In the latest in Focus’ series on “Can Chinese brands go global in 2024?”, we take a look at online retailer Shein, which has found itself at the centre of a debate about fast fashion and expanding Chinese influence abroad
Since exploding in popularity in the late 2010s/early 2020s, fast fashion retailer Shein has captured the attention of millions of shoppers worldwide with its rapid trend cycle and rock-bottom prices. However, its exponential growth has raised concerns within the business community and among consumers.
In this article, we delve into the background of Shein, its remarkable growth, concerns surrounding its business model, and the implications of its expansion for British companies in China and beyond.
What is Shein?
Shein (pronounced ‘shee-n’ or ‘shee-in’) is an online fast fashion retailer with an app and website. It predominantly sells clothing, as well as homewares, beauty products, and an increasing range of miscellaneous items. Sales are driven by heavy discounts – which pop up as soon as a user accesses the website or app – and extensive influencer marketing, as well as the sheer number of products available to browse.
Like Temu, Shein keeps prices low by selling products directly from a network of third-party manufacturers in China. The real key to its success, however, lies in its ‘on-demand’ model, which leverages user data to quickly boost or shut down production of items based on how well they’re selling or what people are searching for. By placing small orders from suppliers who both design and manufacturer items, it can get items on its virtual shelves in as little as a week, allowing it to capitalise on so-called micro-trends and encourage people to keep buying.
Shein then ships products directly from China in individual shipments that have a low enough value that they avoid customs duty in countries like the US and UK. It ships to over 150 countries.
Shein became the largest fashion retailer in the world in 2022 after securing a US$100 billion valuation in a funding round, and it achieved more than £1.3 billion in sales in the UK alone in 2023 according to GlobalData. Although much of this growth has been attributed to Gen Z TikTok users, the average Shein user actually skews a bit older, at about 35 years old, and their average monthly spend is about US$100. This suggests that many consumers aren’t using Shein as an option to buy affordable essentials but rather are using its bargain prices to pad out their wardrobes with impulse buys.
Who owns Shein?
Shein was founded in 2008 by Chris (Yangtian) Xu, an SEO specialist. After several years of e-commerce operations under various guises, Xu changed his company’s name to Shein in 2015. The company ticked over for several years before the pandemic gave it its final push into the stratosphere – especially as brick and mortar retailers struggled.
Despite the company’s success, Xu has remained a mysterious figure. He rarely accepts interviews or even releases public comments. However, with an IPO thought to be on the way, he could find himself thrust into the spotlight.
Are there any criticisms of Shein?
Shein sits at the crest of a new wave of ‘ultra-fast fashion’ retailers that are attracting scrutiny for their environmentally damaging practices. The manufacturing of synthetic fibres like polyester and nylon – prevalent in fast fashion clothing – is highly energy intensive and produces large amounts of microplastics, while textile dyeing is one of the largest sources of water pollution. Overall, the UN Environmental Program has estimated that the fashion industry accounts for 10% of global carbon emissions.
Moreover, Shein’s rapidly changing stock encourages a low re-use rate, and its products come packaged in large amounts of non-recyclable packaging.
Nevertheless, proponents of Shein’s model say that by gathering data on what consumers are buying and then directly feeding it back to manufacturers, they can reduce the production of unwanted items.
In addition to environmental concerns, Shein has repeatedly come under fire for copying designs and styles from independent designers. In July 2023, three US-based designers filed a lawsuit against Shein for “egregious copyright infringement”, alleging that it intentionally and systematically copied their designs. Shein has repeatedly said that it takes all copyright claims seriously and has introduced new AI tools to combat IP theft.
Beyond copyright, like other Chinese platforms, Shein is also facing scrutiny for its collection and use of data, especially in the US. A report published by the US-China Economic and Security Review Commission in April 2023 accused platforms such as Shein of “posing risks and challenges to… regulations, laws, and principles of market access”.
What is the future of Shein?
In November 2023, Reuters reported that Shein was submitting applications to US and Chinese regulators for a US IPO in 2024. Shein did not confirm the size of the deal or its valuation at the time, but sources told Reuters it was targeting up to US$90 billion.
However, on 27 February 2024, Sky News revealed that Chancellor Jeremy Hunt had met with Shein chairman Donald Tang to try to convince the company to float in London instead. If Shein chose London, it would be the second-largest IPO in the history of the London Stock Exchange and provide a major boost to the UK as a business destination.
In sum, there is no doubt that Shein is a Chinese company that has successfully “gone global”. However, in the long term, it may need to reflect on its business practices if it wants to stay on the good side of legal and regulatory bodies in countries like the UK and the US.
