In the 1980s Zara disrupted the fashion industry by radically reconfiguring the supply chain and creating the fast-fashion category.  SHEIN is a Chinese online fast fashion retailer that was founded in 2008.  During the pandemic SHEIN achieved substantial sales growth and is now catching up with Zara.  In 2021, SHEIN overtook Amazon as the most downloaded shopping app on the US iOS and Android app stores. SHEIN has developed its “fast-fashion 2.0” business model—using big data and algorithms to identify customers and their preferences.
Read the case study about SHEINLinks to an external site. and answer the following questions:
Describe how ZARA achieved success by changing the norms of the established fashion industry business model? (10 points)
What is SHEIN’s value innovation(s) that differentiate (or give competitive edge to) SHEIN from (over) other major players of the fast-fashion industry?   (15 points)
Looking at the available data (in the case study) explain how customer segments and markets are different between ZARA & SHEIN. What business strategy helped SHEIN to achieve that? 
At the beginning of the case-study the authors provided an overview of Porter’s 5 analysis for the fast-fashion industry. Based on your understanding of SHEIN’s business, which force do you think SHEIN is most vulnerable to; and which force is SHEIN’s biggest strength? 
Do you think SHEIN has been able to create a Blue Ocean for its brand in the fast-fashion industry? Use an ERRC (strategy canvas) framework to compare the strategy that SHEIN pursued vis-a-vis its nearest competitors. 
One important assertion of the case study is that SHEIN’s exponential growth is due to Covid-19 pandemic, when buyers stayed away from the shopping malls. Assume this is true. Now with the gradual opening of shopping malls & shopping centers, what would be your advice to SHEIN’s marketing team to retain/maintain its sales trajectory?     
The environmental and sustainability impact of the rapidly rising fast-fashion industry is a major concern.   McKinsey has estimated that the fashion industry is responsible for 4 percent of the world’s greenhouse-gas emissions, and emissions from textile manufacturing alone are projected to skyrocket by 60% by 2030 (https://psci.princeton.edu/tips/2020/7/20/the-impact-of-fast-fashion-on-the-environmentLinks to an external site.; https://news.climate.columbia.edu/2021/06/10/why-fashion-needs-to-be-more-sustainable/).  However, the industry is generating huge value in terms of both financial and consumer utility measures.   What would you recommend to SHEIN to address sustainability and environmental concerns?
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SHUQING LUO
GUOLI CHEN
SHEIN VS. ZARA: DIGITAL TRANSFORMATION
IN THE FAST-FASHION INDUSTRY
In May 2021, SHEIN (pronounced Shee-in) overtook Amazon as the most downloaded
shopping app on the US iOS and Android app stores. This was a remarkable achievement,
especially in the highly competitive apparel industry. SHEIN’s clothing had Instagram-style
[see Exhibit 1], and its growth posed a challenge to Zara and H&M, the leading players in the
fast-fashion space.
Despite SHEIN’s success, most Americans over the age of 30 had not heard of the brand. 1 Most
Chinese were also unaware of it—despite it being a Chinese company. Unlike other well-known
Chinese brands (Alibaba, Huawei, or Tencent) that grew big in the domestic market before
venturing overseas, SHEIN had no market presence in China. All its sales were generated
overseas.
The lack of name recognition was partially because SHEIN only existed in the virtual world,
unlike Zara, JC Penny, or Nordstrom that operated many brick-and-mortar stores. SHEIN’s
low-profile media strategy was also a contributing factor. Its leadership team had not given any
interviews to Chinese or foreign media.
But with a series of recent articles in the Wall Street Journal and the Financial Times on this
Chinese apparel maker in mid-2021, SHEIN became much better known among the traditional
media and the business community. Questions including “How can a Chinese player quickly
emerge from this competitive space?” and “What is the role of digitization in its business
model?” were raised. Simultaneously, potential issues about SHEIN were also exposed to the
public. These issues related to product quality, potential environmental impact, and
sustainability. In addition, SHEIN’s success attracted imitators that used a similar business
model. What should SHEIN’s next step be to maintain its competitive advantages and continue
its future growth?
1 Simon Fuller, “How Trump’s trade war built SheIn, China’s first global fashion giant,” Bloomberg, 14 June 2021,
https://www.bloomberg.com/news/articles/2021-06-14/online-fashion-giant-shein-emerged-from-china-thanks-to-donaldtrump-s-trade-war, accessed 20 November 2021.
Dr. Shuqing Luo of The University of Hong Kong and Professor Guoli Chen of INSEAD prepared this case for class discussion.
This case is not intended to show effective or ineffective handling of decision or business processes. The authors might have
disguised certain information to protect confidentiality. Cases are written in the past tense, this is not meant to imply that all
practices, organizations, people, places or fact mentioned in the case no longer occur, exist or apply.
© 2021 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be digitized, photocopied
or otherwise reproduced, posted or transmitted in any form or by any means without the permission of The University of Hong
Kong.
Ref. 21/718C
Last edited: 9 December 2021
This document is authorized for use only by Yanrui Song in Shein Spring 2024 taught by David Kreutter, Columbia University from Dec 2023 to Jun 2024.
For the exclusive use of Y. Song, 2024.
21/718C
SHEIN vs Zara: Digital Transformation in the Fast-Fashion Industry
Origin of SHEIN
Chris Yangtian Xu from Nanjing, Jiangsu Province, created SHEIN (initially called SheInside)
in 2008 as a cross-border e-commerce company that sold wedding dresses. Specifically, SHEIN
sold the dresses to US consumers due to the product’s high profit margin: the price of a
comparable wedding dress in the US was USD1,000, while SHEIN could sell them for USD200
and earn a reasonable margin, due to the supply chain and cost advantages in China. Initially
the company quickly became profitable.
At that time, SHEIN sourced its products from China’s wholesale clothing market in
Guangzhou (southern part of China, close to Hong Kong)—a region where many Chinese
garment factories were located. Originally it sold directly to overseas shoppers without
involving itself in any design, branding, or manufacturing.
But the founder, Xu, quickly realized that such a business model did not have any entry barriers,
making it unsustainable. So, he decided to build his brand by establishing SHEIN’s own
independent website rather than selling its products on a third-party platform, such as Amazon.
Having its own platform enabled SHEIN to attract, collect, manage, and analyze consumer data.
This strategic shift reflected Xu’s background: Xu had started his career not in the fashion
industry, but in the branding and search-engine-optimization sector of a digital marketing
company.