SHEIN's New Direction: Fashion First, Temu Second
SHEIN Pulls Back from Temu Rivalry to Refocus on Fashion
Over the past year, SHEIN has expanded its marketplace strategy, launching SHEIN Marketplace to mimic Amazon's third-party seller model. However, this shift to a broader product category has placed it in direct competition with rivals like Temu and TikTok Shop, which enjoy higher traffic volumes.
Faced with mounting competition, sluggish growth, and delayed IPO plans, SHEIN's leadership made a strategic pivot. The company stepped back from competing directly with Temu, instead centering its efforts on branded fashion products and strengthening collaborations with external merchants to sustain growth.
During recent investor meetings in London and the U.S., SHEIN executives forecasted that revenue growth would stabilize at 20% to 30%, with net profit margins expected to reach mid-to-high single digits.
The Struggles Behind SHEIN Marketplace Expansion
SHEIN has taken two major steps to advance its marketplace strategy. In May 2023, it launched SHEIN Marketplace, adopting Amazon's approach to attract brand merchants. By May 2024, it introduced a semi-managed model, allowing sellers with overseas warehouses to manage logistics and customer service while SHEIN handled pricing and operations.
Initially targeting young women with trendy fashion, beauty products, and accessories at affordable prices, SHEIN's marketplace strategy has enabled it to broaden its offerings. According to a third-party seller, items like kitchen appliances, vanity tables, sofas, and drawer cabinets have been performing well, catering to the wider lifestyle needs of female shoppers.
By expanding its product categories and ramping up its marketplace efforts, SHEIN has entered a highly competitive space. It now faces strong rivals like TikTok Shop and Temu, which benefit from greater traffic and marketing resources. In North America, Amazon's continued dominance only heightens the pressure.
By September 2023, Temu's U.S. GMV had nearly caught up with SHEIN's, according to LatePost, further intensifying competition. In response, SHEIN has shifted focus to increasing its share of non-fashion categories, which now account for roughly 40% of sales, up from less than 20% last year.
Expanding its marketplace has required heavy investment from SHEIN. Moving beyond its efficient "small order, fast return" model for domestic factories, the company now offers enhanced incentives to third-party sellers. Through its semi-managed model, SHEIN eliminates commission fees and deposits, pricing goods at 85% of Amazon's rates to ensure sellers remain profitable.
According to a source familiar with SHEIN Marketplace, sellers incur considerable hidden costs. The platform assigns two operational teams to each seller and funds marketing efforts on external platforms. To support profitability while maintaining competitive pricing, SHEIN charges a modest 10% commission.
SHEIN's increasing investments in its marketplace and commission model are affecting its revenue. Meanwhile, surging air freight and marketing costs are adding more pressure on profit margins.
Amid increasing competition among the "big four" cross-border e-commerce platforms—SHEIN, AliExpress, Temu, and TikTok Shop—advertising and shipping costs have risen sharply, according to a SHEIN employee. "SHEIN's shipping costs have roughly doubled since 2020," the employee noted.
Despite heavy investments, SHEIN's performance is under pressure. Data from SEMrush shows a sharp decline in user traffic, with monthly visitors dropping from 250 million in March 2024 to 190 million in July—a 24% decrease over just four months.
Refocuses on Fashion
SHEIN's push into the marketplace model has faced setbacks. Although the company acquired several brands in 2023 to broaden its product range, progress has lagged behind expectations. The main challenge is not only growing competition but also a lack of branding and customer loyalty, as SHEIN's strengths in supply chain management don't fully translate into marketplace success.
Confronted by rising competition, sluggish growth, and IPO delays, SHEIN has reoriented its strategy. With IPO plans delayed, the company has decided to step away from directly competing with Temu and instead return to its core focus: fashion. The new plan prioritizes branded apparel and fashion items while continuing to expand third-party partnerships on its marketplace.
Since mid-year, SHEIN has intensified its focus on fashion through its various models, including SHEIN Marketplace and its fully- and semi-managed frameworks.
Recently, the company revamped its fully-managed model by granting third-party sellers free access to overseas warehouses in Europe and North America. Previously, domestic sellers had to store inventory in SHEIN's domestic warehouses, with international shipping triggered only after orders were placed—a process that caused delays.
By allowing direct shipments to overseas warehouses, SHEIN has improved delivery times and logistics efficiency. With over 860,000 square meters of free warehouse space, the company is reducing storage and shipping costs for sellers, utilizing centralized and smart warehouses to cut expenses while optimizing overall logistics performance.
Recently, SHEIN has eased entry requirements to attract more sellers, even in key categories like men's and women's apparel. Factory size requirements, previously set at 1,000 or 800 square meters, have been relaxed, with policies now more flexible. This is part of SHEIN's strategy to tap into untapped factory resources and lure sellers from competitors, bolstering its supply chain.
Since August, SHEIN's semi-managed model has also evolved. Sellers of categories such as women's fashion, swimsuits, and wigs, previously exclusive to SHEIN's own brand, are now allowed to join the platform. The company has also removed the 400g weight limit for certain categories.
SHEIN Marketplace has pivoted toward fashion, prioritizing brand owners and large distributors with 1,000+ SKUs and the ability to source goods at lower prices.
SHEIN's return to fashion busines is designed to avoid direct clashes with competitors like TikTok Shop, Temu, and AliExpress. However, the company continues to face the challenge of striking a balance between promoting its in-house products and third-party brands, as well as managing traffic distribution.