Shein's Supply Chain As a Service Initiative a "Pearl Harbor" Moment for Retailers

It's time to start paying more attention to the disruption happening in fashion as wrought by Shein. Shein made a surprise announcement recently as told by the WSJ during the week of Shoptalk. Shein looking to pioneer its small-batch manufacturing model to other brands and designers. Here are the details:

* Shein's Executive Director David Tang called it "supply chain as a service".

* The service would be the manufacturing, technology, and data infrastructure, allowing you to test consumer response to new lines.

If you didn't know, Shein's infrastructure includes access to thousands of Chinese factories that churn out tens of thousands of items daily in small batches.

All of retail is moving to "Netflixization" and this small-batch model. The reason this model is so disruptive is because it creates a structural competitive advantage in how much inventory you hold.

In retail, but especially fashion, inventory is everything -- especially for seasonal or trending items. And if fashion can do it, you know that a wave of startups and VC investment will smell enough blood in the water to move it to other categories, too. Even if it seems more difficult outside fashion, the disruption prize is too great to ignore.

As the largest brand licensing and operators in the world, ABG and SPARC Group are important -- and it pays to take notice when they talk.

Jamie Salter, whose SPARC group recently took one-third investment from Shein, said the following about Shein recently:

* "Shein makes a lot more than $30B..." (which would put it larger than Zara's Inditex)

* "I didn't see Shein and I didn't see Temu... I can't beat them. Their supply chain is too good."

* "Forever 21" is the biggest mistake I made..."

To me, these quotes are important context to Shein's supply chain announcement and not unrelated.

Amazon's supply chain innovation was on the distribution side. Getting inventory close to consumers and reliably getting it there. Shein's supply chain innovation is on the manufacturing side.

In terms of disruptive capability to retail, Shein's innovation is much more disruptive and will force all other big players to develop a similar model or die - Amazon, Walmart, Target, everyone. Even if these players would never adopt Shein's infrastructure, a response is still needed.

Perhaps some kind of investment model in India or other countries might produce a competitor to the approach. It's hard to imagine another country outside of India replicating this.

Time to sound the alarm, and not just for the fashion industry.