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Shein

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Shein
Founded2008
HeadquartersNanjing
Country of originChina
Area servedWorldwide
Founder(s)Chris Xu
Key peopleQuist Huang
IndustryE-commerce
RevenueCN¥63.5 billion (US$10 billion) (2020)[1]
Employees100000+
ParentNanjing Lingtian Information Technology Co., Ltd
SubsidiariesROMWE
URLwww.shein.com
Users43.7 million per month (active)[2]
Current statusActive
Native client(s) oniOS, Android
Shein
Chinese希音
Literal meaning"sound of hope"
Transcriptions
Standard Mandarin
Hanyu PinyinXīyīn
Bopomofoㄒㄧ ㄧㄣ
IPA[ɕí.ín]

Shein (/ˈʃiːɪn/ SHEE-in; styled as SHEIN; Chinese: 希音; pinyin: Xīyīn) is a Chinese online fast fashion retailer. It was founded in 2008 by Chris Xu in Nanjing, China. The company is known for its affordably priced apparel. In its early stages, SHEIN was considered more of a drop shipping business than a retailer. Currently the company is not involved in clothing design and manufacturing, and instead obtains its products from the wholesale clothing market in Guangzhou.[3] Based in China and shipping across 220 countries, SHEIN is the world's largest fashion retailer, as of 2022. The company was valued at $100 billion after a funding round in April 2022.[4]

In recent years, the company has found itself in the middle of several controversies including trademark disputes, tax evasion, human rights violations, and health and safety concerns. According to Bloomberg Businessweek and others, SHEIN's business model has benefitted from the China–United States trade war.[5]

History

Online retail shop Shein was originally named ZZKKO. It was founded in China in 2008 by entrepreneur and search engine optimization marketing specialist Chris Xu.[6][3] The website SheInside.com was registered in March 2011 and advertised itself as "a worldwide leading wedding dress company", although it sold general womenswear too.[7][6] The company acquired its items from Guangzhou's wholesale clothing market, which is a central hub to many of China's garment manufacturers and markets. Shein had no involvement in the design or production of the garments. However, it functioned similarly to a drop shipping firm, which sells items directly to international customers through third-party wholesalers.[3]

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.[3] In 2012, the company began using social media marketing by collaborating with fashion bloggers for giveaways and advertising items on Facebook, Instagram, and Pinterest.[3]

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 their headquarters in Guangzhou, China. Two years later, in order to become a fully integrated retailer, Shein began to develop its own supply chain system.[8] Within the same year, it acquired Romwe, another Chinese e-commerce shop.[3] 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.[6] 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.[3]

By 2019, its merchandise were featured on daytime television shows in the United States with other internet businesses such as Fashion Nova and Zaful. Meanwhile, fashion influencers also displayed Shein products in haul videos alongside other well-known retailers. Despite being an online retail store, Shein also opened up pop-up shops for people who do not wish to purchase online. Moreover, the retailer's early usage of TikTok and ability to advertise viral items boosted Shein's popularity.[3]

By November 2021, Shein grew from a company valued at $15 billion to one valued at $30 billion.[6] During the pandemic of 2020, it reportedly made $10 billion in revenue, making it the seventh straight year of more than 100% sales growth for the company.[6] As of October 2020, Shein was the world's largest online-only fashion firm.[6] As of May 2022, it is the largest fast fashion firm.[7]

In April 2022, Shein raised $1 billion to $2 billion in private funding and had claimed 28% of the US fast fashion market. Earlier that year, a survey of 7000 American teenagers ranked Shein as their second favorite ecommerce website.[7]

In a May 2022, article in Fortune, the company was described as catering to Gen Z while using big data and rapid Chinese manufacturing to quickly design clothing at a lower price point. The company was valued at $100 billion.[9]

Marketing

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.[6] On May 17, 2021, the number of Shein's app downloads surpassed those of Amazon.[10]

Shein claims to utilize the psychology of the new generation and implements marketing strategies accordingly to achieve growth.[11] In 2020, Shein was the most talked about brand on TikTok and YouTube, and the 4th most talked about brand on Instagram.[12] Its low prices attract teenage internet shoppers with small budgets to post what they bought on social media.[11]

For user growth, the company offers relatively low prices to stimulate demand.[11] With more spending, customers can be rewarded with more discounts, which are encouraged to be applied to their next shopping trip.[11] 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 into their cart, watching live streams and joining its contest show, in order to win points which can be redeemed later.[6] This increases the opportunities for customers to be exposed to more information and shopping incentives.[6]

Manufacturing

Originally, Shein did not design its clothes.[3] The company mainly sourced their clothing from China's wholesale clothing market in Guangzhou.[3] However, Shein became a fully integrated retailer in 2014 when it secured its own supply chain system. Now, the company utilizes a network of manufacturing partners and suppliers in order to make and deliver its products.[3]

