Reality is today's customer is hardest to please - they want instant gratification w/o expanding their appetite to pay. They want their closet to have latest trend asap, they want entertainment/ dopamine hit squeezed in every life moment. Will they pay a lot for it? No! Meeting this requires completely reimagining incumbent supply chains.
Both Shein and Reelshort have disrupted traditional apparel mfg and content production by putting them on steroids.
1) Exceptionally low TAT: Aggressive focus on E2E control on production process to remove slack in every step. Apparel mfg typically takes 4-5 months sample approval alone taking 2 months and 10+ stakeholders. Shein removes the multiple iterations and need for human inputs to squeeze design to mfg in <15 days. Similarly, OTTs/ content houses take 9-15 months to create 2 hours of content vs new age micro drama apps squeeze everything in <45 days - AI based script making (20 days), shooting (5-10 days), post production (15 days)
2) Unbelievably low cost of production: Shein's biggest innovation is low cost (factor of high automation) at low MOQ (0-10 MOQs vs 2k+ for incumbents). This results in 50-70%+ lower COGS vs traditional players.
Similarly, ethos for SF drama apps is cut the clutter and get to the point - no expensive backgrounds/ sets, no popular actors. Users will pay for emotionally charged, short stories. This results in their cost of production being 4-5x lower vs incumbents (i.e, it's not the core P&L item)
3) Focus on infinite catalog depth (10k+ combined titles for SF drama / 200k+ monthly releases for Shein): Solving low TAT/ low COGS enables one to focus on largeness of assortment / high velocity releases. This is critical as both platforms realize that you can't predict what customers like so the only way to get it right is have trend-first breadth of assortment layered with personalization as you get more customer data. This reflects in 90%+ of shein catalog never having more than 10 MOQs and only 20% of SF drama catalog actually breaking even. Both industries have sharp power laws as predicting what users want in advance is an uphill battle.
Outcome of this supply innovation is low prices (<$10 outfits, $0.1 per episode), high velocity fresh catalog (i.e., daily drops) and right to personalization. It's interesting how once considered to be creative fields have been industrialized to the brink. Industrialized to the extent that there were 1k+ competitors that emerged in a year.
Other thumb rule that has emerged is low AOV = TAM expansion ALWAYS. Low AOV is always an outcome of a special strategy, never a strategy itself.
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