When everyone is already fast, who can make customers feel you're worth more?
Originally written in Chinese. Translated with AI, reviewed by Gary. Read the Chinese original →
A few years ago, SHEIN's RTR (real-time retailing) model was hyped to the skies.
Back then, whenever people talked about fashion retail, the words you heard most were small batch, test and reorder, real-time data, algorithm, direct from factory. SHEIN turned the traditional apparel industry's most painful problem, inventory, into something that played like an internet product: launch in small quantities, reorder what sells, stop what doesn't, thousands of new styles every day, using data to judge demand instead of a buyer betting on a big batch in one go.
Many people thought at the time that this might be the ultimate answer for fashion retail.
And SHEIN's numbers really were remarkable. Revenue of US$32.1 billion in 2023, US$38.8 billion in 2024 and US$41.9 billion in 2025.
A few years ago its valuation even approached US$100 billion. It was almost treated as the next global retail giant.
SHEIN's engine didn't break; the world outside it changed
But the figures disclosed recently as it prepares for a Hong Kong IPO start to look different.
Sales haven't fallen. The problem is that growth is falling fast. Revenue grew 41% in 2023, 21% in 2024, only 8% in 2025, and just 1.1% in Q1 2026.
Profit is coming under pressure too. In 2024, net profit was still US$3.4 billion. In 2025, revenue kept growing but net profit fell to US$2.06 billion. Q1 2026 showed a net loss of US$99 million. Granted, that includes the accounting effect of fair-value adjustments on preferred shares, so the core business didn't really suddenly turn loss-making, but operating margin dropped from 3.9% to 2.9%.
The valuation has also fallen to US$27 billion.
SHEIN used to have a few huge advantages.
First, while others still couldn't do it, it had already taken small batches, real-time data and fast reorders to the extreme.
Second, it benefited from the efficiency of China's supply chain.
Third, it happened to meet a global trade structure that suited it perfectly. Small parcels from China sent directly to US consumers could often use the de minimis duty exemption, bypassing many of the costs of traditional importers, warehouses and retailers.
But now these things are starting to change.
Temu, TikTok Shop and Amazon have all started copying the playbook, so small batches and algorithmic merchandising are no longer as rare as before. The US has ended the relevant duty exemption for low-value parcels from China, and Europe is tightening too. SHEIN's US revenue was already down about 14% year on year in Q1 2026.
So it isn't that SHEIN's engine broke. It's that the world outside the engine changed.
ZARA: fast in the back, more premium up front
Looking at ZARA at this point is very interesting.
Because while SHEIN pushed "fast" and "cheap" to the extreme, ZARA didn't go crazy alongside it.
If SHEIN sells a piece of clothing for US$10 and ZARA had kept cutting prices to follow, I think it would be struggling today. What ZARA did instead was something else: stay fast in the back end, and become more and more premium up front.
It didn't lose its biggest strength, the supply chain. It still reads data quickly, launches small quantities, reorders what sells and stops what doesn't. The most important thing about this capability was never "lots of new styles". It's reducing inventory risk, reducing markdowns and ultimately protecting gross margin.
But the front end has become completely different.
ZARA's campaigns now look more and more like a luxury brand's: Steven Meisel behind the camera, a whole line-up of supermodels, and this year a two-year collaboration with John Galliano. Flagship stores keep getting bigger and look more like premium fashion spaces, not just selling clothes but with private shopping areas, content studios, even cafes.
It isn't suddenly becoming luxury. It's steadily pushing perceived value upward.
ZARA still sells mass fashion today, but when consumers see it, they shouldn't feel it's cheap clothing. They should feel it looks more expensive than its price.
This matters a lot.
Because in 2025, Inditex's revenue was €39.9 billion, up only 3.2%, actually slower than SHEIN's 8%. Yet net profit was €6.2 billion, still up 6%, with a gross margin of 58.3%.
Which shows one thing: once a company is already very big, what really matters may not be how fast sales can still grow, but how much of every dollar of sales it gets to keep.
The basics no longer automatically make a moat
Looking back, people weren't wrong to idolise SHEIN a few years ago.
Small batches, test and reorder, real-time retail: all of these still matter a great deal today. They matter so much they've become basic skills the whole industry must have.
It's just that once everyone has slowly learned them, they no longer automatically equal a moat.
Everyone uses data, everyone does small orders, everyone reorders fast, everyone advertises on TikTok and Meta, everyone sources from Chinese supply chains. In the end it all comes back to very traditional questions:
Why should consumers buy from you? Why can you sell the same kind of clothing for a bit more? Why do others need to discount when you don't? Why will consumers come back next month?
Looking at SHEIN and ZARA side by side, I find it fascinating.
SHEIN took efficiency to the extreme of an era in recent years, but is starting to find that when competition, traffic, tariffs and regulation all arrive at once, efficiency alone may not keep holding up valuation and margin.
ZARA is doing something else.
It didn't give up speed. Instead it hid speed in the back end, and put brand, design, store experience and aspiration up front.
People used to ask how fashion retail could get faster.
Now we may have moved on to the next question.
When everyone is already fast, who can make consumers feel you're worth more?