Shein
FormerlyZZKKO
IndustryRetail
FoundedOctober 2008 (2008-10) in Nanjing, China
FounderSky Xu aka Chris Xu
Headquarters112 Robinson Road,
Singapore
Key people
Quist Huang
Number of employees
10,000+
ParentRoadget Business Pte Ltd
SubsidiariesROMWE
Websiteshein.com
Footnotes / references
[1][2]

Shein (/ˈʃiːɪn/ SHEE-in; styled as SHEIN; Chinese: 希音; pinyin: Xīyīn) is a Chinese fast fashion retailer. Founded in Nanjing, China, in October 2008 as ZZKKO by entrepreneur Chris Xu, Shein grew to become the world's largest fashion retailer as of 2022. The company is headquartered in Singapore.

Known for selling relatively inexpensive apparel, Shein's success has been credited to its popularity among Generation Z consumers.[3] The company was initially compared to a drop shipping business, as it was not involved in design and manufacturing, instead sourcing products from the wholesale clothing market in Guangzhou.[4][5] Beginning in 2012, Shein began to establish its own supply chain system, transforming itself into a fully integrated retailer.[5] The company has established its supply chain in Guangzhou with a network of more than 3,000 suppliers as of 2022.[6]

In 2022, the company fully moved its headquarters from China to Singapore for regulatory, international expansion, and financial reasons – while keeping its supply chains and warehouses in China.[7] In 2022, Shein generated US$24 billion in revenue, a sum almost as large as established retailers Zara and H&M.[6] Shein was valued at $100 billion after a funding round in April 2022.[8] According to Bloomberg Businessweek and others, Shein's business model has benefitted from the China–United States trade war, particularly in regards to tax advantages.[9] In recent years, Shein has found itself in the middle of trademark disputes, lawsuits involving competitors, product safety concerns, accusations of tax evasion and not respecting labor laws and human rights.

History

People shopping for clothes in Huejotzingo, Mexico
Shein pop-up store in the Greater Toronto Area, Canada

2008–2012: founding and early business model

Shein, originally named ZZKKO, was founded in China in 2008 by entrepreneur and search engine optimization (SEO) marketing specialist Chris Xu (Xu Yangtian).[10][5][11] Information on Xu's educational and career background remains elusive as of 2022, with sources conflicting on details of his biography. According to The Guardian, some sources have described him as a Chinese-American who graduated from George Washington University (GWU). However, other sources indicate that Xu was born in 1984 in Shandong province, and was educated at Qingdao University of Science and Technology. The Guardian notes that Xu is depicted in Chinese media coverage as an average student of poor origins. Shein has insisted that Xu was born in China.[11]

The website SheInside.com was registered in March 2011, advertising itself as "a worldwide leading wedding dress company", although it sold general womenswear as well.[12][10] The company acquired its items from Guangzhou's wholesale clothing market, which is a central hub to many of the company's garment manufacturers and markets.

At the time, Shein had no involvement in the design or production of the garments; it functioned similarly to a drop shipping firm, which sells items from third-party wholesalers directly to international customers.[5]

2012–2019: rebranding and retailer status

Shein made their products available in Spain, France, Russia, Italy, and Germany in the early 2010s; as well as selling cosmetics, shoes, purses, and jewelry, in addition to women's clothing.[5] In 2012, the company established the current website and began using social media marketing by collaborating with fashion bloggers for giveaways and advertising items on Facebook, Instagram, and Pinterest.[5][6]

In 2014, Shein acquired Romwe, a Chinese e-commerce retailer, making it a "fully integrated retailer." By 2016 the company had 100 employees and had already established its headquarters in Guangzhou. The firm's name changed again in 2015 from Sheinside to Shein, claiming that it needed a name that was simpler to remember and easy to find online.[10]

By 2016, Xu gathered a team of 800 designers and prototype makers that manufactured Shein-branded clothing. The company began improving its supply chain, excluding vendors that provided low-quality items or photos.[5]

Registration in Singapore

In 2019, Singapore-registered Roadget Business Pte listed Chris Xu and others as representatives. By 2021, Chinese corporate filing shows that Shein de-registered its main business, Nanjing Top Plus Information Technology Co Ltd.[13] Singapore filings reportedly shows Roadget as the legal entity operating Shein's global website and owns Shein's trademarks.[13]

