Will third time be the charm for Shein as it relaunches in India on Reliance’s back?
As Shein takes another chance at India's fast fashion landscape after five years, it is up against domestic players as well as growing constraints within its China-backed supply chain.
About five years after its ban in India, Chinese global fast fashion retailer Shein, earlier in February, made its third attempt to enter the country’s fast fashion landscape.
This time around, it has partnered with Reliance Retail. According to media reports, Reliance has agreed with Shein to manufacture in India and supply products under the Shein website in return for a licensing fee, however no other details of the partnership were revealed.
The question is: can Shein replicate its success in the current Indian fast fashion landscape?
When it first launched in India in 2017, nearly a decade after its inception, the company had a first-mover advantage. However, now players like Tata’s Zudio, Shoppers Stop’s Intune, and Reliance’s Yousta have jumped into the affordable fast fashion bandwagon, albeit in offline-first channels.
On the digital front, domestic startups like Newme, Myntra’s FWD, Urbanic’s Savana and Littlebox have managed to quickly run in and grab a share of the GenZ wallet in fast fashion.
Shein’s troubles in India began in 2020 when it along with its peer, Club House had to halt shipping after allegations by the Indian customs department that Chinese shopping sites were paying lower duties than their dues.
The company later tried to enter India again through Amazon in July 2021 where it listed itself as a seller. However, the launch did not fare well as its entire catalog was squeezed inside one small shop on Amazon with no regards to the aesthetics and branding the company wanted to project, says Anandita Bhuyan, Founder at Moodboard Analytics, a fashion consultant firm.
The China conundrum
According to a founder in the apparel industry that YourStory spoke to, most products in fast fashion are produced from the same or adjacent factories in China, and are later rebranded and marketed. Some online players even purchase clothes by weight instead of styles, the person said. With everyone working on the same margins and the clothes already being dirt cheap, there is little scope for price competition.
While Shein can heavily rely on its Chinese supply chain for its business in the rest of the world, the equation is a little different with India.
“They [referring to Shein] will not be able to rely solely on imports. So the rest of the world can still manufacture in China, but they'll have to build some Indian supply chain,” an investment analyst in the consumer space told YourStory.
Shein is not the only one trying to find a way out of this issue. Several domestic players are also looking to build supply chains in the country and balance their manufacturing to insulate themselves from currency fluctuations, changing import structures, and having more cash-flow-friendly frameworks.
Building an Indian supply chain comes with its own set of challenges. While the country has strength in certain apparel categories, it lacks the fabric diversity, scale of infrastructure and workshops required to turn around styles quickly.
“In the long term, we see that a lot of investors are also not wanting to underwrite the China risk,” the analyst added.
A real bargain
The “fast” in fast fashion, refers to how quickly styles are taken from runway to shop, focusing on offering consumers quick instant gratification on fleeting trends. Businesses have to churn out styles from runway to retail very quickly in a process that involves identifying trends, trying out samples and then producing successful styles on a larger scale.
Adopting a dynamic pricing models helps companies remain agile, enabling them to adjust in real-time to market shifts while staying competitive and profitable, suggests Rahul Dayama, Founding Partner, Urbanic.
In India, fast fashion is a favourite among millennials and Gen Z shoppers. The category witnessed a growth rate of 30-40% in FY24 compared to fashion which saw a growth rate of around 6%, per a Redseer report released last year.
And, investors are paying close attention. Newme, for example, raised $18 million in series A equity funding in July 2023. While, in March last year home-grown D2C, fast fashion brand Littlebox raised Rs 75 lakh on Shark Tank—a rare five-shark deal
Further, India’s fast fashion landscape is divided into three segments: premium, mid value and ultra value based on the price. The premium segment features brands like Zara and Uniqlo, while the mid-value segment counts multiple digital-first brands like Bliss Club, Snitch, and Freakins.
In the global markets especially the US, Shein operates in the ultra-value segment.
Ultra Value brands, which counts names like Zudio, Yousta, Newme among others in India, are a keen playground for fast fashion players.
Since fast fashion brands cater to GenZ as their target group, a cohort that increasingly buys online and is open to try latest trends and is price conscious, it is crucial for companies to sell affordable products that appear premium along with an image that they are not only riding the trend wave but are ahead of it.
So, beyond pricing and affordability, what is the trick for businesses that are trying to gain and retain market share in this space?
The answer lies in turnaround times.
Kushal Bhatnagar, Associate Partner at Redseer, says, “The speed of how quickly they are able to bring those trends to the market, which Zudio does very well in India and Shein does very well globally. And the second is how creative they are with their designs and trends and fabrics to attract the customer.”
Tata Trent, the parent company behind Zudio, in its half-yearly results released in November 2024 echoed a similar sentiment for profitability. “In an otherwise subdued consumer market, key initiatives including with respect to the product offer, the store portfolio and the operating supply chain helped us deliver encouraging results,” the company said.
While price is a bare minimum requirement, businesses believe consumers have an understanding of fair price, says a founder at a fast fashion brand.
“If customers are willing to pay a certain amount for a piece of a garment then they expect a certain type of quality to come with it. Brands need to understand that there is some “little bit of some value engineering that needs to happen” to strike the “quality and price equilibrium” Shuchi Pandya, who leads investment in fashion, home and lifestyle verticals at Fireside Ventures.
“The problem here is not demand generation. If you sell stuff for so cheap, anybody will buy. The actual USP is your supply.” says Bhuyan.
"It's not a winner-takes-all market. I haven't met a girl whose wardrobe is filled with only one brand. There is space for everyone who is doing it right,” says Dayama.
Pandya, who is on the Newme Board as an observer, believes that fashion is not a “winner takes all market” and the space is big enough for multiple players to grow and grab a chunk of that Gen Z wallet.
For now, Indian companies don’t fear any impact on their shares with the return of Shein.
Edited by Affirunisa Kankudti