Shein makes predictions on trends and produces items as quickly as three days after the identification of a trend.[3] Shein also limits its orders to small batches of about 100 items to gauge customer interest, while its other competitors, like Zara, order larger quantities (about 500), increasing their chances of losing profit if orders are not purchased in full.[3] Shein is also able to avoid paying export and import taxes, contributing to larger margins.[3]

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.[13] 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.[14][5]

Controversies

Intellectual property theft

In 2018, the company was sued by Levi Strauss & Co. for copying a trademarked jean stitching. The case was settled out of court.[15]

In 2021, AirWair International Limited, who are known for the Dr. Martens boots, 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.[16] In March 2021, Ralph Lauren filed a trademark infringement and unfair competition lawsuit against Zoetop Business Co. (the parent company of Shein).[17] 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."[17]

Shein has also been accused by dozens of artists and small fashion retailers of stealing designs.[18][19] 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.[20] Quinn Jones, who is the co-founder of Kikay (an earring brand in Los Angeles), said that he found earring designs on Shein that were very similar to Kikay's earrings.[16] Elexiay also claims that Shein stole its design of a pink and green hand-crocheted sweater, which costs $330, but was sold by Shein for $17. Reclamare PH and Sincerely RIA, both of which are small fashion brands, have said on their social media handles that Shein has copied their designs. Shein has also been accused of copying designs of non-clothing such as enamel pins.[21] In an effort 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.[20][21] 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.[22]

In 2022, Mexico's Secretariat of Culture challenged the use of Shein's use of traditional Mayan designs, prompting Shein to remove them from its website.[23]

2018 data breach

The company also experienced a data breach in 2018 that compromised the email addresses and encrypted passwords of 6.42 million users, leading security experts to denounce the retailer's "reactive cybersecurity strategies" and inability to adequately protect its customers' information.[24]

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 clarified that it was a Buddhist religious symbol, not a Nazi swastika).[25] 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 offensive image, and also for using the image without the permission of the person who created the design.[26]

App prohibition in India

In June 2020, the Shein app was banned in India due to privacy concerns.[27] 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".[28] However, it is still legal in India to purchase Shein products on other websites that are not covered under Section 69A.[28]

Health and safety concerns

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.[29] The company also sold a red purse that exceeded permitted lead levels 5 times the amount.[29] Shein notified Marketplace that they would stop selling the two items and would stop getting supplies with the corresponding suppliers until the problem was addressed.[29]

Human rights violations

In August 2021, Shein claimed on its website that its factories were certified by the International Organization for Standardization (ISO) and SA8000.[30] This was disputed and was considered to be a breach of the United Kingdom's 2015 Modern Slavery Act.[30] According to Reuters, Shein was also in violation of a similar anti-slavery law in Australia.[31] An investigation by Swiss advocacy group Public Eye found staff across six sites in Guangzhou were working 75-hour weeks, in breach of Chinese labor laws.[32]

Tax evasion

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.[33] 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.[34]

Amplification of fast fashion

German national media 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 susceptible to make wise financial decisions, as well as the caused environmental impact.[35] 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 actually need.[36]

