors have begun to copy it.  

Using Google Data to Create More Successful Products More Often

Since Shein can create new products so quickly and at very low risk, they have an incentive to make sure their products are keeping up with trends. So, Shein uses tools like Google Trends to see what product trends are occurring in what countries, looking at specific colors, fabrics, and overall styles

Once they have a best guess of what kinds of products are trending, Shein uses their fast, flexible supply chain to create their own version in small-batch quantities (to avoid risk), and if those products are successful they can quickly scale to meet demand.

There’s science to their predictions. By studying customer purchasing patterns, they correctly guessed that lace would be popular in the U.S. during the summer of 2018

EcommOps is a Full-Service Fulfillment Center Based in China

online shopping ecommerce fulfillment

EcommOps leverages DTC China fulfillment for our clients, which is especially helpful when clients are looking to test products with little to low risk. It’s common for our clients to test 50-100 units worth of new products a few times a month, just to see if they happen to find a winner. 

Many products aren’t successful, and clients move on, but if one does appear to be a winner, we can use the short lead times that DTC China fulfillment provides to quickly meet the demand. Our clients are able to find winners and invest resources in proven products without the risk that traditional retail requires. 

Shein Used DTC China Fulfillment for Faster Scaling

One of the biggest benefits of DTC China fulfillment is short lead times from factories, which Shein was able to use for incredibly fast scaling. In 2021, Shein released anywhere between 2,000 to 10,000 new SKUs a day, which is only possible because of how short lead times are (it’s not uncommon for products to get to China fulfillment centers from factories in China in just a few days, sometimes less than 24 hours). 

DTC China fulfillment allows Shein to replenish stock of successful products in days, not weeks. 

Client Example: How EcommOps Used DTC China Fulfillment for Faster Scaling

EcommOps also uses the fast scaling of DTC China fulfillment to help customers adapt to spikes in demand. For example, we partnered with a client that wanted to test a new, influencer driven product. The client started with 1,000 units, but sold out within 1 minute. Clearly, they had a winning product and needed to scale.

In less than a month, we were able to get 60,000 units to our client (which sold out within 20 minutes). The client sold out even before production was actually finished, but that didn’t impact fulfillment times for customers. 

Out of stock

If our client had used traditional, local fulfillment, (meaning they made a large volume order, shipped it via sea freight, stocked a local warehouse, and then fulfilled customer orders from there) they would have had to wait more than a month to get any kind of inventory replenishment at all, and it’s likely they would have ordered less than 60,000 units. 

With local fulfillment, they would have missed the opportunity to take advantage of the excitement customers had for the new product.

Shein Used Customer Data to Constantly Iterate and Scale Horizontally

We already mentioned that Shein constantly tracks data to see what fashion trends are popular and which of their specific products are winners, but they also track after-sale data. If consistent feedback for a product is because of a design flaw, Shein can quickly make iterations of products (because of short factory lead times) and quickly get otherwise winning products back to market. 

Consistently looking at data allows Shein to break into new markets, which is often key to scaling a winning product that has saturated a specific area. Since Shein uses the small-batch approach to break into new markets, they’re able to constantly try new products with little to no risk, and when they find a winner, they’re positioned to aggressively scale. 

How EcommOps Leverages DTC China Fulfillment for Faster Product Iterations and Brand Extensions

We see this kind of growth with our clients that start as dropshipping stores. A client may start with a single product, and as they understand what their customers like and dislike about the product, they position themselves to create iterations that are in line with what their audience likes. 

After finding success with that product, then they start making long-term investments. They’ll shift away from dropshipping and move towards DTC China fulfillment, and they’ll start ordering and holding inventory for products they know there will be demand for. 

As they learn more about their customer base, they can begin to test products and expand their product lines following what they think would appeal to that base. Since DTC China fulfillment allows products to be tested with very little risk, it’s easier for our clients to fish for products that may win, and when they find something that clicks with their customer base, they can quickly scale production.

Shein Entered Top Global Markets All at Once with Extreme Cost Efficiency 

One of the best benefits of DTC China fulfillment is it slashes the costs usually required to enter new, international markets. Businesses that use China fulfillment don’t have to worry about investing in local warehouses in target markets, nor do they have to be concerned about extremely long fulfillment times and high shipping costs for international customers. 

Shein realized this, so they were able to enter the top global markets literally all at once with extreme cost efficiency. International customers aren’t going to get two-day shipping (for example, Shein’s typical shipping times from China to North America range from 7-10 days to a few weeks). However, fulfillment times are generally consistent, and it’s fast enough for most customers to take advantage of their low prices. 

