Have you ever wondered how Shein is able to make their products so affordable?
Aside from their stylish designs and large selection of products, their incredibly cheap pricing has been key to their success.
So, how is Shein able to price their products so cheaply, and how does it affect you as a customer?
In this article, I’ll be covering 9 different reasons – many of which are completely unique, and unexpected!
1. Most Goods Are Produced Directly By Factories In China
This is perhaps the biggest reason.
Although many fashion brands source their clothing from China, Shein orders units directly from factories, and is able to secure great pricing due to the size and power of the company.
Therefore, they are able to offer prices similar to those you’d find on other Chinese wholesale websites, like Aliexpress or DHgate.
Remember, Chinese-made products come with lower material and lower wage costs. Not to mention, the country has the infrastructure in place to manufacture things as cheaply as inefficiently as possible.
The prices Shein offers simply wouldn’t be possible if they were manufacturing in countries like the United States.
Additionally, because the products often ship directly from China, they are able to take advantage of lower shipping prices – it is often much cheaper to ship items from China to the United States, then it is to send a package using the U.S postal system – even if you’re only shipping the product a mile away!
2. They Quickly Discontinue Unpopular Products
If Shein had one word to describe their catalog, it would be ‘efficient.’
You may have noticed that a product that you were eyeing in the past ran out of stock, never to be seen again. Unfortunately for consumers, this is incredibly common on Shein – but it’s key to helping them maintain cheap prices.
If a product is not selling well, Shein does not reorder it. Most products are made or ordered in very limited runs, – often just 50-100 units, and Shein places future orders based on that product’s past performance.
This prevents their site from being cluttered up with products that consumers simply aren’t interested in, while also ensuring that they aren’t spending money on products that aren’t being sold.
3. Almost All Products Shein Purchases Are Sold
Because Shein is so efficient with the ordering process, this also means that almost all products Shein purchases end up sold.
Stale inventory – or inventory that is sitting in warehouses not being moved or sold, ends up tying a lot of money for businesses. Shein places such small initial orders – and is so great at forecasting sales for future products, that they rarely end up with inventory that is never sold.
In fact, Molly Miao (one of Shein’s founders), told The Wall Street Journal that this was key to making their products so cost-effective.
In other words, they know exactly how many units of each product to order – and when they should drop products entirely.
Few companies have been able to pull this off so efficiently as Shein. And since this drastically cuts down on costs, they are able to pass the savings onto the customer.
4. Shein Ships Directly To Customers
Next, Shein is able to save a lot of money because they ship products directly to customers, rather than shipping to some sort of middleman first. This allows them to pass the savings onto customers, resulting in lower prices on their products.
For example, many companies use third-party fulfillment centers to ship orders to customers. So, the company sources the products from factories, and then ships them to fulfillment centers.
When the product sells, the fulfillment center is who actually ships it – and charges a fee for doing so.
Shein on the other hand handles all fulfillment in-house, meaning there are no additional expenses to pay.
And since most products ship from China directly to customers, they are not required to pay export taxes, leading to further cost savings.
5. Shein Users Often Purchase A Lot At Once
This one is kind of a catch-22!
Because Shein prices are so cheap, customers often order lots of products at once. In fact, Shein actually encourages this by offering coupons and incentives to order larger amounts of merchandise at once.
And because people frequently order multiple products at once, Shein saves dramatically on shipping costs, as the products are able to ship together.
This benefit is particularly important in the clothing space. Clothing is light, so adding additional units to the same shipment often does not increase the shipping cost on the item much at all.
As customers order more, the shipping cost per unit typically goes down.
This allows them to price their products cheap, as their shipping costs are dramatically lower.
6. The Materials Are Often Lower Quality
We’ve talked a lot so far about Shein’s low shipping costs, and their efficiency in ordering from factories.
Yet, as with many discount goods from China, the reality is that a lot of Shein’s products are made out of low quality materials.
While the designs may be stylish and the clothing may actually hold up for a long period of time, they simply aren’t made with the same quality of materials, nor quality control checks that you’d find with more luxurious fashion brands.
Shein knows that it’s their incredibly cheap prices that give them a competitive advantage. While they certainly could source higher-quality products if they wanted to, it would force them to raise prices – which goes against the spirit of the brand.
Because Shein doesn’t actually manufacture the products themselves, they cannot impose the same quality standards across all of the products they offer. It’s ultimately up to the factories producing the items.
This is why some products may appear to be excellent quality, where as others will fall apart on their first use.
Therefore, reading reviews is key if you want to ensure that you’re getting good value for your money!
7. Shein Is Online Only, And Therefore Avoids The Costs Of Retail
This is another big advantage that many popular fashion brands can’t compete with.
Unlike many fashion brands, Shein only sells their products online. There are no retail stores where you can physically shop at – and this means no retail stores, either.
Think about it this way. Retail stores have to deal with costs such as:
- Rent on the location
- Employees / staff
- Local advertising
- Shipping products to the stores
And a lot more!
Again, lower costs means that Shein can offer products cheaper than competitors, as it allows for larger margins.
8. Shein Utilizes Influencer Marketing
Compared to other fashion brands, Shein needs very little marketing to have a large impact. In fact, my wife and I have yet to see a television commercial or YouTube ad for Shein, despite regularly seeing ads for their competitors.
While Shein does have a marketing budget that they spend, much of it is on influencer marketing – which has proven to be cheaper, and offers a much higher ROI than traditional advertising options.
After all, sending free clothing and accessories to influencers really doesn’t cost them much, yet these influencers are able to reach a large amount of people given their following.
It’s incredibly popular for people to post ‘Shein hauls’ on websites like YouTube, TikTok or Instagram, showing off the recent items they received from Shein.
And seeing your favorite creators post their Shein hauls inspires other people to share their own!
9. Ultimately, People Love Shopping There
Finally, Shein is able to offer such cheap prices because people love shopping there.
They know that once they’ve acquired a customer, that customer is likely to return and continue purchasing from them over and over again.
Not to mention, because people love Shein so much, they spread the word about it like crazy – further lowering their marketing costs.
If you think about it, every stylish piece of clothing from Shein almost acts as an advertisement from the brand. If someone loves your shirt and asks you where you got it, you’re essentially promoting Shein for free.
And since their products are so cheap, they make up a large percentage of many people’s wardrobes.
Word-of-mouth marketing is one of the most powerful forms of marketing, and it costs absolutely nothing for Shein.
This is only accomplished because people truly love shopping on the platform – largely due to the incredibly cheap prices.
Ultimately, Shein is able to offer such cheap prices because they are so cost effective – across all areas of their business.
From sourcing the products, to shipping, to marketing, Shein is able to save a large amount of money on their products. They are then able to pass these savings onto customers, at such a great level that other companies simply can’t compete with them.
I hope that you’ve found this article insightful, and you have a better understanding on how Shein is able to offer such low prices.
If you have any other questions about Shein, ask them below and I’ll be happy to chime in.
Wishing you the best, and happy shopping!
– James McAllister