Demystifying the SHEIN supply chain: breaking the magic of fast fashion giants, can Temu be defeated now?

With a valuation of US$66 billion and repeated rumors of an IPO in the US, SHEIN, a cross-border e-commerce platform, has attracted attention at home and abroad.

The development of Xiyin has also attracted the attention of other cross-border e-commerce platforms. Since last year, Xiyin and Pinduoduo’s cross-border e-commerce platform Temu have filed lawsuits against each other. Xiyin accused Temu of counterfeiting and infringement of trademarks, including plagiarizing products and pictures of its SHEIN brand. Temu claimed in the lawsuit that Xiyin used Market dominance forced clothing manufacturers to abandon cooperation with Temu, requiring more than 8,000 manufacturers to sign exclusive agreements with Temu to lock the supply chain.

Although Xiyin believes that Temu’s lawsuit has no basis, and said that it will actively respond to the lawsuit and use strong legal means to protect the company’s rights, the outside world is still curious about Temu’s supply chain factories. What kind of supply chain supported Temu’s 22.7 billion yuan last year? US dollars (approximately 163.24 billion yuan) in revenue, but Xiyin is reluctant to disclose too much about the supply chain factories.

Recently, reporters from The Paper visited Xiyin’s factories in Guangzhou, Dongguan, and Foshan respectively. This company, which is headquartered in China in Nancun Town, Panyu District, Guangzhou City, revitalized the factory near Nancun Town in the early stage of development, and with the order The volume is further expanded, the supply chain radiates outward, and the rich supply and price advantages of Guangzhou and surrounding cities have further fostered the development of Xiyin.

During the interview, two factory managers told The Paper that they had contacted Xiyin before its rapid development, and now Xiyin is their main customer. “In the early factories, some failed to meet Xiyin’s standards and were eliminated, and some followed Xiyin’s development and growth, from small factory owners to entrepreneurs.” A person in charge said.

“Small Order” and “Quick Reverse”

According to public information, Xu Yangtian started his business in 2008, providing marketing consulting services for international trading companies. After that, he started his second business, exploring the B2C model directly facing consumers. In 2012, he focused on women’s clothing and adopted an independent website. Independent brand model. Xiyin’s business is mainly oriented to markets in Europe, America, the Middle East, and Southeast Asia. It has achieved rapid development in recent years. From 2017 to 2020, its GMV will maintain an annual growth rate of over 100%. In 2021, its GMV will exceed RMB 100 billion.

According to Chen Shaotong, secretary-general of the Guangdong Garment and Apparel Industry Association, Xiyin is different from the models of major e-commerce platforms. The typical feature of Xiyin is that it started from its own brand. It has 11 independent brands with different positioning such as SHEIN, ROMWE, and MOTF. From product design, Style positioning, manufacturing standards, quality management standards, etc. all need to follow the management and requirements of SHEIN’s own brand, and finally sell in the market with the trademark and LOGO of its own brand. The self-owned brands headed by SHEIN are the core brand assets of Xiyin, and the secret to the success of these brands is the new operation mode of “small order and quick response”, and the price is cheap.

Small order refers to small-batch production, while quick response refers to rapid response to market demand, rapid adjustment, and then deciding whether to replenish and mass-produce according to market feedback. there is a big difference. How fast can Xiyin’s suppliers achieve quick responses for small orders?

Lin Jing, head of the digital printing factory in Foshan, Guangdong, told The Paper that the factory has served more than 200 garment factories in the Xiyin system. When a garment factory places an order for fabrics with the factory, he can deliver it within 24 hours. The fabrics produced will meet Xiyin’s compliance requirements for weight, color, texture, rubbing fastness, etc., “It will be finished in 16 hours, and the logistics will be delivered within 8 hours. We have 10 vehicles ourselves. When the car is not enough, it will call a third-party freight company to deliver the goods.” Lin Jing said.

In the factory, the reporter saw that one digital printing machine is running at full power to print patterns on the fabric. These digital printing machines are not limited by the pattern, and the image can be modified arbitrarily, which can realize single-piece production or large-scale printing. Mass production and fast delivery. When the fabric is sent to the garment factory, it enters the production and processing link. A head enterprise located in Humen Town, Dongguan City is mainly engaged in the textile and apparel and apparel industries. The person in charge of the company told The Paper that the Humen clothing industry cluster is rich in types, and the fabric can be delivered to the factory within 3 days at the earliest. Goods, “the group has 15 subsidiaries, more than half of which cooperate with Xiyin, and the company also cooperates with other customers at the same time. In terms of the ability to quickly respond to small orders, we have achieved the ultimate in Dongguan. Xiyin A SKU usually starts at 100 to 200 pieces, and if the sales trend is good, the order will be returned immediately, but if the sales do not meet expectations, production will be suspended.”

