Reliance’s Shein Bet - A ?80,000 Crore Disruption in Indian Fashion?
Valued at a staggering $10 billion, Shein accounted for nearly one-fifth of the global fast-fashion market in 2022, outpacing giants such as Zara and H&M. To put things in perspective, Shein was founded in 2008, whereas Zara was incorporated in 1975 and H&M in 1947.
Shein’s Meteoric Rise and Sudden Exit from India
In India, Shein made a significant impact upon its launch in 2018. By 2020, it had become a dominant player, driving online searches and influencer-led content. However, its rapid ascent came to an abrupt halt when the Indian government banned the platform over concerns regarding data security. The fear was that Shein’s Chinese parent company might be storing or transferring Indian customer data to China, amid heightened geopolitical tensions.
Shein’s exit left a vacuum in India’s fashion ecommerce space, which domestic D2C brands quickly sought to fill. Brands like Urbanic, Twenty Dresses, and Cilory attempted to replicate Shein’s success but struggled to match its mass appeal. Venture capitalists also backed startups like The Souled Store ore, Virgio, and NEWME e, which adopted Shein’s formula of affordable, trendy fashion. Ecommerce unicorn Meesho, too, leveraged affordable fashion and content-driven sales strategies reminiscent of Shein.
Despite these efforts, no brand has quite managed to recreate Shein’s unique market disruption—until now.
Shein’s Re-Entry Through Reliance Retail
Shein is making a grand return to India, this time under a strategic partnership with Reliance Retail. The fast-fashion giant now joins Reliance’s portfolio of over 50 brands, which includes Silk Feet, Jivers, Xlerate, Dhuni by Avaasa, Riva, John Player Select, and premium international labels like Kenzo, Marc Jacobs, Coach, and Steve Madden.
India’s fast-fashion market is projected to reach $30 billion by FY23, according to a Redseer report. The broader fashion sector grew at a modest 6% YoY in FY24, but fast fashion surged by up to 40% in the same period. Shein’s return is a strategic move to capture a significant portion of this growth.
However, Shein’s return is not as a standalone entity. Instead, its products will be available exclusively on Reliance Retail’s platforms and physical stores. The operations will be fully managed by Reliance Retail, with Shein’s parent company receiving a license fee based on profits generated solely in India. To comply with Indian regulations, all customer data and the Shein app itself will be hosted within India, ensuring Shein has no direct access to user information.
Reliance Retail is set to launch Shein within the coming weeks. Additionally, in a bid to diversify its supply chain and support domestic industries, Shein is expected to source goods from India for its global operations in the Middle East and other markets.
The Secret Behind Shein’s Low Prices
Shein’s affordability is rooted in three primary factors:
- Ultra-Fast Fashion Model: Inspired by Zara’s fast fashion approach, Shein has perfected a demand-driven model. Instead of mass-producing thousands of items and risking unsold inventory, Shein creates small batches of around 100 pieces of trending designs. It tests these styles in the market and scales up production only for the successful ones. This minimizes waste and maximizes profits.
- Online-Only Business Model: Unlike other fashion brands that maintain physical stores, Shein operates entirely through its app and website, eliminating costs related to retail space and logistics. This online-first approach enables them to offer ultra-affordable fashion at scale.
- Exploiting Tax Loopholes: Shein has previously taken advantage of global tax exemptions. For example:
These strategies, combined with cheap raw materials and labor, allowed Shein to dominate the global fashion market. However, this business model has drawn severe backlash due to concerns about worker exploitation, data security, and tax evasion.
What’s Different This Time? The Reliance-Shein Partnership
Unlike a joint venture, the Reliance-Shein deal is structured as a license agreement, ensuring Shein operates differently in India this time. Here’s what’s changing:
- Reliance Owns the Shein App & Data: All Indian consumer data will now be controlled by Reliance, addressing concerns about security and surveillance.
- 100% Made in India Supply Chain: Unlike its previous reliance on Chinese factories, Shein will now source from Indian manufacturers, boosting the domestic economy and creating local jobs.
- Expanding India's Manufacturing Network: Reliance aims to establish a vast network of local suppliers, reducing dependence on imports and increasing efficiencies in the Indian textile sector.
