Shein is preparing a third-party platform to become the "Amazon" of the fast fashion industry

It is learned that according to the Wall Street Journal, fast fashion giant Shein is considering developing into a third-party online marketplace, allowing third-party sellers to sell on its platform, which will put it in direct competition with e-commerce giants such as Amazon.

According to Shein, the purpose of building a market platform is to increase customer satisfaction and engagement. In fact, this is not the first time Shein has tried to build an online market. In October this year, it launched a resale market SheinExchange, allowing US customers to buy and sell second-hand goods in its mobile application.

The move to a third-party e-commerce platform will give Shein a new revenue stream at a time when retailers are seeing slower growth due to economic uncertainty. Amazon's third-party sales services bring in billions of dollars in revenue and support its advertising business.

Industry executives estimate Shein will generate $24 billion in sales revenue in 2022. Earlier this year, Shein's market value was valued at more than $100 billion, and it plans to go public by 2024.

What is Shein’s confidence in transforming into a market platform?

Shein is attractive enough as an e-commerce platform for third-party sellers because it has a sizable customer base that regularly visits its website and app.

In addition, Shein's flexible supply chain model can track consumer trends and demands and tell manufacturers which products need to be produced or discontinued. Third-party sellers may be able to take advantage of this and reduce the risk of inventory backlog.

Currently, Shein delivers products to more than 220 countries and has stores in at least eight countries, mainly in Europe. In the United States, Chinese accounted for 28% of fashion retail sales in 2021, according to Earnest Research. Globally, it has replaced giants such as Zara and H&M.

In addition to its own advantages, third-party sales platforms still dominate the global e-commerce market. According to Klarna data, 16% of consumers worldwide start their online shopping on online markets such as Amazon, and sales in online markets are soaring.

Shein has also been quietly working to build an online market and diversify its logistics chain outside of China. Currently, most of Shein's goods are produced in Guangdong Province. But this year, Shein began to produce products in Turkey and is expected to start operations in Poland to serve Western European customers.

Brazil as the first stop?

In Latin America, Brazil and Mexico are among Shein's main markets. Earlier this year, a team from the company reportedly visited Brazil to study the feasibility of establishing a national logistics network. Prior to this, logistics was the biggest obstacle to Shein's growth in the region, and establishing a logistics network could shorten the delivery time of its products.

If Shein opens an online marketplace in Brazil, it will directly compete with Brazil's current e-commerce giants such as Magazine Luiza, Mercado Livre, Amazon, Shopee, Marisa and Renner.

Shein is very popular in Brazil for its rich product range, fast update speed and high cost performance. This year, it invested in a concept store in Rio de Janeiro and even opened a temporary store in Sao Paulo, which attracted more than 7,000 visitors on the opening day. It also plans to bring the physical store experience to Belo Horizonte, and the specific date and location are awaiting confirmation.

Another strategy Shein has adopted to capture consumers in Brazil (still in 2021) is the diversification of payment methods to adapt to the realities of local consumption. In addition to including a purchase installment option, which is a difference that the brand has consolidated here, Shein has also started accepting Pix.

Possible challenges

Although third-party marketplaces have many benefits, they also have many risks. First, more and more retailers are beginning to transform into third-party platforms. For example, Macy's and British drugstore chain Boots have launched third-party marketplaces, and competition is intensifying, not to mention mature platforms such as Amazon and Walmart.

Secondly, third-party platforms face challenges in terms of customer experience, product quality, etc. Different customer services between platforms and third-party sellers may undermine the customer experience, and problems with counterfeit and shoddy goods may also arise.

In addition, Shein itself has certain limitations. The first is the problem of supervision. Shein is currently accused of a series of sensitive issues, such as suspected use of Xinjiang cotton produced by forced labor and clothing fabrics containing toxic substances.

Shein's strengths lie in its affordable fashion and slightly higher-end items such as evening gowns, which may limit the potential range of sellers. But overall, the transition to an online marketplace is a logical development strategy for Shein, which will help it break its growth stagnation and achieve revenue growth.

Editor✎ Ashley/

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