The Amazonization of fast-fashion giant Shein

Shein is courting brands such as housewares conglomerate Colgate-Palmolive, toy maker Hasbro and skin care brands to sell their products on its marketplace, Reuters reported Tuesday. The company, known for its affordable and stylish clothing, although made with concerns on working practices and their environmental impact, is taking steps to create a platform that appeals to everyone.

Everyone associates Shein with fashion, but we work across all verticals, said Christina Fontana, senior director of Shein brand operations for Europe, the Middle East and Africa, at a conference in Paris on April 17, according to Reuters.

Our consumers want brands, [so] if that's what they're looking for, that's what they're going to give them, she added.

Shein's outward expansion is a clear tactic to take a bigger piece of the e-commerce pie, said Steve Tadelis, a professor of economic analysis and policy at the University of California, Berkeley. Fortune.

Shein has the the largest market share in fast fashion in the United States, and its annual profit doubled to reach 2 billion dollars in 2023 compared to the previous year. It is considering an IPO and a huge Valuation of $90 billion. Although the size of its retail empire still pales in comparison to Amazon's stranglehold on 38% of the U.S. e-commerce market, Tadelis said Shein will want to go after the industry leader.

It should come as no surprise that with all the regulators around the world talking about Amazon's monopoly needing to be reined in, well, Shein is now taking a bite of its apple and will probably take even more, a- he declared.

She wins big victories

Shein, a fast fashion platform based in China based by billionaire Sky Xu in 2008, has achieved meteoric success and has 45 million monthly users thanks to its massive and efficient production and distribution strategies.

Using AI and electronic monitoring, Shein is able to identify online trends, turn to its suppliers to make small batches of products, and then take initial sales data to decide whether to mass produce a product. The system almost guarantees that the company is in tune with trends and can deliver the goods quickly, even though it has found itself in a sticky situation due to allegations of copyright infringement and data scraping , as well as the proliferation of counterfeit product lists.

Even though regulators, like the European Commission of the European Union, have attempted to impose checks and balances on the company to thwart its questionable business practices, Shein may have found a way around this problem.

John Deighton, professor emeritus at Harvard Business School, said Fortune that Shein's strategy of incorporating more brand names onto its platform will only help the company avoid increased attention: the site could soon be flooded with thousands of listings for familiar and trusted products, such as the Colgate toothpaste and Play-Doh, essentially telling regulators that there's nothing to see here.

They won't be caught up in the scrutiny, Deighton said.

Coming up against Amazon

Shein's behind-the-scenes methodology makes expanding beyond fashion a natural next step, Tadelis argued. With an efficient infrastructure in place, Shein is able to be more agile in its expansion outside of the apparel sector.

I really think it's a smart business decision to say, 'We have an incredible logistics network, let's start expanding it to other areas where we could get cheap products,'” he said. added.

Rui Ma, technical analyst and COO of market research platform AlphaWatch.AI, said Fortune Shein's secure place in the clothing sector offers another advantage in its race to beat Amazon. Fashion is a notoriously fickle industry, and Amazon, although it has entered the clothing business, has not been able to achieve the same success as Shein, Ma said.

It's been very difficult, historically, to keep up with demand and supply, she said. This has not been a particularly easy category.

But while Shein is taking pages out of Amazon's playbook, Amazon is simultaneously doing the same thing with Shein. Amazon announcement Last December, it would cut sales fees from 17% to 5% for clothing under $15, with clothing between $15 and $20 triggering a 10% fee starting in January. The company said Monday that its packages were being delivered faster than ever: 60% of orders placed in 60 major US cities arrived the same day or the day after the order was placed. According to the company, this is part of its long-standing efforts to stay on top of the e-commerce market and meet customer needs. Shein customers may need to wait 14 days for their orders to arrive.

Tadelis thinks it's normal. As in most markets, business philosophies begin to converge when an effective formula is found.

It's not surprising that these things are becoming more similar, he said. Because once there is a good winning strategy, you will see imitators.

To the consumer, there will certainly appear to be copies and similarities in promotions and benefits on e-commerce platforms. But Ma said: Don't be fooled by Shein's attempt to mimic its competitors. The site might start to look a lot like Amazon in its offerings, but behind the scenes it remains loyal to its unique logistics network.

It could be the same for us consumers. It's going to become more of an everything store, she said Fortune. But the way it builds that experience, I think the logic is very different than Amazon.