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How mighty Shein is hurting local retailers

Facebook: Shein


Shein, the $100 billion Chinese apparel behemoth that takes the concept of ‘fast fashion’ to the extreme, is gobbling up market share the world over.

Less than a year ago, it was worth more than Zara's parent Inditex and H&M combined. This situation has changed as the responses of both global players have begun to yield results (their share prices are up around 40% over the last 12 months, pushing their combined value to close to $150 billion).

Still, Shein is reportedly second only to Amazon in the US, and it occupies first or second place in the shopping app category in the majority of the more than 150 markets it operates in globally.

In South Africa, it is the most popular shopping app in the Google Play Store (and by most measures, the second-most popular overall after WhatsApp).

On iOS, it is in the top five, based on recent downloads.

A new report shows just how much Shein is starting to negatively impact South African clothing retailers.

22seven Insights, which leverages the data from a base of 50 000 consumers (and users of the 22seven budgeting app), shows that shoppers who do spend at Shein spent 20% of their entire clothing and footwear budget at the Chinese retailer last year.

That means the remaining 80% is spent at all other retailers. The top three in this segment are TFG (11% share), Mr Price (11%) and Superbalist (10%).

Notably, the average Shein shopper’s average monthly apparel spend is R1 062, more than double the amount for non-Shein shoppers (R488).

The insights provider does highlight that Shein’s “market share is composed of a relatively small number of customers spending relatively large amounts”.

Of this base, however, 20% of spend that is no longer occurring in South Africa.

For this study, 22seven focused on consumers earning between R25 000 and R40 000 a month. It says that “at the risk of stereotyping” the data on where a typical Shein shopper is more likely to also shop “suggests that Shein customers are more likely to be female”. (Shein mostly sells women’s clothing.)

Seductive … but not simple

Shopping at Shein is not as simple as buying from any of the local retailers.

All orders are shipped from China, which means delivery takes time (typically around two weeks), and customs fees are often required. Delivery charges are steep when compared to other sites (R150 on orders under R590), but these are free for purchases over R1 050.

The attraction? Desirable, popular fashion, available for ridiculously low prices. When comparing these to other stores, it is not uncommon to find items for less than half what one would pay elsewhere (sometimes as low as a third!).

It is understood that the major local retailers are unhappy about what they say is an uneven playing field for Shein.

Retailers pay full, prescribed import duties and a significant portion of goods have to be produced locally.

Shein reportedly sends goods in small parcels with values of under R500, which means they are exempt from import duties.

There are reports that if customer orders are above this amount, they are sent separately. Unions have claimed the Chinese retailer pays between 10% and 20% on import tariffs versus the typical range of 40% to 45%.

For more on this story visit www.moneyweb.co.za