2020–present

Amid the COVID-19 pandemic in 2020, it reportedly made $10 billion in revenue, making it the seventh consecutive year of more than 100% sales growth for the company.[10] As of October 2020, Shein was the world's largest online-only fashion firm.[10] Shein was noted for being an early adopter of TikTok as a promotional tool, and the firm's ability to advertise viral items boosted its popularity.[5]

By November 2021, Shein grew from a company valued at $15 billion to one valued at $30 billion.[10] According to Ernest Analytics, Shein became the largest fast fashion retailer in the United States in 2021, and had also launched online in Mexico.[14]

A survey of 7,000 American teenagers in 2022 ranked Shein as their second favorite e-commerce website.[12]

In 2022, Shein moved its headquarters to Singapore.[15]

In April 2022, Shein raised $1 billion to $2 billion in private funding and claimed 28% of the US fast fashion market. As of May 2022, it is the largest fast-fashion firm in the world.[12] In a May 2022 article in Fortune, the company was described as catering to Generation Z consumers while using big data and rapid Chinese manufacturing to quickly design clothing at lower prices. The company was valued at $100 billion.[16]

In October 2022, The Wall Street Journal reported that Shein generated US$24 billion in revenue in 2022, becoming almost as large as traditional fast fashion brands such as Zara and H&M.[6] Its other competitors include ASOS, Fashion Nova, Forever 21, PrettyLittleThing, Temu, and TopShop.[17]

Expansion in North America and potential IPO

Shein launched their marketplace, featuring third-party vendors, in Brazil and the United States in May 2022.[18] In 2022, Shein established a distribution center in Whitestown, Indiana,[19] with plans to open more distribution facilities in southern California and northeast US.[20] In November 2022, Shein opened a new corporate office and distribution center in Markham, Ontario, to function as Shein's main distribution hub in Canada.[21] Sales in 2022 were $23 billion.[18]

In July 2023 Shein announced to investors it had seen its highest recorded profits for a first half of a year. The company had an estimated value of $66 billion,[18] a drop from the estimated $100 billion in value in 2022, according to The Wall Street Journal.[22] In February 2023, Marcelo Claure was appointed chair of the Latin American operations of Shein.[23] According to reports, in 2023, although still domiciled in Singapore, Shein sourced primarily from manufacturers in China.[24][25] In 2023, Shein had 100 factories in Brazil, and had outlined plans to increase that number to 2,000.[26] In June 2023, the company faced an online backlash after international influencers toured and promoted its facilities in China.[22][27]

In 2023, The Information reported that Shein representatives had informal discussions with U.S.-based tech giants Amazon and Google about a potential investment in the company. The report notes that the company was expected to debut on the New York Stock Exchange (NYSE) in the future.[28] In August 2023 Shein received a temporary restraining order in the US against its competitive rival Temu on a trademark infringement case.[29] They also were involved in US lawsuits against each other with accusations of monopolization.[30] In June 2023, the company announced plans to open a warehouse in Mexico for a "bigger foothold" in Latin America.[31] In December 2023, Temu sued Shein, alleging illegal interference with its suppliers.[32]

Marketing

Shein is available through its website, and through dedicated mobile apps;[33] it is distributed on the Google Play Store, App Store, Galaxy Store, and Huawei AppGallery. According to CNN, TikTok plays a large role in driving customers to the company website due to a TikTok trend of bulk buying clothes from Shein and presenting Shein clothes to their audience like a standard haul video.[10] On May 17, 2021, the number of Shein's app downloads surpassed those of Amazon.[34] Shein was the second most popular shopping app globally in 2021, and the most-downloaded app in May 2022.[22]

Shein claims to utilize the psychology of the new generation and implements marketing strategies accordingly to achieve growth.[35] In 2020, Shein was the most talked-about brand on TikTok and YouTube, and the 4th most talked-about brand on Instagram.[36] Its low prices attract teenage internet shoppers with small budgets to post what they bought on social media.[35]

For user growth, the company offers relatively low prices to stimulate demand.[35] With more spending, customers can be rewarded with more discounts, which are encouraged to be applied to their next shopping trip.[35] Shein not only makes use of its algorithm-driven recommendation system but also attracts customers to visit the platform frequently to do tasks, like adding items to their cart, watching live streams, and joining its contest show, to win points which can be redeemed later.[10]

