Shein Takes on Amazon in the Business of Selling Everything

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TikTok than any other apparel brand, according to a recent report published by the investment bank UBS. On Instagram, it has the third-most followers, snagging the most likes in May. “If they can establish themselves with that younger crowd and stick with them through the years, that could really turn them into a viable Amazon competitor," said Brian Ehrig, partner in the consumer practice of the consulting firm Kearney.

But Shein’s explosive success is rooted in a model distinctive from Amazon’s. The company uses algorithms to predict customer demand and preferences based on their browsing activities. It subcontracts with thousands of small factories, places orders in small quantities to test market appetite and replenish orders as needed, which helps cut inventory waste to low single digits, the company said.

That’s far below the industry average of 30%. Shein will continue to produce apparel, cosmetics and lifestyle products, Pernot-Day said, and third-party sellers will have access to Shein’s demand-measurement and supplier-management capabilities to help them cut down unsold items. By opening up to third-party sellers and general merchandise, Shein is introducing complexities to its established supply chain, analysts say.

It requires discipline to manage other merchants and ensure adequate logistics. Onboarding a large number of sellers, along with tens of thousands of new products, presents another challenge. Shein is also entering a part of e-commerce dominated by Amazon, which has spent decades building a logistics system.