Honeyed words

How Shein, the Chi­nese e-com­merce gi­ant, de­ployed TikTok in­flu­encers to lure teens Margi Mur­phy

The Daily Telegraph - Business - - Front Page -

‘They are in­cred­i­bly se­cre­tive about what is hap­pen­ing be­hind the scenes’

You might not have heard of Shein, but it has be­come one of the most pop­u­lar re­tail­ers in the UK af­ter de­ploy­ing an army of TikTok in­flu­encers to cap­ture the hearts – and purses – of Gen­er­a­tion Z. Take a quick scroll through TikTok and you will come across nu­mer­ous young women shar­ing their “Shein haul”. This new trend, with half a mil­lion views al­ready, sees young women shar­ing videos with piles of Shein pack­ages, and try­ing each piece on with some clever edit­ing and chart mu­sic. Addison Rae, who has more than two bil­lion likes and 46m fol­low­ers on TikTok, mak­ing her the se­cond most fol­lowed per­son on the plat­form, is just one of the TikTok cadets pro­mot­ing their clothes.

“TikTok and Shein is the per­fect mar­riage be­cause Shein of­fers an at­tain­able price, and it is much more fun to watch peo­ple try­ing on their ‘haul’ than it is to scroll through pic­tures of peo­ple wear­ing clothes on In­sta­gram or long videos on YouTube,” says Mae Kar­wowski, chief ex­ec­u­tive of Ob­vi­ously, an in­flu­encer agency.

Kar­wowski es­ti­mates Rae was given a “five fig­ure” fee for pro­mot­ing the com­pany. But Shein’s eyes are on much smaller fish. It of­fers any­one who has an ac­count, no mat­ter how small their fol­low­ing, a 10pc to 20pc cut of sales, some­thing un­heard of in the current mar­ket. It re­posts its cus­tomers’ videos on its of­fi­cial chan­nel as mar­ket­ing, which is not only cost ef­fec­tive but in­spires more TikTok users to try on out­fits and tag them­selves, in the hope they will be se­lected and gain fol­low­ers and “likes”. This has cre­ated an or­ganic vi­ral ef­fect across the app, help­ing Shein rank con­sis­tently in the top five shop­ping apps across Ap­ple and An­droid in both the UK and the US. The model ap­pears to be taken from the Sil­i­con Val­ley play­book, in the early days of Uber and Airbnb, which of­fered un­prof­itable rates in or­der to achieve mas­sive growth.

Shein’s clothes and ac­ces­sories are un­de­ni­ably ap­peal­ing to a younger au­di­ence with a mon­u­men­tal cat­a­logue of the latest trends at sus­pi­ciously low prices. Hun­dreds of items in­clud­ing biki­nis, trousers and even san­dals go for un­der £5, and it of­fers in­cen­tives like 80pc off dis­counts and free ship­ping.

Yet very lit­tle is known about the com­pany: where it came from, who owns it, and how it can sell clothes so cheaply. Cus­tomers have com­plained about items fail­ing to ap­pear, and oth­ers about long wait times.

En­ter its name into Google and re­sults like “Is Shein real”,

“Can I trust Shein” and

“Who owns Shein” au­to­mat­i­cally pop up.

Sus­pi­cions have risen over its strange de­signs, in­clud­ing 5G lo­gos and cell phone towers hid­den on the soles of san­dals and slip­pers.

Last month, there was con­tro­versy over its sale of Swastika neck­laces and prayer book rugs. It was im­pos­si­ble to find a rep­re­sen­ta­tive from head of­fices or a pub­lic re­la­tions agency, as is the norm. Af­ter sev­eral news ar­ti­cles, Shein shared an apol­ogy post on In­sta­gram.

What is par­tic­u­larly strik­ing about the re­tailer is that it does not sell to cus­tomers in its home coun­try, but the rest of the world.

