SHEIN has been a success in reforming the apparel supply chain and offering consumers across the world a vast selection at very low prices. Its growth since the pandemic years have been even more impressive.

However, this year, SHEIN’s growth and profit margins slowed significantly, which many industry observers attribute, at least partially, to rival Temu. While Temu is not a fast fashion brand as SHEIN is, it taps into the same talent pool, supplier base, and logistics infrastructure. In addition, Temu is positioned squarely at the future path of SHEIN’s ambition – a marketplace of daily goods other than fashion. 

Below is an excerpt from a recent article on SHEIN published by Chinese business magazine Caijing. The original article (link here) is very long and at many places confused by the overload of facts/numbers. Nonetheless, we find the pointers below interesting for those trying to have a grasp of what is going on. 

To understand more about the SHEIN business model, you can also read Momentum Works Who is SHEIN report. You can also obtain a copy of our Temu: 2 years on report to get a sense of the company that causes SHEIN headache. 

Here is the excerpt of the Caijing article: 

      1. A supplier of SHEIN, who were making 200-300k net profit in a good month, has seen the unit price paid by SHEIN reduce by 5-7% this year. Another supplier complained that the unit price dropped from RMB7 Yuan to 5.5. The second supplier also noticed that while cutting prices, SHEIN has become stricter in enforcing quality assessment;
      2. SHEIN has come a long way since its founding in 2012. In early days, SHEIN’s small order volume and tight delivery schedule were unattractive to suppliers. To solve that issue, SHEIN shortened the payment cycle, often paying upon delivery of merchandise. Even now the credit terms SHEIN extends to its suppliers are still way shorter than other fast fashion brands;
      3. An industry veteran mentioned that SHEIN became attractive to suppliers because of its stable (and growing) order volume, fast payment and respect of suppliers’ profit margins. That trust in the supply chain allowed SHEIN to grow much faster than other Chinese rivals – the pandemic accelerated that;
      4. SHEIN’s GMV surged to US$45 billion in 2023. However, the slowdown in 2024 has been obvious. According to media reports, revenue growth YOY has slowed from 40% last year to 23%; while profit margins have reduced from 8% to 2%;
      5. SHEIN has maintained profitability and high growth for years – balancing both have become harder. In May 2023, SHEIN opened up a marketplace, allowing third party sellers to sell on the platform alongside SHEIN’s own brands. In August 2024, COO Molly Miao announced that supply chain, operations and fulfillment departments will each have their own P&L from 2025 onwards, allowing better visibility of the company’s cost structure, and ensuing decision-making;
      6. A key headache for SHEIN in the last two years has been Temu. Temu set up its operational HQ within 1km from SHEIN’s own operations centre in Guangzhou, and started poaching SHEIN staff. Initially, SHEIN employees did not take Temu seriously – because many other large tech platforms had tried to copy SHEIN’s model, without any success;
      7. However, Temu very quickly showed its aggressiveness and determination. Many SHEIN suppliers have received repeated calls and visits by Temu’s supplier acquisition team. Temu also drove up logistics costs for SHEIN to almost all major markets: US, Europe, Latin America etc.;
      8. To solve the compliance challenges with cross border ecommerce, SHEIN chose to build its supply chain outside China – in Brazil, Turkey, Mexico etc. This should not only avoid the scrutiny on cross border, but also improve fulfillment speed and reduce logistics costs. Trump’s tariff threats have accelerated the urgency of this process;
      9. According to the suppliers interviewed for the article, SHEIN is a good company that genuinely cares about its suppliers, and the workers in the apparel industry. It has helped multiple suppliers improve their factories, from production process to airconditioning for workers in hot summer days. However, facing a tough competitive environment, SHEIN’s approach might mean higher costs and thus less competitiveness. That is a major challenge.

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