Manufacturing

Originally, Shein did not design its clothes.[5] The company mainly sourced its clothing from China's wholesale clothing market in Guangzhou.[5] However, Shein became a fully integrated retailer in 2014 when it secured its supply chain system. Now, the company utilizes a network of manufacturing partners and suppliers to make and deliver its products.[5]

Shein makes predictions on trends and produces items as quickly as three days after the identification of a trend.[5] Shein also limits its orders to small batches of about 100 items to gauge customer interest. Order sizes are increased only if the small batches do well with consumers.[3] In contrast, its competitors such as Zara order larger quantities (about 500), increasing their chances of losing profit if orders are not purchased in full.[5] According to Bloomberg News, Shein's small-batch strategy is seen as key to its success. Suppliers working with Shein also saw their business grow as the scale increased.[37]

Lobbying

In 2022, Shein hired Akin Gump Strauss Hauer & Feld and Ben Quayle as lobbyists, according to U.S. federal lobbyist disclosures.[38][39] According to Politico, Shein's lobbying campaign is geared toward shaking off forced labor claims.[40]

Tax treatment

Shein can avoid paying export and import taxes, contributing to larger margins.[9][5] The U.S. legislative bill Section 321 in the Trade Facilitation and Trade Enforcement Act of 2015 (also referred to as "de minimis") states that any import up to $800 per person is duty-free.[41] This bill has allowed Shein to deliver to the USA without paying taxes, allowing Shein to have a competitive advantage over domestic companies in the USA.[42][9]

In April 2023, Brazilian officials stated that Shein used a loophole in Brazilian law to practice tax evasion and "smuggling" to consumers in the country.[43]

Tax evasion accusations

The United Kingdom requires foreign sellers shipping low-value consignments (under £135) to register for UK VAT, collect VAT from buyers on such shipments, and remit it to His Majesty's Revenue and Customs.[44] It has been suggested that Shein failed to do so for at least 9 months after the requirement took effect, and its website does not display its UK corporate registration number or itemize VAT, as UK rules require.[45]

Controversies

Environmental impact

Deutsche Welle released in late 2021 a video detailing the ultra-fast-fashion system Shein is built on, criticizing the targeting of young adolescents less likely to make wise financial decisions, as well as the caused environmental impact.[46] Other media outlets have pointed at the addictive nature of the app, noting how its low prices get people to buy things they do not need.[47] Due to the affordability of Shein, most clothes are not high quality and can lead people to dispose of them, exacerbating the textile waste problem.[48] In 2023, Time magazine reported that the company was producing more than 6.3 million tons of carbon dioxide every year.[49]

In response to criticism, Shein launched a resale service on its US app that enables the buying and selling of secondhand Shein fashion. There are mixed reactions to the efficacy of this initiative. Shein pieces are highly affordable hence customers may choose to buy a new item rather than purchase a resale piece.[50]

Unsafe lead exposure

Shein was also cited in a Marketplace investigation overseen by professor Miriam Diamond at the University of Toronto for selling toddlers' jackets that contained almost 20 times the amount of lead permitted under Health Canada's safety regulations.[51] The company also sold a red purse that contained five times the permitted amount of lead.[51] Shein notified Marketplace that they would stop selling the two items and would stop getting supplies from the corresponding suppliers until the problem was addressed.[51]

Labor law violations

In 2021, a Public Eye investigation reported that employees of six Shein suppliers in Guangzhou were working 75 hours per week in breach of Chinese labor laws.[52] Public Eye also discovered workshops with blocked corridors and stairways.[53]

Shein said it has built an in-house team to monitor supply-chain partners and engages with independent agencies such as the Intertek Group to conduct regular and unannounced audits.[54]

ISO certification claim

In August 2021, Shein claimed on its website that its factories were certified by the International Organization for Standardization (ISO) and complied with standards set by "organizations like SA8000".[55] While the ISO sets standards, it does not directly certify any company. SA8000 is not an organisation but a standard administered by Social Accountability International, which said Shein had received no such certification. The claim was removed after Reuters inquired the company about it.[55]

