Shein’s Latest Scandal Won’t Deter Fast Fashion Giant’s Success

What Happened: China’s fast fashion giant Shein has had a bruising few weeks. Firstly, a documentary for Channel 4 found that the Guangzhou behemoth upheld appalling conditions for its employees, which included often only one day off a month, less than three cent (0.27 RMB) per garment produced. and 18-hour work stints — both of which contravene Beijing labor laws. Denied by Shein, these allegations come on top of an audit of its suppliers in 2021 which found that 83 percent had mediocre or poor performance and were therefore in need of corrective action. Earlier this month, Shein’s parent group Zoetop Business Company, Ltd, was also fined $1.9 million (13.7 million RMB) for failing to properly handle a data breach in 2018; this impacted the personal information of some 39 million Shein account holders.  

The Jing Take: Shein is, quite simply, an anomaly. The Chinese fast fashion company has managed to gain international visibility (and profitability to match) and eclipse all global rivals including Primark and Amazon in just a few years. Bloomberg estimated annual revenue reached at least earnings at $16 billion (115 billion RMB)  in 2021, up from $10 billion in 2020. Built on algorithms that seem to know exactly what consumers want before they do, it’s difficult to think of any equivalent. The startup even received investment from Sequoia Capital China (which recently hired Vogue China’s former Editor in Chief, Angelica Chung). Very few homegrown firms have done so well by trading outside the mainland without relying on the domestic market. 

In July the venture hired Jacobo Garcia Miña as development director to take charge of its expansion in Europe. With almost 20 years of experience in the western continent’s fashion retail distribution, including with H&M and Burberry, Miña will be “helping new and existing brands grow together with Shein.” With so much potential and endorsement, its continued transgressions are all the more frustrating. But surprising? No. 

According to a UBS report entitled “A $2.5 trillion industry at risk? What if consumers stop buying disposable clothes?”, the fashion industry — globally estimated at the aforementioned $2.5 trillion (18 trillion RMB) annually — contributes to roughly three percent of the world’s GDP. This global spend puts, as founder of sustainability initiatives Redress and The R Collective Dr. Christina Dean says, “a lot of power in fashion brands and manufacturers’ hands.” And this is “flexed throughout supply chains, particularly in emerging markets, in the search for bigger margins.” Under the guise of profitability, the squeezing on the supply chain, particularly on the social side in terms of “wages and working conditions,” will come as no surprise to industry professionals. 

You’d hope that this would send shockwaves to consumers. But, as we see repeatedly, global fashion consumption will be relatively unchanged by this news. Indeed, such revelations of apparent malpractice in the supply chain, or ESG violations, produce little change. “Generally speaking, most consumers have a goldfish memory in terms of how they change their longer-term clothing shopping behavior as a result of these.” UBS’s report found that significant ESG factors such as the Rana Plaza garment factory building collapse, in which over 1,100 people died or a generalized “concern” for the environment have not broadly affected apparel purchasing patterns thus far. As Dean says: “unfortunately this could be a case of today’s news, tomorrow’s fish and chip wrappers.”

To counter negative press, Shein has jumped on the sustainability bandwagon the latest initiative of which is their resale site. The irony of the company launching such a platform has less to do with its debut coinciding with the broadcast of the documentary than the audacity of offering consumers a trading platform for secondhand garments (purchased originally for a handful of dollars) as a way of mitigating their ethical footprint. 

On October 17, Shein announced the launch of Shein Exchange, an online peer-to-peer resale platform. Photo: Shein

Shein is certainly undaunted. It aims to reduce shipping times in the US to around three to four days by opening a distribution center in southern California next year and in the northeast of the States, joining its existing one in Indiana. And it’s unlikely these latest realizations will hamper the growth of a D2C unicorn that Bloomberg has valued at $100 billion (720 billion RMB). Cognitive dissonance will always hamper our acceptance of facts. It’s difficult to see the world as it really is. We need to find a way to do so — and with that, usher in radical, immediate change. 

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

Categories

Companies