Shein is a Chi­nese com­pany, head­quar­tered in Shen­zhen and founded by Yang­tian, or Chris Xu in 2008. It has raised $50m (£39m) from back­ers like Bei­jing’s IDG Cap­i­tal and Green­woods As­sets Man­age­ment, Japan’s Jafco and Se­quoia Cap­i­tal China. Doc­u­ments from a set­tle­ment be­tween the state of Cal­i­for­nia over its al­leged ship­ping of toxic ma­te­ri­als in a hand­bag, which the com­pany de­nied, sug­gests it is owned by a par­ent group named Zoe­top. Zoe­top also owns pop­u­lar fast fash­ion brand Romwe (which has sim­i­larly struck a chord on TikTok). Shein has an of­fice listed in Eastleigh, but all emails and re­quests for in­ter­views failed to elicit a re­sponse.

“They are in­cred­i­bly se­cre­tive about what is hap­pen­ing be­hind the scenes,” says Juozas Kaz­iuke­nas, chief ex­ec­u­tive of e-com­merce re­search firm Mar­ket­place Pulse. “There is barely any cov­er­age about the com­pany’s story so far given how suc­cess­ful it is.”

Kaz­iuke­nas guesses that Shein only sells out­side of China be­cause an in­ter­na­tional postal treaty has made it a lu­cra­tive busi­ness model. He says Shein is prob­a­bly ship­ping prod­ucts on de­mand straight from fac­to­ries in China, which would ex­plain the long wait time and how it can of­fer a large cat­a­logue at such a low price.

Do­ing this al­lows Shein, and other Chi­nese re­tail­ers like Alibaba’s Aliex­press and Wish, to avoid costs as­so­ci­ated with stor­ing items in Europe or the US.

By ship­ping small items sep­a­rately, it avoids im­port du­ties into most Western coun­tries.

China was granted cheaper in­ter­na­tional ship­ping un­der the Uni­ver­sal Postal Union, a 146-year-old or­gan­si­sa­tion now run by the United Na­tions, of which the UK is a mem­ber. The subsidy was of­fered as part of an agree­ment that it was a de­vel­op­ing coun­try, and mem­bers were happy to help its econ­omy thrive.

This ges­ture has be­come a thorny po­lit­i­cal is­sue of late and re­tail­ers in the UK say they can­not com­pete with Chi­nese sell­ers who ben­e­fit from sub­si­dies.

They ar­gue that it is wrong for it to be cheaper to send an item from Shen­zhen to Manch­ester, than Lon­don to Sh­effield, and that Bri­tish com­pa­nies are be­ing priced out of the mar­ket as a re­sult.

The sub­si­dies have irked US pres­i­dent Don­ald Trump, who threat­ened to pull the US out last year, claim­ing China now had an un­fair ad­van­tage.

There are other po­lit­i­cal nar­ra­tives at play which might im­pact Shein’s longevity. Shein was banned in In­dia last month, along with TikTok. Xu will be watch­ing closely to see if the White House’s as­sault on all Chi­nese busi­nesses will im­pact its abil­ity to sell in the US.

At the very least, its busi­ness model will have a last­ing ef­fect and Shein’s abil­ity to cap­ture Tik­Tok­ers is a les­son for many flail­ing re­tail­ers in the West.

“Shop­ping here is in­cred­i­bly stale and has been the same for the past cou­ple of decades,” says Kaz­iuke­nas.

China has had the video shop­ping mar­ket nailed down for years with live stream­ing and short videos of shop­pers dis­cussing what they are go­ing to buy and un­box­ing their goods a long­time hit.

For now, Shein’s hype looks set to con­tinue. De­spite know­ing lit­tle about how Shein works, what fac­to­ries it uses and how much it pays its em­ploy­ees (Shein says it com­plies with all “lo­cal” laws on its web­site), it seems Tik­Tok­ers will con­tinue to share their hauls, for now.

“Fast fash­ion is in line with TikTok be­cause the app it­self is so con­sum­able and fast paced,” says Kar­wowski. But TikTok has be­come a hive for po­lit­i­cal and so­cial commentary. “A lot of the in­flu­encers we work with ask very spe­cific ques­tions around sus­tain­abil­ity and ask us if we know about the sup­ply chain and whether em­ploy­ees are treated well,” she says. Shein has some ques­tions to an­swer if it wants to keep its en­vi­ron­men­tal­ly­minded Tik­Tok­ers shar­ing their hauls.

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