Startup case book.
Case studies of SHEIN.
Quick snap shot of
The history.
The marketing strategy.
The founder.
The investment.
The fashion online store of Shein is gaining attention in the US. The founder is worth 10 billion dollars. What an overnight sensation! Or was it?
Let’s review.
This is a startup case book investigation of SHEIN. Shein comes from the world SHEINSIDE. We will briefly review the history and growth. We will then discuss the business model that made it unique. Then we discussing the massive online marketing strategy. All these publicity and visibility takes money. We will talk about the investment situation. Shein’s founder is obviously the difference maker. We will review his background. Then we draw some conclusions about startup.
Overnight sensation?
• If you have noticed SHEIN in 2021, you should know it started in 2008. The world order started to change after the financial crisis. It was originally a wedding brand called ZZKKO and later came under the domain SheInside, as a site that sold wedding dresses and women’s fashion geared toward US and English-language shoppers.
• After its latest funding round, a Chinese tech blog reported the company’s worth to be around 300 billion yuan (or $47 billion). It is roughly the valuation of Twitter, still a chump change for Elon Musk.
Nothing big happens suddenly. Shein kept growing over 100% per year for many years, and then the ordinary citizens of the world started to notice.
• It is merely a winner, out of many. Many hundreds of thousands websites, stores and companies started around 2008 to sell in USA.
• Most ended being just a happy little store on Amazon.
• SHEIN is the eventual result of all the upstarts from the ruins of a global financial crisis. This is the start of all the shops now there on Amazon.
One of a kind.
No success is accidental. Sheni’s business model is unique and hard to duplicate. It includes three elements.
• Low price, high volume.
• Fast design and fast prototyping.
• Tiktok advertising.
There are tens of thousands of styles on the retailer’s site, and each day, about 1,000 -5,000 more are added (depending on the source of report).
By 2016, the founder had assembled a team of 800 designers and prototypers, dedicated to rapidly producing Shein-branded clothes.
Of course, as you start to realize, such speed and cost can only be achieved in one place on earth. In Guangzhou China, to be exact. The place is flushed with textile markets, ever since the Ming dynasty. Many people work hard and have a lot of experience with commerce.
Hefty leverage
• In 2017 Shein starts to land in the US. However it is not until Tiktok in 2020 does it become viral.
• All the advertising, hiring and growth campaigns takes money. It can not be sustained organically from revenues and profits.
• By 2020 SHEIN has raised E round of 15 billion US dollars. It is not eager to go IPO, which carries calculated risks. Though 15 billion sounds like a lot of money, it is used to support really massive market penetration quickly.
Is the investment worth it? Amazon’s valuation is 1 trillion dollars. If SHEIN can reach 1/10 of that, or 100 billion dollars, this late round investor may still manage to not lose.
Costly marketing
Why a profitable company needs so much investment? The answer, marketing is expensive. Shein relentlessly drive both organic and paid traffic. Its website SEO has tens of millions of backlines to help with Google algorithm, and then it pays Google extra.
Founder Edge
You may wonder, what kind of person or team would come up with this idea in 2008? In fact, it is nothing but founder’s good management. As I said, many similar stores popped up in 2007. The founder, Chris Xu, or Yang Tian Xu in Chinese, actually was a fresh college graduate in 2007 from Qingdao university of science and technology. He did not graduate from Tsinghua University, or MIT, but he did SEO work on his first job off college. He took off from there.
I tell these lessons to help listeners draw some lessons. Here are some important lessons that I hope you agree.
• It takes 10-15 years to achieve anything great.
• Takes extraordinary founder and persistence to win.
• Without capital no one will know Shein.
• Traffic and habit building is critical, part of the customer acquisition cost.
• Technical insider knowledge of SEO is key
Do you agree? Please leave comments!
The story like this is always epic when you look back the day one of the start. Actually stories like these are not rare, but very common. For other stories please take look at my channel.
We have two questions listed for thinking or discussions.
• Why is it important for the founder to take on investment?
• Do you think anyone else would have done the same if they started at the same time?