Anti-modern slavery reporting

The United Kingdom's 2015 Modern Slavery Act requires companies over a certain size to make statements about how they are combatting modern slavery. A similar law has been passed in Australia. Shein declined to disclose its revenue to Reuters in 2021 but said it was in the process of preparing such statements.[17]

French investigation

In November 2023, the French Ministry of Economics and Finance initiated an investigation into Shein to assess its compliance with international guidelines and French laws after the Socialist Party accused the company of not respecting human rights, the environment, and consumer interest. Shein said it would cooperate with the investigation.[56]

Xinjiang cotton

In November 2022, Bloomberg News reported that Shein's apparel was made with cotton sourced from Xinjiang amid the Uyghur genocide.[57] Following the report, a coalition of U.S. senators wrote to Shein to demand information about the potential use of forced labour in Xinjiang for cotton products.[58]

Legal experts have noted that Shein may be able to avoid the repercussions of the Uyghur Forced Labor Prevention Act because most Shein parcels shipped to the U.S. are worth less than $800 (de minimis shipments), which means that inspection by customs may be waived.[59]

In May 2023, a group of U.S. lawmakers called on the U.S. Securities and Exchange Commission to halt Shein's initial public offering until the company could verify that it does not use forced labor for its products.[60]

In August 2023, 16 U.S. states requested the Securities and Exchange Commission to audit Shein's supply chain for forced labor before its initial public offering.[61]

Intellectual property infringement

Shein has been sued by indie creators and by companies such as Deckers Outdoor Corporation and Levi Strauss & Co. for copyright and trademark infringement. Most of these cases were settled out of court.[17][62]

In 2021, AirWair International Limited, who are known for the Dr. Martens boots, in a lawsuit accused Shein and its sister company, Romwe, of selling copies of their designs (and calling them "Martins") at a cheaper price while using photos of authentic Dr. Marten shoes to "entice customers," to which Shein responded with a blanket denial of AirWair International's claims.[62]

In March 2021, Ralph Lauren filed a trademark infringement and unfair competition lawsuit against Shein's parent company.[63] In the complaint, Ralph Lauren said that Zoetop Business Co. selling clothing with a "confusingly similar" mark was an exploitation of their "goodwill and reputation of genuine Ralph Lauren products."[63]

In 2022, Mexico's Secretariat of Culture questioned Shein's use of Mayan cultural elements in the design of one of its garments. The elements represented the "collective creativity" passed down through generations of Mayan people. Shein subsequently removed the item from its website.[64]

Design theft accusations

Shein has been accused by dozens of artists, small fashion retailers, and brands such as Reclamare PH and Sincerely RIA, of copying their designs, including enamel pins.[65][66] It can be difficult to receive legal protection, however, because items with basic, useful functions are not broadly covered by copyright laws, and any unique or creative element must be separated out when making claims.[67]

In 2018, Ilse Valfre, who owns the LA-based brand Valfré, was notified by her customers that Shein was selling "identical copies" to her products.[68] Quinn Jones, who is the co-founder of the US company Kikay, said that he found earring designs on Shein that were very similar to Kikay's earrings. In response to the controversy, Shein removed the products and pledged to drop the supplier that produced the copied item.[62]

To bring awareness to Shein's actions and to help support indie brands and artists, the hashtag "boycottShein" became popular on TikTok and Twitter in 2020.[68][67] In 2021, Mariama Diallo, founder of and designer for Sincerely Ria, accused Shein of stealing her designs in a Tweet that included comparative images to demonstrate her point.[69]

In July 2023, a civil lawsuit was filed against Shein in the US alleging that its aggressive copyright infringement amounts to racketeering under the Racketeer Influenced and Corrupt Organizations Act (RICO). The lawsuit, filed by three fashion designers, claims that Shein produced, distributed, and sold exact copies of their creative work without permission. The lawsuit also alleges that Shein used artificial intelligence in the process, but what role it actually played is unclear.[70][71]

An industry analyst expresses that as long as the company still has room to grow, it would be motivated to keep expanding its product offering as quickly as it can and accept that some of the items would not conform to intellectual property norms.[62]

