Is the Shein D2C movement in China for Real?
Today , my colleagues of our newly established technology solution provider, Interface Company, Shenzhen (因特飞思科技（深圳）有限公司) attended our first D2C Summit here in Futian, Shenzhen at the Ritz Carlton Hotel.
Although I personally felt as I were in an abyss of Chinese speaking individuals with no translation to be found, I roamed around in the lobby of the hotel, remained determined to make connections while reflectiong and absorbing anything and everything about this emerging movement called D2C in China.
D2C , short for “direct to consumer” marketing, is a growing trend in which Chinese sellers invest in their own branding, to eventually sell directly to overseas consumers on their internal website and social media channels like Instagram, Pinterest, TikTok, as opposed to relying on sales through traditional e-commerce platforms like Amazon, AliExpress, Walmart. In my opinion, this movement is trending due to a perfect storm of two few recent events:
1) Shein, a once rumored to be a small wedding dress Chinese clothing manufacturer turned massive D2C US $47 billion brand, now is one of the worlds largest “fast-fashion” companies, beating Amazon to its own game and outdoing incumbent brands like Zara and H&M . In fact they have overtaken Amazon as the #1 most downloaded shopping App in the US and 49 other countries,and the second most popular fashion website in the world. Part of success has stemmed from innovative investments for scale :
1. Product Reach — On Demand Marketplace, including a massive online marketplace with around 6K Chinese clothing manufacturers
2. Innovation — Propropritary software algorthm that collects near real-time feedback on trending items, leading to on demand new inventory, original commissioned designs through software as opposed to brick and mortar designers.
3. Streamlined operations — Through its manufacturing partners, Shein churns out and tests thousands of different items simulantiously (over 7K items of daily new items), adding to its App on a daily basis. Using a LATR model, “large scale automated test and re-order”, it will start with order small batches of garment for test with buyers, leading to larger orders
4. Efficiency — Inventory Prodution time- 30 day turn cycles
5. Behemoth marketing engine — customer acquisition by gamifying E-Commmerce to the rest of the world. Making shopping a form of entertainment t featuring livestreamers, flash sales, enticing pop-ups, custom product recommendations, a mini social network with mini games, a reward points sales, TikTok short-burst videos, etc.
2）Amazon and Chinese Manufacturer relationship deterioration. Customer complaints about counterfeiters , dangerous products and fake reviews, damaged the reputation of Amazon, leading to hundreds of merchants being banned from the Amazon platform. This shift of policy along with constantly tougher policy and larger service fees for warehousing and order fullfillment, is leading to rising frustration with Chinese merchants, contributing to this D2C movement.
…
Back to the Summit at the Ritz…
As I wonder through the halls of the lobby at the summit , I hunt for clothing manufacturers looking to go D2C , to try entice them to use the technology solution of our client, GUpshup, an international Silicon Valley based company with roots in smart messaging. GUpshup is now providing smart solutions to help brands have conversations with customers via the likes of AI Chatbot technology, helping brands with scale initiatives in e-commerce, support, and marketing.
Unfortunately, as I meet others at this event, I am realizing that I’m amongst a sea of other service providers, investors, and platform companies, like Shopify, Shopplaza, OKKI, FunPinPin… all looking for those same customer prospects. Those merchant prospects are nowhere to be found, perhaps sitting behind a factory floor- focused on design and new product development as opposed to attending events like this.
I spoke to an investor I met, a former NY based Goldman Sachs employee, who came back to Shenzhen to join a local VC young startup looking to invest in the next big brand…Although she sees promise in D2C, she still feels its a long ways away for most Chinese manufacturers. According to her, most chinese sellers are not brand oriented, they are increasingly product oriented, but still not brand. It’s a matter of them though, as today, thgey are still more focused on short term results of profit, and not long term growth.
The future of providing solutions like Gupshup’s to D2C Chinese market seems very real, the opportunity being immense. The only question is the timing of this emerging opportunity. But given the rate at which industries, markets and trended develop over here, I’m optimistic.
Back to my networking…and getting educated on this new movement.
References:
“How Shein beatAmazon at its own game — and reinvented fast fashion , by Louise Marsalis, Meaghan Tobin and Wendy Chen- https://restofworld.org/2021/how-shein-beat-amazon-and-reinvented-fast-fashion/