The Paper reporter followed the staff to a standard factory under the group. The factory only produces Xiyin’s clothing. Facing the same process, this factory has a highly intelligent production line and a production line that relies on manpower.

“The purpose of intelligence is not to replace people, but to improve efficiency and reduce waste. For example, Xiyin’s first test order may be 100 pieces, and we can do it manually. After several rounds of retests, mass production will be even more It is suitable for intelligent production lines.” The person in charge of the above-mentioned group said that they had contact with Xiyin in 2018. Because of Xiyin’s blessing, the company’s business has grown rapidly in recent years. “At the group level, the order volume of Xiyin Accounting for more than 30%, the factory does not have to worry about orders, and Xiyin has no distinction between low and peak seasons, and the size is not a problem, it depends on whether the factory can “eat” it.”

In the view of the factory director, the capital chain is the lifeline of the factory in the supply chain. Xiyin provides the factory with quite competitive settlement terms. The payment cycle is usually weekly, every two weeks or 30 days, while the average level of the industry It is 90 days. Considering the liquidity and profitability of funds, the factory is also willing to cooperate with Xiyin. According to the reporter of The Paper, like the standard factories of the above-mentioned groups, every process of production must meet Xiyin’s requirements, and Xiyin will provide suppliers with a certain amount of financial subsidies to build standard factories, which will motivate more suppliers. To build a factory suitable for Xiyin, but the person in charge of the above-mentioned factory is unwilling to disclose the specific amount of Xiyin’s subsidy.

In order for supply chain companies to understand Xiyin’s standards faster, Xiyin built an “Innovation Research Center” in Guangzhou, covering an area of 60,000 square meters and employing more than 1,300 employees. “You can understand it as a garment of Xiyin Manufacturing the brain. Internally, it is the research of the lean production model of small orders and quick responses, and then export the standards of small orders and quick responses to the outside world. If a factory asks how each link can meet the requirements of Xiyin, you can find the answer in this factory.” The person in charge of the above-mentioned factory who has been to the innovation research center for training said.

Mysterious founder “Working for two years, I only saw Xu Yangtian once in the elevator, ‘he doesn’t look good’.”

“Some of the photos of the boss on the Internet are wrong, and he didn’t ask to change, and even asked the company not to sort out his personal information.”

“He has never been interviewed by the outside world, and other executives cannot accept media interviews without the company’s permission.”

Some Xiyin employees expressed the above-mentioned emotions to The Paper reporters. Regarding the impression Xu Yangtian gave to employees, three Xiyin employees used the words “practical” and “business-oriented” to evaluate him.

At present, the outside world has roughly the same description of Xu Yangtian’s experience as the founder of Xiyin: born in the 1980s, a native of Zibo, Shandong, graduated from Qingdao University of Science and Technology majoring in international trade, did SEO (search engine optimization) in the early days, and later established Xiyin to start a business. Wedding dress business.

More information about Xu Yangtian comes from the narration of his early partner Li Peng. According to a late LatePost report, Li Peng’s first impression of Xu Yangtian was that he was “as thin as a monkey”. Li Peng said that some people are forced to work hard.

Xiyin’s predecessor, Nanjing Dianwei Information Technology Co., Ltd., has three shareholders, Xu Yangtian and Wang Xiaohu each hold 45% of the shares, and Li Peng holds 10% of the shares. However, the company was deregistered in 2016. Li Peng said in an interview with the media: “I participated in the founding of Xiyin’s predecessor, but Xu Yangtian kicked me and another founder, Wang Xiaohu, out of the game.”

At that time, Xu Yangtian set his sights on the field of wedding dresses, “He has done SEO and knows more about marketing methods. For example, if he searched Google for the keyword ‘wedding dresses’ in the early days, Google would recommend Xu Yangtian’s website to you, but the wedding dresses were still too expensive. It’s single, the market is limited, and it will naturally transition to women’s clothing in the later stage.” An early Xiyin employee told The Paper.

