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The $100 Billion Shein Phenomenon, Explained

This week, reports revealed that Shein is seeking over $1 billion in funding at a $100 billion valuation. BoF breaks down how the fast-fashion disruptor has built a global business that now rivals Zara and H&M.
Shein has reportedly been valued at $100 billion.
Shein has reportedly been valued at $100 billion. (Instagram @sheinofficial)

This week, the fashion world was abuzz about Shein reportedly seeking over $1 billion in funding at a $100 billion valuation, according to a Bloomberg report. That valuation is slightly more than the combined market capitalisations of Zara and H&M, two-decades-old fast-fashion retailers that operate thousands of stores in dozens of countries.

With $15.7 billion in sales, Shein has more than quadrupled its revenue since 2019, while its rivals have struggled to grow. But the company has no permanent physical locations and has only become a recognised brand in the last few years. So how did an unknown e-commerce company become a juggernaut in the global fashion landscape seemingly overnight?

Below, BoF breaks down the five pillars of Shein’s $100 billion business model.

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1. Ultra-High Volumes, Razor-Thin Margins

The most astonishing thing most people notice first when visiting Shein’s website is its jaw-dropping low prices. The cheapest dresses are $3. A phone case costs $1.50. So, how does Shein make money?

There’s no guarantee it is. As a private company, Shein isn’t obligated to make its financial results public and has not disclosed whether it is profitable. But what is clear is that Shein’s business isn’t about healthy margins. If the typical margin for a fashion label is two or three times the cost of goods, Shein’s is likely cents on the dollar.

Those cents add up if you sell enough clothes, and last year’s nearly $16 billion in sales represents a staggering number of $3 dresses and $1.50 phone cases. It’s a model that Shein has used to attract some of the biggest investors, including Sequoia Capital China, Tiger Global Management and IDG Capital that have enabled the company to aggressively grow sales without worrying too much about the bottom line.

2. A Nimble, AI-Driven Supply Chain

Shein has been investing heavily in its supply chain since 2013, George Chiao, president of Shein US, told BoF in October.

The company is headquartered in Guangzhou, a city in China’s Pearl River Delta, a major clothing manufacturing hub. While many fast-fashion brands use Chinese manufacturers, Shein’s proximity to its suppliers has allowed it to shorten the time from design to sale.

Shein’s design process is tech-driven. The company has built AI software that combs the internet and social media for trending styles and plugs them directly into computers on the factory floor. Its fashion, therefore, is about as fleeting as the day’s viral Tiktok.


Rather than owning and operating large facilities, Shein works with small partner factories. With this structure, it’s been able to produce quickly and nimbly, placing orders on a daily basis that can be updated frequently. Shein adds about 6,000 new styles each day.

Whatever styles sell well will stay on the Shein site and are iterated with updates, while what doesn’t sell is dropped, an algorithmically-driven process that many other start-ups are now trying to mimic.

In a November report detailing Shein’s supply chain operations, Swiss watchdog Public Eye found multiple instances of labour violations, including the use of make-shift factories with barred windows and no emergency exits. The report also said workers sewing for Shein factories were on a “per-piece pay rate,” a practice advocates say leads to untenable hours labourers must endure in order to make a living wage.

Working with third-party manufacturers instead of in-house ones has helped shield Shein from assuming direct responsibility, although the company did tell BoF it was launching an investigation after the report since it has “a strict supplier Code of Conduct which includes stringent health and safety policies and is in compliance with local laws.”

3. Ultra-Low Pricing on Everything Trendy

It’s not just that Shein’s products are cheap. They’re trendy, too, even if your tastes run niche. Quantity matters at a time when fashion has become highly fragmented. While a traditional retailer agonises over whether to abandon skinny jeans for wide-legged pants, Shein offers both and everything in between, plus whatever never-before-imagined styles TikTok’s algorithm surfaced yesterday.

Ask a young shopper why they spend money with Shein and you will probably get the same response: the discounts. Every day is a bank holiday on the Shein site, where shoppers can log on at any point and find promotions like buy two and get 50 percent off or buy three items for $19. For low-income consumers, especially teenagers and college students, trendy clothes at ultra-low prices is an irresistible proposition. Discount retailers as a whole thrived in the past decade, benefiting from deepening inequality in markets like the US and UK. The pandemic created further economic insecurity for much of the population.


4. Gamification and an Addictive App

Over the last year, Shein and Amazon have traded spots as the most-downloaded shopping app in Apple’s store in the US, according to SimilarWeb.

Shein has turned to casino-like tactics to draw customers in, rewarding shoppers with points for creating accounts, leaving reviews, sharing looks on social media or just logging into its app. The points can be redeemed for Shein clothes. The rewards get shoppers to return, again and again.

5. Sustainability? So What

Sustainability advocates have long warned that fast fashion is causing substantial harm to the environment and conditioning shoppers to develop a throwaway culture. Shein has supercharged this negative feedback loop.

The meteoric rise of Shein uncovers an uncomfortable truth: the very generation that says they care about sustainability are also the ones powering Shein’s sales.

There’s no mystery as to why — for most consumers, value trumps morality every time. Shein’s dizzying assortment is tough for its target demographic to avoid when many are still in school and don’t have much disposable income. Young consumers are also spending much of their free time on TikTok, where the social media culture is to post your newest outfit and latest #hauls.

Shein has acknowledged its environmental impact. In November, it hired Adam Whinston, the company’s first head of ESG, who told BoF he intends to clean up Shein’s supply chain and incorporate more sustainable practices like using recycled materials and developing a resale program.

But to truly make a meaningful impact, activists are pushing for fashion to slow down and produce less, which is something Shein is not willing to do. Its head of ESG said in an interview with BoF that the company’s cheap, fast and trendy fashion “is our core business model and I don’t think that’s going to change.”

But governments around the world are putting the squeeze on fast fashion. The US Congress is considering legislation that would roll back an exemption that waived taxes on Chinese imports up to $800, including the vast majority of Shein’s shipments to America. Last month, the EU laid out a proposal for new textile manufacturing policies that would make apparel more long-lasting and easily recycled, as well as mandatory minimums for recycled garments. In New York, legislators have introduced a bill that would require large fashion companies to disclose at least half of their supply chain and identify areas of high carbon emissions.

And even if many young consumers aren’t willing to shop their environmental beliefs yet, climate change is only going to grow more salient as an issue. Every industry and its biggest players will be forced to reckon with their impact on the planet.



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Compiled by Joan Kennedy and Diana Pearl

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