Key Takeaways:
- As brands and retailers wrestle with both upstream and downstream pressures, giants like Shein and Amazon are translating different parts of their respective technology infrastructures into B2B services.
- Shein is seeking to turn its supply chain infrastructure and technology into an “as a service” product, available to third-party brands, turning what many see as the company’s competitive edge into a monetisable product in its own right.
- After scaling back the vision for its “cashierless” stores, Amazon is scaling up cloud-based rendering through AWS – ostensibly targeting it at the visual effects industry, but also putting it on an increasingly even footing with fashion-specific rendering services that offer an elastic, turnkey way to extend the value of digital product creation.
Amazon and Shein are about to have even more in common – both are pushing different parts of their technology stacks to other businesses, building service offerings out of their respective competitive edges. Although Amazon’s proposition is likely to surprise people who are expecting more innovation in physical retail.
Let’s start with Shein. This week it was revealed that the online fast-fashion giant will offer out its supply-chain infrastructure and technology to external brands and designers – allowing those third parties to use Shein’s systems and networks to experiment with new fashion products in limited quantities, and to then monitor their consumer appeal.
This is described as “supply chain as a service” by executive chairman Donald Tang in a letter to investors, reports WSJ – and eagle-eyed readers will recognise that label as being something that other fast / mass market fashion companies have tried (and then abandoned) in the past.
So what makes Shein think it might succeed where others have failed? At least part of the answer might lie in the context of the move, rather than the content.
Recently, Shein has more than doubled its profits as it awaits regulatory approval from Beijing to go ahead with a potentially blockbuster public listing in New York or London. Shein hit a record of more than $2bn (£1.6bn) in profits for 2023, and recorded around $45bn (£36bn) in gross merchandise value (the total value of sold goods on its website), according to the Financial Times. When analysts talk about the scale of Shein’s operations, this merchandise value is the real yardstick they use to measure.
But scale is a dual-edged sword. The company is thought to be considering a London listing because it believes that the US Securities and Exchange Commission is unlikely to approve its IPO on the New York Stock Exchange. If it were to go ahead, it would be one of London’s biggest ever corporate listings, valued at up to $90bn (£72bn). If it were to be refused, it would likely be – at least in part – with sustainability and regulatory concerns… some of which Shein could potentially duck by pointing out that its high-volume production network is a universally-available service, at the same time as wringing even more money out of that network.
Shein’s success, after all, has a lot to do with its on-demand manufacturing model, with a network of around 5,400 third-party contract manufacturers in China who can produce tens of thousands of new styles every day. That model is something that other brands – whether they like to publicly admit it or not – would probably like a slice of.
And from a top-line financial perspective, Shein is also following in the footsteps of Amazon, Alibaba, Pinduoduo, and JD.com by offering a smorgasbord of options and services accessible to all stakeholders. This includes marketplaces, seller services, and now, services tailored for designers and apparel brands. By opening up its supply chain infrastructure, Shein aims to effectively manage its own costs while facilitating more growth, at high speed – all through selling its in-house systems as a pre-packaged “best practice” blend of software and service to other industry players.
Establishing a resilient, multi-pronged business trajectory, then, is essential for Shein’s IPO to be successful, as investors are likely to prioritise factors such as growth prospects, consistent profitability, and a distinctive competitive position, as well as heading off the threat that regulation and taxation of imported fast fashion might present.
IPO or not, Shein has already made technology and service offerings a part of its global strategy – introducing a marketplace model in the US, Mexico, Europe, and Brazil where third-party sellers can use Shein’s platform. Shein expanded its portfolio by acquiring the intellectual property of British retailer Missguided and entered into a partnership with Authentic Brands Group, securing a one-third stake in Forever 21.
Then there is Amazon, who this week has announced that it is removing its Just Walk Out technology from its Amazon Fresh stores. The system enabled customers to make purchases without queuing and to receive receipts afterward, and while it was billed as an AI play, with a set of cameras feeding a computer vision system, reporting and rumour over the last two years has been that the system required human intervention in the majority of cases – making this abandonment as much of an indictment of Amazon’s machine learning approach as it is a strategic re-prioritisation.
In its place, Amazon disclosed that it will introduce smart carts, enabling customers to bypass checkout lines while also providing real-time visibility of their spending. These are, of course, not new, but they do at least represent a more realistic acknowledgment of what the future of in-store technology will look like.
Perhaps coincidentally – this week Amazon Web Services (AWS) also announced the availability of AWS Deadline Cloud, which according to the announcement is a “fully managed service that helps customers set up, deploy, and scale rendering projects in minutes, so they can improve the efficiency of their rendering pipelines and take on more work.”
Through Deadline Cloud, clients engaged in computer graphics, visual effects (VFX), or integrating artificial intelligence-generated (AI-generated) visuals into their workflows can establish a cloud-based render farm. This render farm, known as aggregated compute, can scale from zero to thousands of compute instances to meet peak demand, eliminating the need for clients to deal with operating their own infrastructure. This elasticity is likely to be the key to a lot of industries (including fashion) realising the value that can come from sporadic, turnkey access to offline rendering.
As a case in point, here in fashion brands and retailers often deal with fluctuating need for rendering services, especially during peak seasons or when launching new collections. And this is only becoming a more pronounced problem as 3D / DPC strategies continue to scale.
Cloud-based rendering allows them to scale their rendering capacity up or down based on their current requirements, ensuring they can handle any workload efficiently without the need for extensive on-premises infrastructure, and (in the case of the managed services that already exist in fashion) without assigning people to these tasks. This can result in significant cost savings, particularly for smaller fashion brands with limited budgets.
We all have a front row seat to what is playing out when it comes to Amazon and Shein’s tech strategies. Is it only a matter of time before other behemoths in the fashion industry, and maybe beyond, will either try to replicate them for the first time, or resurrect previously-abandoned attempts to translate their own competitive edges into B2B products and services?
The best from The Interline:
We kicked off the week speaking to the Chief Growth Officer of Bandicoot Imaging on building out 3D/DPC to be part of core business operations for fashion.
Clare Tattersall analyses the value proposition of Games X Fashion. The fashion and videogame industries have been growing progressively closer, sharing tools and, increasingly, sharing audiences. Which crossovers have made the most impact? And what are the most compelling near-future opportunities?
