Shein pushes into Europe to boost supply chain beyond China (2024)

SINGAPORE – Fast-fashion giant Shein will strengthen its presence in Europe and Mexico, including selling more locally made products, in a bid to diversify its China-centric supply chain.

The company will launch an online marketplace in Mexico in June, where products from third-party sellers can be bought alongside Shein’s own brand of US$10 (S$13.50) dresses and US$12 jeans. This will be followed by roll-outs in Germany, Spain, France and Italy in the third quarter.

The move builds on existing offerings in Brazil and the United States, and “reinforces the entire localisation strategy worldwide”, Shein global head of public affairs Leonard Lin said in an interview at the company’s headquarters in Singapore.

“We’ll be prepared to grow the diversification and work with manufacturing suppliers in other countries as well.”

Shein’s pivot to selling products other than its own, including Skechers shoes and Lansinoh mother-care items, brings it closer to what rival Temu offers. The bargain shopping app backed by China e-commerce heavyweight PDD has surged in popularity in the US and saw sales top Shein’s in May, with its wide array of items from clothing to socket wrenches.

Mr Lin said Shein’s expansion is not a reflection of what competitors are doing and the firm will continue to focus on what it can offer to the young female shoppers who are its core clientele. There has been a huge increase in demand from customers for more product variety, he added.

China reliance

Despite its diversification push, the company remains heavily reliant on a vast network of contract manufacturers in China that churn out new designs in about 10 days to meet the fast-changing whims of Western consumers.

While the system has underpinned Shein’s rapid ascent – it far surpasses Zara and H&M in the US fast-fashion market – it has also left the company mired in the middle of US-China tensions that are rippling across a raft of sectors.

The firm has also long faced criticisms that run the entire gamut of its operations, from accusations about stealing designs to links to forced labour and its contribution to overconsumption that is harming the environment.

The company has spent millions to address these concerns, including upgrading factories and launching a programme that showcases independent designers’ work and gives artists a cut of the profits.

Mr Lin said Shein takes copyright infringement seriously and uses automated and manual checks to review products from suppliers and third-party sellers before offering them for sale. The company also monitors geopolitical developments and is committed to complying with local laws and regulations, he said.

“We take visibility across our entire supply chain seriously and we’re committed to respecting human rights and adhering to local laws in each market we operate in,” Mr Lin said. “We have zero tolerance towards forced labour.”

Supply shifts

Efforts to shift further away from China are also likely to remove one of its biggest disadvantages: long delivery times. The company already has distribution centres in the US Midwest and California to get items to customers quicker. It has opened a warehouse in Toronto and has a facility in Poland.

Local production is being considered in India under a partnership with billionaire Mukesh Ambani’s Reliance Industries and there are about 1,000 manufacturers of Shein-branded items across Turkey and Brazil. The company wants the South American country, the first to get a Shein marketplace, to have 85 per cent of sales from local producers and merchants by 2026, Mr Lin said.

Shein is already rolling out the red carpet to entice businesses. It will offer training and incentives, like waiving commission for certain periods of time, to potential top vendors.

It wants 100,000 sellers across all marketplaces to achieve annual sales of US$100,000, with another 10,000 hitting US$1 million in three years, according to Mr Lin.

Some of the company’s current sellers have managed monthly sales that top US$1 million within three months of joining the platform.BLOOMBERG