How mighty Shein is hurting TFG, Mr Price, others

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 parent Inditex and H&M combined. This situation has changed as the responses of both global players has 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.

ALSO READ: Why is government investigating Shein, the world’s most popular fashion brand?

Local impact

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 is 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.)

ALSO READ: Shein kicks Zara off top spot on Top Brands of 2022 list

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 one would pay elsewhere (sometimes as low as a third!).

In a note from September, Simon Anderssen, head of 22seven Insights, puts the scale of Shein in perspective.

“To evaluate just how popular Shein has become, we compared it to more established brands like Cotton On, Superbalist and others. In July 2022, for every 100 22seven users who purchased something at Cotton On, 60 users purchased at Shein – impressive for an online-only newcomer. Superbalist still has almost double the number of shoppers as Shein, but it has been around for much longer in South Africa.”

He also notes that “the average transaction value at Shein is one of the highest among the retail groups we track, both in-store and online”.

At that point, the average Shein transaction was R1 355.

Among those 22seven users who earn between R10 000 and R25 000 per month, Shein’s market share has rocketed from a standing start in January 2021 to reach close to 10% by the end of last year. Its share quadrupled between November 2021 and November last year. No wonder the majors are concerned.

Shein’s share of spending among users earning R10-25k pm

In January, a separate report from 22seven Insights showed that Shein achieved the largest increase in market share over the previous 12 months of all clothing retailers.

Those whose market share declined in 2022?

Superbalist, Mr Price, Cape Union Mart, Pepkor, Sportsmans Warehouse, Retailability and TFG.

Mr Price said in June that of the five largest retailers in the market, only Mr Price Group (it sells across seven brands) and Shein gained traffic market share in 2022.

Visits don’t necessarily translate to sales, however. TFG has launched Bash, a single destination (and app) for all its brands. In the various app store charts, Bash appears to be performing well when compared to Shein.

For now, all retailers remain rather guarded about the impact of Shein. TFG’s singular reference to Shein in its most recent results presentation was on a slide titled “big e-tail has checked into South Africa”.

ALSO READ: Greenpeace warns of Shein clothes containing ‘hazardous chemicals’

‘Unfair’

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%.

The Department of Trade, Industry and Competition confirmed to News24 and the WSJ in March that an investigation into Shein “in partnership with organised business and labour” is underway.

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This article originally appeared on Moneyweb and was republished with permission.
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