How customer segmentation drives the retail fashion giant you might never have heard of
At White Box, we’ve never claimed to be fashionistas, but with social media flooding the screens and minds of everyone today, visual fashion is certainly at the forefront of everyone’s attention. It’s not so surprising then that our team was recently engaged in a conversation about this subject.
It started with a quick online price comparison ahead of a lunch time retail run. That’s where SHEIN suddenly popped up – if the appearance of an ad for the world’s largest online retailer can be said to be ‘sudden’.
Somehow, most of our team had never heard of SHEIN
This is despite its enormous worldwide success. How did that happen?
Unlike other mainstream brands such as Zara, Forever 21, Uniqlo and H&M which have physical stores across many different countries, SHEIN has dominated the online eCommerce space to become the most popular shopping website in the world.
The company that would become SHEIN was established in March 2008 in China with the aim to sell exclusively overseas. Through a few corporate iterations they landed on their current identity around 2015; and today, targeting primarily Gen Z women, the company creates and sells incredibly cheap lines of apparel that follow the latest fashion trends.
When we did some research, we found some interesting facts about the fast-rising brand:
SHEIN surpassed Amazon as the most downloaded shopping app in the world.
Its revenue increased almost 4 times from USD$3.15 billion to USD$15.7 billion between 2019 and 2021.
Brand popularity and sales skyrocketed from 2020 onwards when COVID became widespread.
SHEIN is currently valued at USD$47 billion, and planning for an IPO in 2022.
Now, there is a murky side to this. We acknowledge the brand’s fast growth has come with a series of controversies around the sorts of environmental and intellectual property issues that tend to trail fast fashion, and raise eyebrows about the ethics of this contemporary phenomenon.
Despite this, it is still undeniable that SHEIN’s smart strategy has played a significant role in its success, not just in the fashion industry but also in the e-commerce space too.
As a data-obsessed team, we were keen to know more. How did SHEIN do it?
The (not so) secret behind SHEIN’s popularity and success
It’s mind-boggling how far fashion trends have come. With one brand from China now dominating the global industry, any business would be keen to know the secret formula to their success.
After all, who doesn’t want to be the number one brand in their industry?
The truth is that it’s not entirely a secret how SHEIN became today’s leading brand when it comes to fast fashion.
So, how exactly did they do it?
Data!
Every business needs valuable data and insights to make better decisions. When it comes to understanding your target audience and customers' preferences, big data plays an integral role.
As the name suggests, organisations have a surging volume and breadth of information right at their fingertips. If you gather, transform and analyse it the right way, you can unlock powerful commercial insights.
This is the strategy SHEIN used to successfully conquer the global fashion and eCommerce industry. Thanks to big data analysis, SHEIN succeeded by setting up an agile data collection and reaction system, where they accurately segmented customers so they could then detect and adapt to trends with a strong supply chain, fast logistics and the ability to scale based on global preferences.
Remarkable stuff! Here’s how it works.
Defying the odds: how SHEIN became the fastest-growing eCommerce in the world
True to its brand DNA, SHEIN’s business model is entirely about ‘real-time fashion’.
Let’s break down the business strategy that SHEIN used to gain so much incredible traction:
1. Supply chain and scale
It’s been estimated that SHEIN has more than 1000 suppliers and 300 core suppliers located within a two-hour drive from their headquarters, all collaborating to add an average of 5000 to 6000 SKUs every day.
The company also has a tracking system to summarise the most current trends, colours and styles from a variety of global websites and retailers, which then feeds into a production process that only takes 7 days from prototype to production. That’s around 7-10 days faster than the closest competitor, Zara.
With such a super quick trend identification and production process serving a generation that thrives on instant gratification, SHEIN is giving global consumers what they want. Fast.
2. Accurate segmentation
As we mentioned earlier, most of our team didn’t know of SHEIN - and there’s a reason why.
It’s only by using social media platforms such as Facebook, Instagram, Pinterest and TikTok that you’ll come across SHEIN’s hyper Gen Z-targeted online ads.
According to statistics, around 51% of Gen Z consumers have expressed that price is the most important factor when shopping for fashion and SHEIN solves that and much more. With their ability to mass produce on-trend clothes fast, SHEIN can sell products at a much lower price compared to all other brands.
SHEIN’s marketing segmentation strategy is based on user demographics data and their media consumption habits. As a result, the brand has effectively used micro-influencer marketing to help dominate the global fashion industry.
Does this make you think of your own business? Are you sending the same messaging to all your customers? Do you have any idea what makes your customers tick in different ways? It’s something to think about.
3. Micro-influencer diffusion
Building on their accurate segmentation data approach, these micro-influencers, who have anywhere from a few hundred to a couple of thousand followers on Instagram, YouTube or TikTok, get sent free products every month. These micro-influences then go on to showcase their #SHEINhaul to their audience of fans and followers, wearing the clothes and other trendy items they’ve received from the brand, resulting in a massive uptake of demand.
This means SHEIN’s clothing has hyper-diffusion capabilities to spread right through the target generation easily, right across the world at a rate that is just astounding. They then have a global logistics system that can keep up with this sheer demand.
It’s an effective formula and it all starts with data
Their profitable marketing segmentation approach comes from a deep understanding of the new generation from appreciating how big data can empower more accurate and faster decision-making to outperform competitors.
That’s why we specialise in data at White Box
Because businesses need unbiased clarity and that comes through the correct approach to data analysis and visualisation. Whether you’re a fashionista or a commercial enterprise looking to gain insights into the behaviour of your customers, you need to understand before you can act.
Let’s start a conversation to see how we can empower your team
As your partner in data analytics and visualisation, we’ll help you to realise the full potential of your data and maximise your business success through advanced and innovative solutions that make all the difference.
Get in touch today for your free data strategy consultation.
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