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In this episode, Chelsea dives into the uniquely dystopian business model of Shein, and how it blows our conception of fast fashion out of the water. Be sure to join our membership program at the $4.99 tier to get access to all of our exclusive bonus video content!

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Hey, guys.

It's Chelsea from The Financial Diet, and this week's video is brought to you by our incredibly powerful and mysterious membership program. So as some of you might know, we have, for a while, had a membership program here at TFD, our Society at TFD, which we have decided to totally overhaul in order to make it both more financially accessible to different price points and also give you more bang for your buck.

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And I'm in the office this week because, as sometimes happens, I'm a busy [BLEEP] with a lot to film. And so I'm coming off filming some TFCs, which will be up imminently. In my interview with Mina, we talked a lot about how the ubiquity of fast fashion has really shaped our relationship, to how we dress, how many clothes we feel that we should own at any given time, and our expectations about what clothes should cost.

Of course, social media is a huge driver for this ubiquitous rise in fast fashion, but so is the generally increasing demand for more clothes. We own more clothes per person now than any other time in history at radically lower prices, which do, ultimately, have a cost. There are a lot of huge offenders in this space.

There are, obviously, the old brick and mortar ones like Forever 21 or H&M. There are also things like Fashion Nova and boohoo. But in many ways, eclipsing all of them and kind of creating its own new frontier of [BLEEP]-iness-iness is the online retailer SHEIN.

Now, for most of us, if you are a pretty conscientious consumer, which I hope you are if you're watching TFD, this isn't news. And it's also not news the extent to which many of these companies attempt to greenwash all of the environmental and human rights impacts of their production and labor practices by engaging in superficial recycling programs, or buying carbon offsets, or doing philanthropy that mostly just amounts to good PR. Because even in their most aggressive form, experts on the matter have essentially agreed that programs like recycling, even if well-intentioned, are nowhere near enough to offset the incredible environmental damage done by such a ridiculously breakneck manufacturing rhythm.

But as I mentioned, even if the bad practices and the subsequent greenwashing are pretty ubiquitous and even some of the more high-end seeming retailers are engaging in all kinds of shenanigans, the truth is that SHIEN, in many ways, both completely dwarfs and is redefining even the most egregious offenders. But before getting into the specifics of SHIEN, a Chinese-owned brand which exploded onto the scene in 2008, it's important to set the stage in terms of what fast fashion had already done to the world by the time SHIEN reached North American consumers back in 2014. Because ultimately, the problem with fast fashion boils down to this.

Americans are throwing away far more clothing than they used to, and as of 2021, Americans throw away approximately 14 million tons of clothing per year, which is double from 20 years ago. In 2018, 7 million tons of textile waste ended up in landfills, according to the EPA, and those textiles can take up to 200 years to decompose in landfills. And fast-fashion clothes are made to last about as long as trends are, which is to say, not very long." In the World Resources Institute's piece, for example, which was written more than five years ago, it noted an uptick in trend cycles.

Traditionally, in the 20th and early 21st century, collections were released seasonally, with collections for spring/summer and fall/winter being set fairly early. More recently, though, when it comes to releases throughout the year, there can be anywhere from 50 to 100 new collections released by a single brand in a single year. WRI determined that as of 2014, people were purchasing clothing at a rate of 60% higher than they were in 2000 but keeping their garments for half as long.

And again, check out our interview with Mina Le, which will link in the description, for a deeper dive on all of that. And something that is a consideration in this conversation when it comes to fast fashion and who uses it and kind of more importantly, who gets shamed for using it, we do want to acknowledge that for many people, super low-cost clothing may be some of the only accessible options to them. Yes, of course, there are things like thrift and secondhand, but when it comes to having a range of sizes or the right clothes for a professional environment or even having access to quality thrift stores, that may not be realistic for everyone for every item of clothing they need to purchase.

But even if you are going to go the route of fast fashion, it's important to make the distinction that even amongst fast fashion, SHIEN blows it out of the water in terms of badness. For example, even all of those pretty damning facts about how frequently clothes are produced and how quickly they're being discarded are from the mid 2010s, which is just on the cusp of SHIEN entering our market in the US, and well before it completely took over the space. As of today, SHIEN controls an estimated 28% of the American fast-fashion market, and that is in a relatively short amount of time.

SHIEN has even once been referred to as, quote, "a brand that makes fast fashion looks slow." So I've stressed that SHIEN is different and worse, but how? So even from its inception in 2008, SHIEN has always operated pretty differently from other fashion retailers. It was founded by Chris Xu as ZZKKO.

Xu's main experience prior to SHIEN was not in apparel merchandising or design but rather in marketing and SEO. Originally, ZZKKKO did not create original clothing designs but rather sourced clothing from a large wholesale clothing market in China, specifically from Guangzhou, a region widely known for its concentration of garment factories and wholesale operations. This selling model is known as drop-shipping, which is basically the process of connecting consumers to ready-made clothing at low prices, often with different labels stitched in.