New products are fast enough, cheap enough, easy to use, and a large amount of marketing investment on social platforms is the reason why Xiyin brand attracts overseas customers. Some people say that Xiyin is the online version of ZARA. It also provides sales channels for other merchants with brand capabilities to enter the international market. With the further expansion of its platform model this year, Xiyin is now more like, which has both self-operated and platform, but sells other major brands. products, while Xiyin sells its own brand on its own.

At the capital level, two people familiar with the matter told The Paper that Shen Nanpeng, the founder of Sequoia China, attaches great importance to Xiyin, and Xiyin is also a project he personally participated in the management of.

Xiyin was seen by investment institutions in 2013. According to Zheshang Securities’ previous analysis, Xiyin completed the A round of financing in 2013, and Jifu Asia invested 5 million US dollars; in 2015, the company completed the B round of financing, Jinglin and IDG invested 3 RMB 100 million, with a valuation of RMB 1.5 billion; in 2018, the company completed the C round of financing, with investments from Sequoia and others, with a valuation of US$2.5 billion; in 2019, the company completed the D round of financing, with investments from Sequoia, Tiger Global and others exceeding US$500 million , with a valuation of over US$5 billion; in 2020, the company will complete Series E financing with a valuation of over US$15 billion.

According to the Tianyancha APP, since 2023, Xiyin has completed the G round and G+ round of financing. In the G+ round of financing, Xiyin raised 2 billion U.S. dollars, with a valuation of 66 billion U.S. dollars, which has shrunk from the 100 billion U.S. dollars a year ago. more than one-third. The Wall Street Journal pointed out that Xiyin’s latest round of financing was led by Sequoia Capital, General Atlantic Investment Group and UAE sovereign wealth fund Mubadala, among which Sequoia Capital and General Atlantic Investment Group both participated in Xiyin’s previous financing.

Although the valuation has shrunk, Xiyin is full of confidence in the future development. In a “management briefing” that Xiyin presented to investors, Xiyin said the company aimed to achieve annual revenue of $58.5 billion in 2025, up from $22.7 billion last year, the Financial Times reported. . That would exceed the existing combined annual sales of retail giants H&M and Zara.

Repeated rumors of IPO, mutual litigation with Temu overseas

Since last year, Xiyin has repeatedly reported IPO (Initial Public Offering, initial public offering) news.

According to a Reuters report in June, Xiyin has submitted a registration application to regulators and is preparing for an initial public offering in New York. If successfully listed, Xiyin will become the most valuable Chinese concept stock listed in the United States since Didi Chuxing listed in New York in 2021. At that time, Xiyin denied the news to The Paper.

The British “Financial Times” reported in January this year that Xiyin expected to conduct an IPO in the United States, its largest market, as early as this year.

Right now, Xiyin is also facing lawsuits overseas. Overseas, some designers have filed lawsuits, accusing Xiyin of copyright infringement and using secret algorithms to quickly identify and copy emerging trends and designs. Swedish fashion retailer H&M has also filed a lawsuit against Xiyin, claiming that it “infringes on our designs in a number of cases”.

However, among the overseas lawsuits about Xiyin, the mutual lawsuit between Xiyin and Temu has attracted more attention, which to a certain extent reflects the increasingly fierce competition in cross-border e-commerce. According to Bloomberg, when Temu was launched in the United States in September last year, it set a goal of surpassing Xiyin in the total value of goods within one year.

In Xiyin’s trademark infringement lawsuit against Temu, Xiyin accused the latter of “deliberately and blatantly infringing on its proprietary and valuable trademarks and copyrights” and “pretending to be the Xiyin brand on social media to promote its own growth in the US market.” ” and use copyrighted images owned by Xiyin as part of their product listings. Temu disputed the allegations, saying Xiyin failed to enforce its copyright claim because some of the allegedly infringing images were not registered. Temu also said it never impersonated Xiyin, nor was it involved in the creation of related Twitter accounts created by third-party players of its games.

Temu filed an antitrust lawsuit against Xiyin in Boston Federal Court in the United States in July this year. Temu believed that Xiyin used market dominance to force clothing manufacturers to abandon cooperation with Temu. In addition, Xiyin also sent a large number of false notices of copyright infringement to Temu. disrupt the sale of its products. Temu said it had removed more than 10,000 products from its shelves since October last year.

According to the latest news, the court approved Xiyin’s request for an emergency temporary restraining order against TEMU for its trademark and copyright infringement claims.

The above-mentioned mutual lawsuits between the two parties have not yet been concluded.

It is worth noting that in May of this year, Xiyin expanded its platform model and started selling household, beauty and electronic products, which are also products sold by Temu in the US market.