Shein is so cheap because it employs a highly efficient and cost-cutting business model that includes selling directly to consumers online without middlemen or physical stores, using rapid, data-driven production cycles, manufacturing mainly in low-wage regions like China, and purchasing materials in bulk. They use AI-driven demand prediction to produce only what sells, minimizing waste and inventory costs. Additionally, Shein relies on low labor costs, cheaper synthetic materials, minimal marketing costs mostly via social media, and benefits from subsidized postal rates for cheap international shipping. These factors combined allow Shein to keep prices extremely low compared to traditional retailers.
Key points:
- Direct-to-consumer online sales avoid retail markups and store costs.
- Rapid, on-demand production responds quickly to trends and avoids excess inventory.
- Factories in low-wage countries like China keep production costs low.
- Bulk buying and local sourcing of materials reduce material costs.
- Use of synthetic fabrics instead of costly natural materials.
- Minimal spending on physical stores and advertising, using digital marketing tactics.
- Subsidized shipping rates help keep delivery costs down.
This model has trade-offs, including concerns about product quality, labor conditions, and environmental impact, but it explains how Shein can offer ultra-low prices on fashion items.