Over the course of the next seven years, it acquired several of its own manufacturing supply chain businesses, such as e-commerce retailer ROMWE. It then changed its name to SHIEN and expanded internationally. Now, SHIEN is not a publicly-traded company, so notes about its growth and valuation are already just estimates and secondhand reporting.

And they are also a notoriously secretive company, meaning that most information about SHIEN finances and marketing techniques are gained through analysis or insider info, with limited information or comparisons. But as of April of this year, the company is reportedly valued at $100 billion, with its most recent round of private funding gaining it somewhere between $1 and $2 billion. And for a company that's been in the US market for less than 10 years, that's a staggering trajectory.

For context Gap Brands, which owns Gap, Old Navy, Banana Republic, and many more, is estimated to be valued at just over $4 billion. And although its high was $20 billion in its heyday, that is still just one fifth of the value of this relative newcomer. Now, obviously, SHIEN, like other online-only retailers, had a huge advantage during the worst of the COVID pandemic, when many brick-and-mortar stores were forced to close temporarily, and people, in general, were just shopping less in person, but its specific business model also allows it to operate at a speed, which basically, dwarfs any other competition, including other online-only fast-fashion retailers.

SHIEN is estimated to list an additional 6,000 products on its site per day. Comparatively, on the New section of fast fashion competitor Zara, there are an estimated 600 new items, and its New section is not updated daily. Now, how SHIEN comes up with those designs is the subject of many accusations.

Their practices have been referred to as surveillance capitalism, where their data collection networks are, basically, on par with many leading world government's spy agencies. Now, of course, this has not been proven, and to be fair, the art of collecting data and understanding what your customers are doing both on and off of your website is not unique. But if you marry that with SHIEN's production techniques, you get a pretty interesting, and by interesting, I mean bad, formula.

Fast fashion, basically, relies on reconciling the supply the retailer provides with the current trends in consumer demands and not eating away at the bottom line by overproducing too much of a single garment. SHIEN manages to overcome this because it speeds up production of key garments only when a certain threshold is hit. In typical fast fashion, it's estimated to take about one month for an item to go from its initial design stages to a store, but analysts put that time frame at closer to one week for SHIEN.

Analyst Matthew Brennan, who has researched the company extensively, even coined the term "real-time retail" to differentiate it from the fast fashion we know. He explained how SHIEN is able to use their data analytics to essentially assess almost immediately how well a specific garment is likely to perform and how much to produce. Zara initially pioneered the practice of producing much smaller quantities so as to not be left with a bunch of unsold garments that then have to go on sale, but SHIEN has used real-time data analytics to essentially perfect that art.

And lastly, they've also been able to take some market dominance in such a short span of time through a world-class combination of social media marketing, SEO, influencer marketing, and search and social ads. And although they have worked with big legitimate megastars like Katy Perry, their strategy mostly relies on targeting smaller influencers. We're talking about influencers who have followings anywhere in the four-to-five-figure ranges, everything from ASM artists to an aspiring poet.

Now, the influencer market already has a lot of issues in terms of being much less regulated, having all kinds of problems with proper ad disclosure, but this is even worse with the micro-influencers, who often just don't even have an audience large enough to call them on their bull-bull-[BLEEP].. And on the flip side, even if the ad is being properly disclosed, which it often isn't, many of these micro-influencers have basically no experience with brand deals. They don't know what to charge, and in many cases, aren't being paid at all or are just being sent free products.

And although it is not unique in the world of digital marketing to leverage micro-influencers to cheaply seed out your brand to as many people as possible with some pretty questionable disclosure, marketing analysts have determined that the extent to which SHIEN does this, the sheer number of people who are out here doing unboxing and haul videos, is pretty unprecedented in basically the entire world of retail. And while we often think of things like unboxing and haul videos as being organic trends that are just popular on platforms like YouTube, and TikTok, and Instagram, it's important to remember that in many cases, these are very targeted ad campaigns. They're, essentially, astroturfing the popularity of this very specific way of buying and interacting with the clothing market.

And because a lot of these influencers who are receiving product for free, which is essentially an advertisement, are not disclosing it as such, It gives the impression that these are genuine purchases being made and further normalizes the idea that this is something that the average person should be engaging in, which then does create people who, do, do this organically, and so the trend continues. But the broader effects of SHIEN go well beyond just social media culture. There's an old saying that you can either do something fast or do it right, and the sheer speed at which SHIEN is producing things is basically guaranteeing that they're getting a lot wrong, and often on a pretty massive scale.

But because they're at an estimated valuation of $100 billion, SHIEN is pretty firmly in the disaster-proof territory. You can check out our recent video on Elon Musk's financial instability to understand how past a certain point of value, it is very, very difficult for even huge blunders to have real, long-term consequences because SHIEN has already had quite a few. And their mistakes have run the gamut from small, isolated oopsies in quality control, like accidentally producing a swastika necklace.

