Fast Fashion’s Curious Comeback

A woman leaves a pop-up store of Chinese fast-fashion retailer Shein in Paris, France, May 5, 2023. REUTERS/Johanna Geron (REUTERS)
A woman leaves a pop-up store of Chinese fast-fashion retailer Shein in Paris, France, May 5, 2023. REUTERS/Johanna Geron (REUTERS)


  • Shein is getting buzz, but how sustainable is fast fashion as a business model?

Fast fashion is back in vogue, thanks to online apparel retailer Shein. Will it be a trendsetter or a one-hit wonder?

Shein, which has grown at a monster pace in recent years, is an online-only fast-fashion player with few peers of similar scale. Last year the online seller accounted for 1.7% of apparel-industry sales in North America, making it the fourth-largest clothing seller behind Nike, Old Navy and Lululemon, according to Euromonitor. When asked where their first-choice shopping destination is for “going-out" clothes, Gen-Z respondents marked Shein as their No. 1 pick, and it was the second pick (behind Amazon) for millennials, according to a survey conducted by Cowen last year.

Though Boohoo Group, ASOS and Fashion Nova occupy a similar space as online-only sellers, their revenues are only a fraction of Shein’s, which brought in $23 billion of revenue last year, The Wall Street Journal reported. Its sales are comparable to multinational apparel giant H&M, which reported net sales of 223.6 billion Swedish krona, equal to about $21 billion, in its fiscal year ended November 2022 and Inditex-owned Zara, which reported 23.8 billion euros, or $25.5 billion, of sales in its fiscal year ended January 2023.

The company, with its supply base in China, has a well-oiled test-and-scale model: It produces 100 to 200 pieces of any given product at launch and then increases production only if demand is strong, a company spokesperson said in an email. That results in little excess inventory, which in turn helps its bottom line.

On the supply side, it milks efficiencies by using a digital manufacturing system. The system asks Shein’s extensive supplier base to share real-time capacity and tags each of them based on category strengths and weaknesses, according to a March report from Boston Consulting Group. To minimize costs, Shein selects master fabrics and requires designers to choose from the pool, the report noted.

Fast fashion was invented by companies such as Zara, and to a lesser extent H&M, in the late 1990s, when the companies took the latest styles seen on the catwalk and brought similar products to market, according to a report written by Simon Irwin, equity analyst at Credit Suisse. For companies such as Zara, it took about three to four weeks to bring something like a simple T-shirt from design to the stores and six to eight weeks for something like a jacket or a dress, though the fast-fashion element was a relatively small part of those companies’ sales, according to Irwin.

But the category fell out of favor in recent years as consumers and investors became more critical of the apparel industry’s impact on the environment. To some extent, off-price retailers such as T.J. Maxx started to fill consumers’ demand for runway designs at bargain price points, said Simeon Siegel, equity analyst at BMO Capital Markets. “Off-price effectively did the same thing [as fast fashion] but without sacrificing quality," he said.

If what Zara did in the ’90s was fast fashion, Shein’s version is “ultrafast fashion," Irwin said in an interview. Shein’s inventory on average takes around 40 days to turn over, according to Boston Consulting Group. That is about half of what it takes for Zara owner Inditex. The quick-turn strategy goes against industry trends. In general, apparel companies’ inventory turnover has lengthened over the past two decades. In 2000, for example, inventory turnover at H&M used to take a little over three months. Last year, it took more than four months.

Shein’s meteoric rise shows that trendy and cheap have enduring appeal. While Gen Z cares about sustainability, it also values self-expression. Timing probably helped, too. Fast-fashion retailers Charlotte Russe and Forever 21 left a vacuum when they filed for bankruptcy in 2019, closing hundreds of stores. And Shein’s low prices probably shined even brighter in the past three years as shoppers experienced an unusual rise in clothing price tags. Apparel prices had been on a downward trend through most of the past decade before rising steeply following the initial shock of the pandemic in 2020.

Did Shein invent an online fast-fashion business model that works? Online fast fashion doesn’t have a great track record. ASOS and Boohoo Group, both of which are U.K.-based online-only fast-fashion players, have thin operating margins and, after some heady profit growth during the pandemic, swung to a net loss in their most recent fiscal years as top-line growth slowed.

While Shein doesn’t disclose financials, the Journal reported the company made $800 million of net profit on its $23 billion of revenue last year, implying a net margin of 3.5%. That is far behind Zara owner Inditex’s 12.3% net margin and Uniqlo owner Fast Retailing’s 11.9%. Shein’s very noticeable presence on social media implies that its marketing budget isn’t small. Its free-return policy can’t be much help to its bottom line, either.

Shein has probably found itself a comfortable niche between larger Western apparel giants who don’t want to be associated with fast fashion and very small online-only competitors. Its advantages are difficult for most competitors to replicate, including its extensive supplier network and the tax advantages that come with operating with little physical footprint in the countries where it sells clothes.

While Shein’s tech-enabled test-and-scale model is compelling, it probably doesn’t work for higher-quality apparel that takes longer to make. But its biggest advantage so far might be its nonpublic status, which means less scrutiny on both its profitability and business practices.

This could soon change if Shein wants to raise money in the public markets, which will want a line of sight to attractive margins (in other words, its marketing budget and free-return policy might face more scrutiny) and proof that its business practices are ESG friendly. Notably, a bipartisan letter signed by more than 20 U.S. lawmakers asked the Securities and Exchange Commission to order a supply-chain audit before Shein is allowed to pursue an initial public offering on an American stock exchange.

Even though the company has said it has no suppliers in Xinjiang, where there are allegations of forced labor, the company seems to be hedging its bets to allay concerns: It plans to source more fabric from India, as the Journal reported earlier this month.

The IPO will be an interesting test for investors who seek sustainability but also want a compelling growth story. Environmentally friendly resale platforms such as ThredUp and The RealReal made their debuts on the public markets to great fanfare, but their appeal among shoppers and investors has proven transitory: Growth has slowed on their platforms, and their market valuations are only a shadow of what they were at the time of their IPOs. Allbirds, a footwear brand that boasts environmentally friendly practices, has seen its popularity fizzle, too.

Shoppers and investors like to see green credentials, but if Shein’s popularity has shown anything, it is that cash always looks greener.

Write to Jinjoo Lee at

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