- Shein Gets Paid for Brand Name: Shein will earn a fixed fee or a revenue-sharing model for allowing Reliance to use its globally recognized brand name.
Even India's Union Minister Piyush Goyal has confirmed that the government approved this deal because it supports India's manufacturing sector and generates employment.
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Why is Reliance Interested in Fast Fashion?
Reliance has been struggling to establish a foothold in India's competitive fast fashion market. Currently, Ajio (Reliance’s online fashion platform) holds only a 4.5% market share, far behind leaders like Flipkart, Myntra, Meesho, and Amazon. In the offline space, Tata’s Zudio has emerged as a dominant player, generating over ?6000 crore in revenue, surpassing Tata’s own Westside brand.
Reliance’s previous attempts at launching a fast fashion brand, Yousta, failed to gain significant traction. Moreover, with emerging startups like NuMe, Snitch, StyleUp, and Intune entering the market, the competition is fiercer than ever.
By bringing Shein back under its umbrella, Reliance can leverage the strong brand recall and trust Shein already enjoys among Indian consumers, saving years of effort that would be required to build a brand from scratch.
The Rising Demand for Fast Fashion in India
India’s fast fashion industry is currently valued at ?80,000 crore and is expected to triple by 2030. Interestingly, Shein’s global sales are already three times larger than India’s entire fast fashion market, highlighting the immense growth potential in the country.
The demand is largely driven by Gen Z and Millennials, who form over 50% of India’s population. Unlike older generations, this demographic prioritizes affordability and trendiness over fabric quality or durability. Moreover, even Tier-2 cities are witnessing a massive surge in demand, as seen with the success of brands like Zudio and Vishal Megamart in smaller towns.
What This Means for Fashion Ecommerce in India
The Reliance-Shein partnership is a formidable combination. Reliance’s vast resources and Shein’s strong brand name create a powerful market force that could disrupt India’s fashion ecommerce landscape.
Reliance’s fashion ecommerce app, Ajio, directly competes with Myntra, Nykaa Fashion, Meesho, Amazon India, Flipkart, and Tata Cliq. Ajio currently holds around 30% of the market share in terms of monthly active users (MAUs), according to AllianceBernstein. Flipkart-owned Myntra leads with over 50% market share in active users, though its GMV growth slowed to 12% in FY23 from 35% in FY22.
Industry experts believe Shein’s return could impact Nykaa Fashion more than Myntra, as Nykaa primarily caters to premium fashion, while Myntra serves both mass and premium markets. Karan Taurani, SVP at Elara Capital, sees Shein as part of Reliance’s broader strategy to expand its brand portfolio rather than a standalone disruptor.
Should D2C Brands Be Worried?
The Indian D2C fashion landscape has grown tremendously, with brands like Andamen, House Of Rare, Bombay Shirt Company, Snitch, Damensch, and The Souled Store making significant strides. Between 2018 and 2023, D2C fashion brands captured 93% of the total funding raised in the Indian fashion ecommerce space, per Inc42 data.
Industry insiders predict that Shein’s entry will intensify competition, particularly for D2C brands targeting Gen Z. While Shein’s affordability is a major selling point, its biggest strength lies in its data-driven approach to fashion.
Devangshu Dutta, CEO of Third Eyesight, notes that the real challenge for D2C brands is not Shein’s pricing but its ability to stay ahead of fashion trends. Brands with strong products and high-quality service will continue to attract non-price-sensitive customers. However, those failing to keep up with fast-changing consumer preferences risk losing market share.
Conclusion
Reliance’s partnership with Shein is a strategic masterstroke, allowing it to capitalize on the booming fast fashion industry without building a brand from scratch. By localizing manufacturing, Reliance ensures compliance with Indian regulations while also creating jobs and boosting the economy.
For Shein, this is a golden opportunity to stay relevant in a growing market without having to handle the operational complexities of running an independent business in India.
As India’s fast fashion market gears up for explosive growth, it will be interesting to see how Reliance navigates the challenges of consumer retention, regulatory scrutiny, and intense competition. Will Shein 2.0 in India be as disruptive as its first stint? Only time will tell.