There's also been more serious stuff like the 2021 CBC marketplace investigation, which found that some of its clothing items contained high amounts of lead, about 20 times the maximum allowable amount by Health Canada, and some of it's children's clothes. But the absolute most troubling thing about SHIEN is how it fits into the already unsustainable world of fashion retail and what the environmental impact is. According to the United Nations Alliance for Sustainable Fashion, the clothing industry is responsible for anywhere from 2% to 8% of global emissions.

Last year, Toronto Metropolitan University's School of Fashion published a study of young people that found that they were highly concerned about the environment and climate change, but the concern that they expressed did not correlate with their purchasing patterns. Study author Shelley Haynes wrote, "Despite having an abundance of sustainable fashion options and an awareness of fast fashion's harm, consumers have yet to adopt sustainable fashion on a large enough scale to overcome the current dominance of fast fashion consumption." Factors standing in the way of mass adoption included style, convenience, lack of knowledge and how to repair clothing, and above all else, price. Researcher and author Maxine Bender has said about SHIEN's business model, quote, "You cannot have a business model like that and operate, in any way, with respect to the planet or its people" it's a highly energy-intensive process to create textiles, and because SHIEN produces thousands upon thousands of pieces per day in China, which operates off a coal-based energy grid, SHIEN is putting out a lot of emissions only for a lot of its clothing to likely end up in a landfill.

Now, all of this can feel pretty insurmountable. And as I mentioned, the degree to which this has become normalized, if not outright demanded, by our incredibly fast-moving social media culture and the weird normalization that now regular normal people can't post the same outfit twice on the grid. It's important that we do things to unplug ourselves from the fast-fashion matrix.

Now, it is unlikely that any of us will be able to hard stop shopping at any store that doesn't have high-quality environmental and labor practices because, again, even a lot of the higher-end stores have terrible practices in this regard. And with all the greenwashing out there, it's pretty difficult to suss out what is actually sustainable versus who has just got a really great PR team. But if it's fair to point the big guns anywhere, it's definitely at SHIEN.

And if you want to make one productive step in reducing your environmental impact, starting by saying, at minimum, no to SHIEN is an excellent place to start. Because even if you're a terrible person and you don't care about the environment or labor practices or the amount of clothing filling up landfills, this fast-fashion mentality, the relationship that it is created between ourselves and the clothes that we wear, is also bad for us personally. In 2015, research found that the pleasure signals in the brain that activated when purchasing fast fashion were similar to those of people in active addiction.

That the combination of how much you like an item versus how little you pay for it can give a feeling of gratification that is much more intense and low effort than, say, what you can get from a one-hour workout. Ironically, in the long run, keeping up with these trends can also make you feel terrible, despite the short-term pleasure. According to that Toronto Metro University paper, "Advertising experts have exploited the process of cultivating cultural meaning, and the industry is preoccupied with the creation of artificial freshness and subsequent obsolescence to induce desire amongst consumers." Consumers, then, feel a constant urge to replace existing garments, which can negatively affect their self-esteem.

Understanding fast fashion through the prism of addiction-like response and cultivated dependence can feel like a pretty extreme comparison, but it's not really extreme to say that the production and marketing methods of companies like SHIEN and the ubiquity of social media and how we're making our consumer decisions is, effectively and intentionally, getting us addicted to the quick hits of buying a lot of clothes for not a lot of money. But again, it's also not realistic for most people to just overnight move to a model of only buying super sustainable clothing and having a minimalist capsule wardrobe. It's a lot more likely, to be sustainable and actually stick, to look at the change toward how you buy clothes as more of a mentality shift and to be about making each purchase as intentionally as possible.

That means unsubscribing from influencers who are constantly pushing this stuff or just people who are constantly wearing fast fashion. It means doing frequent and thorough audits of your existing wardrobe to possibly get use out of pieces you've been forgetting or remix the way you're putting clothes together. It means finding a few quality pieces that you can keep for a long time or perhaps even buy the same one of in a few colors because it fits and look so perfect, rather than chasing whatever trends might be all over social media but look terrible on your specific body.

That's how we all ended up in the great sleeve crisis of 2017, by the way. It means thinking about your relationship to these things from a more psychological perspective and also understanding that if something is extremely cheap for you, it's probably because it had a really high cost somewhere else, like the environment or exploited laborers in a factory in China. This is not to shame anyone for purchases we've already made, or inevitably, again, sometimes engaging with unoptimal production practices.

It's about reminding ourselves that the way we currently interact with fashion is not normal. It is very new and was very intentionally created by very few companies. So say no to SHIEN, and say yes to thrifting, honey.

As always, guys, thank you for watching and don't forget to hit the Subscribe and join buttons and to come back every Monday, Tuesday, and Thursday for new and awesome videos. Goodbye.