Don’t look for the next Shein

Key points to remember:

  • Lightning-fast fashion brands like Shein have skillfully harnessed Gen Z’s demand for cheap, trendy clothing by combining influencer marketing, low price tags, and liberal distribution of discount codes.
  • Gen Z’s preferences are less rooted in a sense of brand loyalty and more in their lower purchasing power compared to their Millennial and Gen X counterparts.
  • Increased interest in and demand for durable goods and rising incomes pose long-term challenges for cheap fashion as Gen Z’s purchasing power is poised to overtake that of Gen Y’s. by 2030.

Nanjing-based fashion brand Shein recently made headlines around the world as it became a serious competitor to historic fast-fashion companies like Zara and H&M by leveraging the manufacturing supply chain. from China to launch hundreds of new products a day. Powered by micro-influence marketing on Instagram and TikTok that relies on discount codes for already cheap clothing (in some cases costing a fraction of the prices of its competitors), Shein encourages her customers to share their ” massive journeys with a captive audience of adolescents. the world.

Shein’s approach of covering the world with her products by making them almost free for influencers – ranging from nano-sized to mega-popular – seems to be working. Like Jing Daily before Noted, his hashtag TikTok #shein had collected 6.2 billion views as of April 2021, and her name has appeared in more than 70 other trending hashtags on the app.On Instagram, Shein’s ten verified accounts total nearly 30 million subscribers. The company has doubled sales for eight consecutive years, and it was recently reported to be valued at about $ 30 billion, closing in on H&M ($ 38 billion) and overtaking Zara ($ 21 billion). In May, Shein dethroned Amazon from # 1 spot as the most downloaded ecommerce app in the United States.

Naturally, Shein’s success has motivated investment firms to start looking for similar companies that could become the next big thing among the global Gen Z, ideally with a TikTok-style algorithmic model that can attract young buyers and buyers. Encourage buying through a constant flow of personalized recommendations.

The most recent “copy” deal is Andreessen Horowitz’s $ 22 million investment with DST Global in Chinese retailer Cider. According to Fashion business, Cider’s business model focuses on pumping out small batches of new items weekly, with products being withdrawn within days if they don’t generate enough interest from buyers. As Connie Chan, general partner at Andreessen Horowitz, put it, “What sets Cider apart is that it looks like a direct selling brand on the outside but works like Shein on the inside,” adding that “its technology is the secret sauce.”

All the activity around new models in the not-so-new fast fashion industry begs the question, should are we looking for the next Shein? Part of the excitement surrounding high-speed fashion for investment firms is the lightning-fast returns expected, as well as a breakthrough to reach young consumers around the world. According to a Bank of America study from November 2020 report, Generation Z will to reign the global economy over the next 10 years, with “Zoomer” income reaching $ 33 trillion by 2029 and surpassing that of millennials the following year. For big investors who invest millions in the fast-paced fashion scene, the logic seems to be that today’s consumers of cheap clothing will switch to high-end clothing by the end of the decade.

But the reality is a little more complicated. In addition to growing purchasing power and an encyclopedic knowledge of labels, Generation Z has increasingly become aware environmental issues and expects more from brands than older consumers. According to a December 2019 investigation by First Insight, a majority of Gen Z consumers prefer to buy sustainable brands and are willing to spend 10% more on sustainable products. They (along with millennials) are also the most likely to make their purchasing decisions on values ​​and principles.

So while the current Gen Z spending spree on price-fueled fast fashion has fueled the rise of Shein and her wannabes, it’s a boom that may very well crumble sooner than we think. . Already, the ‘medium-fast fashion’ market is being squeezed out as young consumers polarize on opposite ends of the spectrum, with ultra-cheap names like Shein on one side and affordable brands on the better. quality like Ark and Everlan the other. Those caught in the middle either resort to widespread store closures or even bankruptcy, as in the case of Topshop / Topman and Forever 21. And among Gen Z consumers who make purchasing decisions based on a company’s values ​​and principles, Shein will find it hard to keep pumping massive volumes of inexpensive clothing “largely made of virgin synthetics like polyester.

With more and more young consumers looking to limit their carbon footprint and fit within a budget, resale is shifting into high gear. According to thredUP 2020 report, the global second-hand market is expected to grow to $ 64 billion over the next five years and overtake fast fashion by 2029, the same year Gen Z revenues are expected to exceed $ 30 trillion. This consumer demographics are already key for the big luxury brands, even if their spending has not reached the levels of millennials or Generation X. Like Daniel Langer Noted earlier this year, “[Gen Z consumers] are the most digital, the best informed, have the highest expectations and are the least loyal. If a brand doesn’t see them as a real group of consumers, it’s probably because they already find the brand irrelevant.

As their income grows, Gen Z’s demand for higher-end, better-quality products will also increase, meaning that the current love affair with super-fast fashion may very well be overtaken by their growing interest in forms of clothing and accessories that are less damaging to the environment, whether this translates into a demand for vintage and archival pieces, durable and vegetable matter, or simply more transparency on the environmental impact of a brand. If people like Shein or Boohoo don’t think about the future, their current boom could turn into a collapse before the end of the decade.

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