Data security concerns

Shein experienced a data breach in 2018 that compromised the email addresses and encrypted passwords of 6.42 million users.[72] It was later revealed that the company had lied about the severity of the breach. The number of affected accounts was actually 39 million, credit card information was also compromised, and many users were not notified or required to reset their password afterwards. In 2022 Shein's parent company, Zoetop, was fined $1.9 million by New York state authorities for its inadequate response to the data breach.[73] In 2023, US accused Temu and Shein of data risks in latest action targeting Chinese-backed apps.[74] In December 2023, the United States House Committee on Energy and Commerce requested more information from Shein on its data privacy practices and its relationship with the Chinese Communist Party.[75]

App prohibition in India

In June 2020, the Shein app was banned in India due to privacy concerns.[76] The Ministry of Electronics and Information Technology of India classified the Shein app along with 59 other Chinese apps under Section 69A in The Information Technology Act, 2000, saying "[u]pon receiving recent credible inputs that such apps pose threat to sovereignty and integrity of India, the Government of India has decided to disallow the usage [...] both [on] mobile and non-mobile Internet-enabled devices." Section 69A grants the central government the "power to issue directions for blocking public access of any information through any computer resource".[77] However, it is still legal in India to purchase Shein products on other websites that are not covered under Section 69A.[77]

Criticism for offensive images

In July 2020, a necklace with a swastika was reported and later removed from the site in response to widespread public criticism; the brand explained that it was a Buddhist religious symbol, not a Nazi swastika.[78]

In May 2021, Shein received criticism for offering a phone case with an image of a handcuffed Black man outlined in chalk. Shein issued an apology for the unintentional offensive image and for using it without the permission of its original designer, who had created the image after the killing of Michael Brown. He has asked Shein to donate the proceedings from the sales to Black Lives Matter.[79]

References

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  62. 1 2 3 4 Lee, Dave (14 June 2021). "Chinese ecommerce site Shein hit with trademark disputes". Financial Times. Retrieved 4 October 2021.
  63. 1 2 "From Dr Martens to Ralph Lauren, Lawsuits Are Starting to Build for $15 Billion Ultra-Fast Fashion Brand Shein". The Fashion Law. 15 June 2021. Retrieved 27 September 2021.
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  66. ↑ "'They took my world': fashion giant Shein accused of art theft". The Guardian. 6 March 2022. Retrieved 6 March 2022.
  67. 1 2 Pruitt-Young, Sharon (20 July 2021). "Why Indie Brands Are At War With Shein And Other Fast-Fashion Companies". NPR. Retrieved 27 September 2021.
  68. 1 2 "Chronicling SHEIN's Problematic History". www.34st.com. 9 July 2020. Retrieved 4 October 2021.
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  70. ↑ "China's Shein hit with lawsuit citing RICO violations, a law originally used against organized crime". ABC News. 14 July 2023. Retrieved 15 July 2023.
  71. ↑ Weber, Harri (14 July 2023). "Designers sue Shein over AI ripoffs of their work". TechCrunch. Retrieved 21 July 2023.
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  73. ↑ "Shein owner Zoetop fined $1.9m over data breach response". BBC News. 14 October 2022. Retrieved 17 October 2022.
  74. ↑ "US accuses Shein, Temu of data risks in latest action targeting Chinese-backed apps". South China Morning Post. 15 April 2023. Retrieved 18 April 2023.
  75. ↑ Fonrouge, Gabrielle (20 December 2023). "Chair of powerful House committee pushes Shein about data protections, China relationship". CNBC. Retrieved 21 December 2023.
  76. ↑ Toh, Michelle (15 July 2021). "Amazon is helping a Chinese upstart make a comeback in India after its app was banned". CNN. Retrieved 30 August 2021.
  77. 1 2 "Chinese 'Shein' app blocked but sale of products on other platforms not covered: MeitY to Delhi HC". The Hindu. PTI. 5 October 2021. ISSN 0971-751X. Retrieved 6 November 2021.{{cite news}}: CS1 maint: others (link)
  78. ↑ "Popular online retailer Shein apologizes for selling swastika necklace after backlash". CBS News. Retrieved 6 November 2021.
  79. ↑ "Online Store Shein Apologized For Selling A Phone Case Depicting A Handcuffed Black Person Outlined In Chalk". BuzzFeed News. Retrieved 6 November 2021.
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