References

  1. ^ Faithfull, Mark. "Shein: Is China's Mysterious $15 Billion Fast Fashion Retailer Ready For Stores?". Forbes. Retrieved 2021-06-15.
  2. ^ "Shein Revenue and Usage Statistics (2022)". 10 March 2022.
  3. ^ a b c d e f g h i j k l m n Nguyen, Terry (2021-07-13). "Shein is the future of fast fashion. Is that a good thing?". Vox. Retrieved 2021-11-06.
  4. ^ Scott, Miriam Gottfried and Charity L. (2022-04-05). "Shein Valued at $100 Billion in Funding Round". The Wall Street Journal. ISSN 0099-9660. Retrieved 2022-06-25.
  5. ^ a b "How Trump's Trade War Built Shein, China's First Global Fashion Giant". Bloomberg Businessweek. 14 June 2021. Retrieved 2021-06-15.{{cite news}}: CS1 maint: url-status (link)
  6. ^ a b c d e f g h i Michelle Toh (15 August 2021). "The secretive Chinese upstart 'making fast fashion look slow'". CNN. Retrieved 2021-11-06.
  7. ^ a b c Vara, Vauhini (May 4, 2022). "Fast, Cheap, and Out of Control: Inside Shein's Sudden Rise". Wired. Condé Nast. Retrieved May 5, 2022.
  8. ^ Chen, Louise Matsakis, Meaghan Tobin and Wency (2021-12-21). "How Shein beat Amazon at its own game – and reinvented fast fashion". the Guardian. Retrieved 2021-12-22.{{cite web}}: CS1 maint: multiple names: authors list (link)
  9. ^ Lau, Yvonne (2022-05-31). "Thought Zara was inexpensive? China's $100 billion startup Shein is undercutting the fast fashion industry with even cheaper clothes". Fortune. Retrieved 2022-05-31.
  10. ^ Xiao, Eva; Moss, Trefor (2021-08-02). "How Shein Became the Chinese Apparel Maker American Teens Love". The Wall Street Journal. ISSN 0099-9660. Retrieved 2021-11-06.
  11. ^ a b c d "How US-China trade war turbocharged shopping app Shein's growth". South China Morning Post. 2021-06-16. Retrieved 2021-11-06.
  12. ^ "Analysis Shows 'Most Talked About' Brands Across TikTok, YouTube and Instagram". Retrieved 2021-10-04.
  13. ^ "De Minimis Value Increases to $800". U.S. Customs and Border Protection. Retrieved 2021-11-06.
  14. ^ Helfenbein, Rick. "Outsmarted By China, Not Protected By Biden, Retail Takes A Hit". Forbes. Retrieved 2021-11-06.
  15. ^ Lee, Dave (2021-06-14). "Chinese ecommerce site Shein hit with trademark disputes". Financial Times. Retrieved 2021-10-04.
  16. ^ a b Lee, Dave (2021-06-14). "Chinese ecommerce site Shein hit with trademark disputes". Financial Times. Retrieved 2021-10-04.
  17. ^ a b "From Dr Martens to Ralph Lauren, Lawsuits Are Starting to Build for $15 Billion Ultra-Fast Fashion Brand Shein". The Fashion Law. 2021-06-15. Retrieved 2021-09-27.
  18. ^ Strumpf, Dan (2022-07-03). "China's Fast-Fashion Giant Shein Faces Dozens of Lawsuits Alleging Design Theft". The Wall Street Journal. ISSN 0099-9660. Retrieved 2022-07-04.
  19. ^ "'They took my world': fashion giant Shein accused of art theft". The Guardian. 2022-03-06. Retrieved 2022-03-06.
  20. ^ a b "Chronicling SHEIN's Problematic History". www.34st.com. Retrieved 2021-10-04.
  21. ^ a b Pruitt-Young, Sharon (2021-07-20). "Why Indie Brands Are At War With Shein And Other Fast-Fashion Companies". NPR. Retrieved 2021-09-27.
  22. ^ Michie, Natalie (2021-06-16). "Shein Stolen Designs: Fast Fashion Retailer Accused of Copying...Again". FASHION Magazine. Retrieved 2021-12-06.
  23. ^ Diaz, Lizbeth (2022-07-21). "Mexico concerned by Chinese retailer Shein's use of a Mayan design". Reuters. Retrieved 2022-07-24.
  24. ^ "Over 6 Million Users Hit by Breach at Fashion Retailer SHEIN". www.securityweek.com. Retrieved 2021-11-06.
  25. ^ "Popular online retailer Shein apologizes for selling swastika necklace after backlash". www.cbsnews.com. Retrieved 2021-11-06.
  26. ^ "Online Store Shein Apologized For Selling A Phone Case Depicting A Handcuffed Black Person Outlined In Chalk". BuzzFeed News. Retrieved 2021-11-06.
  27. ^ Toh, Michelle (July 15, 2021). "Amazon is helping a Chinese upstart make a comeback in India after its app was banned". CNN. Retrieved 2021-08-30.{{cite web}}: CS1 maint: url-status (link)
  28. ^ a b "Chinese 'Shein' app blocked but sale of products on other platforms not covered: MeitY to Delhi HC". The Hindu. PTI. 2021-10-05. ISSN 0971-751X. Retrieved 2021-11-06.{{cite news}}: CS1 maint: others (link)
  29. ^ a b c Jenny Cowley, Stephanie Matteis, Charlsie Agr. "Experts warn of high levels of chemicals in clothes by some fast-fashion retailers".{{cite web}}: CS1 maint: multiple names: authors list (link) CS1 maint: url-status (link)
  30. ^ a b Waldersee, Victoria (2021-08-06). "Chinese retailer Shein lacks disclosures, made false statements about factories". Reuters. Retrieved 2021-11-06.
  31. ^ "Shein is Falling Short of Modern Slavery Reporting Rules, According to New Report". The Fashion Law. 2021-08-06. Retrieved 2021-11-06.
  32. ^ "Shein suppliers' workers doing 75-hour week, finds probe". BBC News. 2021-11-12. Retrieved 2021-11-17.
  33. ^ UK Government. "VAT and overseas goods sold directly to customers in the UK". Gov.UK. Retrieved 2022-04-27.
  34. ^ Chambers, Sam (2022-04-23). "How Chinese clothing giant Shein conquered the UK — and undercut rivals on tax". The Sunday Times. Retrieved 2022-04-27.
  35. ^ If you think fast fashion is bad, check out SHEIN, retrieved 2022-05-04
  36. ^ Mahmood, Zainab (2022-04-18). "Ultra-fast fashion is taking over – and using every trick in the book to get us addicted". The Guardian. Retrieved 2022-05-04.
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