The result for Shein has been enormous. They now operate in 150 different countries, and even though they’re based in China, the U.S. represents their largest demographic, accounting for 35-40% of their total sales

Shein Hasn’t Abandoned Local Fulfillment

Shein has leveraged DTC China fulfillment to help break into international markets, but that doesn’t mean they’ve abandoned local fulfillment. Afterall, local fulfillment does have unique advantages (it may allow for better price-per-product if inventory can be bought in bulk, and it allows for much faster shipping to local customers). 

Shein warehouses

Shein will use local fulfillment for products, but only after products have proven to be winners in specific areas. For example, they’ll use their small-batch product testing method in the U.S., and if a specific product starts to get popular, they’ll place bulk orders for that product and ship inventory to local fulfillment centers in the U.S. 

This strategy (formally known as hybrid fulfillment) allows Shein to take advantage of both fulfillment models without taking any of the risk that is usually associated with traditional, local fulfillment. 

How EcommOps Efficiently Breaks into Global Markets with DTC China Fulfillment

Our clients are often shocked by how easy it is to break into international markets when the only factor they change in their strategy is shipping from China. DTC China fulfillment cuts out the cost and time of freight shipping products to a local warehouse, and it significantly reduces overall shipping times to international customers, regardless of where they are. 

The result is a great customer experience (with shipping times that are acceptable to most customers), the ability to offer free shipping on most international orders, and the overall opportunity to break into new, international markets without the traditional risks. 

Of course, that doesn’t mean EcommOps completely throws local fulfillment out the window. We often work with clients to create a hybrid fulfillment strategy that includes the flexibility and low-risk of DTC China fulfillment, as well as the sometimes lower costs and faster shipping times of local fulfillment. 

Shein Was Realistic About Customer Expectations of Product Quality

Regardless of how efficient your supply chain is, how you represent your brand vs. how customers perceive your products will have a huge impact on repeat sales. Shein was honest about their products from the get-to. They sell fast fashion, which means their clothes aren’t built to last, and Shein is honest about the quality of their products. 

Shein ecommerce china fulfillment mobile application

Instead of trying to convince customers that a $5 shirt will last as long as a $50 shirt, Shein leaned into what their customers really cared about. Fans of fast fashion don’t want their products to last forever, they want their clothing to be the latest trend. Shein invested in personalizing the shopping experience, creating customer loyalty because it was fun and easy to shop with them, not because their clothing would last forever. 

Shein even leverages their small-batch ordering to drive sales. The drive of the Shein brand is that they will almost always have clothing that is trending. However, since their new items are ordered in small batches, customers know that new, popular items may not be in stock very long, which drives sales of new items. 

Proper Customer Expectations Drives Repeat Sales

As a result of Shein’s honesty and expectation setting with customers, they have a very loyal customer base. Their repeat customer percentage has been slowly climbing since 2020. Shein has shown that you don’t have to have the highest-quality product on the market to succeed. 

Instead, you need to be honest about what you’re selling and identify what about your product and shopping experience your core customers care about most. For Shein’s customers, they care most about:

  • Low prices
  • Good enough shipping speeds
  • International availability

Client Example: How EcommOps Anticipated Customer Expectations to Drive Sales

We worked with a fast-fashion brand that was making sales, but they were struggling to manage the sheer amount of SKUs they offered. They were struggling to keep inventory organized and to track which products were selling well and which were struggling. 

Under our consultation, the client decided to reduce inventory to their top selling SKUs, allowing them to focus on proven winners. However, in order to keep up with trends, the brand would occasionally launch new varieties of clothing as “limited editions,” which created an illusion of scarcity that drove sales. 

In the end, customers understood the kind of product they were getting, and also understood which products were main-stays (and would be regularly available), and which products were limited-time offerings. 

Partner with EcommOps to Leverage DTC China Fulfillment for Your Business

Shein’s success with DTC China fulfillment is extraordinary. While businesses shouldn’t expect to see DTC China fulfillment as a magic bullet to a multi-billion dollar valuation, businesses can expect to leverage China fulfillment in similar strategies and reap similar rewards. Businesses can leverage this strategy to:

  • Lower financial risk
  • Create a flexible, resilient supply chain
  • Enter international markets without high shipping costs or long fulfillment times 
  • Test new products with little to no risk

If you’re interested in learning how you can leverage DTC China fulfillment for your business, we’d love to connect. After you reach out to us, our experts will examine your business plan to see how we can create a custom DTC China fulfillment strategy unique to your business.

*Disclaimer: No images in this article are from the Shein warehouse.

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