Fast and furious

A new major online fashion player is taking over the fast fashion market.

The sector formed in the late 1990s when retailers such as Primark, Topshop, H&M, and Zara began to grow. The growth of ecommerce then drove the emergence of online pure plays such as Boohoo, Asos and most recently, Shein (seen above). Last year, Shein became the largest fashion retailer in the world, valued at around $100bn in April 2022. Shein's ultra-fast fashion model has disrupted the market, and we look at how their strategy is evolving. 

How has Shein disrupted the market?
The key success factor for Shein is a result of its supercharging of the fast fashion model, using algorithms and AI to identify the latest fashion trends from social media and predict future trends, which informs the design of thousands of products sold at extremely low prices. The business model has significant appeal to Gen Z consumers seeking trend-driven garments at affordable prices, who have taken to social media to promote the platform.

Shein's success has grown despite it's significant ethical and environmental controversy. The company has been criticised for mass-producing cheap products using synthetic materials that don't biodegrade, as well as poor labour conditions and significant pollution within the supply chain.

According to a First Insight survey, most Gen Z shoppers prefer to buy sustainable brands, yet Shein's price point and product range appears to outweigh the environmental costs given its success driven by young consumers. Its biggest markets include the US, Brazil, France, Spain and Canada, consisting of largely Westernised consumer groups with sustainability awareness. However, with consumer awareness of sustainability increasing and other brands such as H&M increasingly promoting ethics and transparency in their supply chain, it is unlikely that Shein's disruptive business model can continue without impact on sales. Shein is recognising this, having announced plans to reduce emissions across its value chain by 25% by 2030, to reassure consumers.

Expansion beyond online?
Shein recently began its expansion into physical realms, having hosted a series of pop-up stores across the UK, with 30 more planned this year aiming to enhance consumer interaction and tackle issues with brand perception. Its pop-up event in Dublin earlier this year attracted around 4,000 customers a day, demonstrating the brand’s significance in driving footfall, so what does this mean for the brand going forward?

Other fashion retailers are adapting to the evolving retail market, recognising the difficulty of single channel business models. Online retailers Boohoo and ASOS have reported sales losses over the past year, resulting from customers returning to stores and rising inflation causing consumers to cut back on non-essential spending. These brands have also recently tapped into the physical market, with ASOS having hosted a series of pop-ups over the past 6 months, and Boohoo launching their first earlier this year.

H&M are retreating stores, closing profitable stores in smaller locations if they do not meet their target sales threshold and focusing store investment in larger locations with higher footfall. The brand is focusing on enhancing omnichannel experiences to adapt to the changing consumer base. Primark has expanded beyond its store-only strategy, trialling a click and collect service across 25 stores across the UK, with a further 32 planned for summer after success of its initial trial. Meanwhile, Next have utilised their click and collect model to drive store footfall. This demonstrates the evolving nature of the market and how brands are increasingly utilising a combination of channels. 

Online fashion retailer Missguided expanded into physical space in 2016, opening two flagship stores in Westfield and Bluewater in the UK, but this strategy failed due to sales not meeting the high overhead costs. It is therefore likely that other online fashion players like Shein will be unlikely to adopt permanent physical space on high streets.

The future
Online will likely remain as the core business model for Shein, as well as other pure plays. The emergence into physical space through pop-ups is largely a strategy to enhance brand awareness and remain relevant in a highly competitive market, rather than the sole strategy to increase market share. Shein predicts its revenue to double by 2025, however, given the rapidly evolving nature of the retail market, it is likely Shein will have to adapt its business model to reach these goals.

While Gen Z is a significant market for new brands, originally driving the rise of Shein, it has been found that their loyalty is harder to retain, which questions the future of Shein upon arrival of new brands. Given the extreme ethical concerns associated with Shein and its ultra-fast fashion model, it is likely that the brand will have to further demonstrate sustainable commitments, as well as continue to adapt to evolving consumer preferences to remain competitive in the market.

Emily Brown