A MARTÍNEZ, HOST:
In the past few years, Shein has grown into the world's largest online-only fashion retailer known for trendy clothes on the cheap. In the process, the Chinese-owned company has also drawn criticism from some U.S. lawmakers. From our daily economics show The Indicator, Adrian Ma and Darian Woods explain how Shein's unusual business model helped it grow into a fast-fashion behemoth.
ADRIAN MA, BYLINE: To better understand how Shein has been able to grow so fast and sell clothes so cheaply, we reached out to Sheng Lu. He teaches the business of fashion and apparel at the University of Delaware.
SHENG LU: So sometimes I'm joking I'm the least fashionable fashion professor in, now, maybe in the U.S. or maybe in a world.
MA: And he pointed us to four main things about Shein's business model.
DARIAN WOODS, BYLINE: First, the way the company uses technology. All fast-fashion brands use tech to identify trends and find customers, but Shein just takes it to another level. Sheng says they even hire data scientists to help design clothing.
MA: So data scientists is, like, the new fashion designers.
WOODS: Yeah. What can't they do?
MA: Anyway, Shein's second competitive edge has to do with its approach to launching new products. So retailers like H&M and Zara are constantly worried about replenishing old products when they sell out.
WOODS: Here are some numbers that really put it into perspective. Sheng says that during a recent 12-month period, H&M offered around 25,000 different products for sale. Zara offered around 35,000. So this sounds like a lot, right?
MA: Yeah.
WOODS: But over the same period, Shein offered around 1.3 million different products. That's 40 to 50 times as many products.
MA: So many products.
WOODS: The third ingredient in Shein's special sauce is that it's very different to its competitors in its supply chain. While other brands work with manufacturers all over the world, pretty much all of Shein's contracted factories are in China. According to the company, it has about 6,000 of them.
MA: And fourth, maybe the most interesting of Shein's competitive advantages has to do with U.S. trade law.
SHENG: So for conventional retailers and brands, when they import the products at the beginning, it has to go, you know, through big container. You have to go through the normal customs procedure.
MA: Meaning when other retailers have big containers full of thousands of pairs of pants coming into a U.S. port, those pants have to go through inspections. They have to pay tariffs on them, things like that. But Shein does not have to do that because the law makes an exception for de minimis, or low-value, goods, as they're called, basically anything under $800. And because Shein is usually shipping relatively small orders direct from factories to U.S. customers, it gets to avoid a lot of that custom stuff.
WOODS: But all this spectacular growth has brought scrutiny of Shein. Like other fast-fashion brands, they've been under fire for their labor practices. The company says they have a zero-tolerance policy against the use of forced labor.
SHENG: Our industry is not just about a commodity. It's about the people. When Shein is so big, which means we have a bigger impact on its workers, this also means you have a bigger responsibility.
MA: Now, there have been reports that Shein is looking to go public in the U.S. eventually, and if that happens, Sheng hopes that could compel the company to be more transparent about how they make their clothes.
Adrian Ma.
MA: Darian Woods, NPR News.
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