Shein may soon look a little more like Amazon.
The online fast fashion giant is looking to allow other retailers to sell to consumers through a marketplace platform, according to a note to investors seen by The Wall Street Journal.
Founded in China and closely associated with China, contributor Christian Siriano is trying to diversify away from the country, according to the note. The controversial Gen Z darling, which appears headed for an international listing, has started manufacturing in Turkey since mid-summer and has leased and operated warehouses in Poland to store goods and ship to customers in Western Europe.
“The marketplace platform offers a variety of additional merchandise and shipping options, which we expect will result in greater customer engagement and satisfaction,” the note said.
Shein declined to comment on the market report.
A market launch would push Shein directly against e-commerce giants such as Amazon, Walmart and even Macy’s, all of which have their own marketplaces with third-party sellers, as well as Alibaba Group, which operates e-commerce shopping site AliExpress and online marketplaces Tmall and Taobao.
The jury is out on the success of a potential market, especially since the company’s coveted buyer demographic appears to prefer the direct-to-consumer (DTC) retail model.
In the United States, just over 50 percent of Gen Z consumers believe that buying directly from an international brand feels more personalized than buying from a big market, according to a survey by cross-border e-commerce platform ESW. In China and India, that sentiment is more widespread, at 60 percent and 67 percent of consumers, respectively. Among millennials, 60 percent of US consumers prefer the personalized feel of DTC sales, compared to nearly 80 percent in China and 76 percent in India.
Shein denies Xinjiang ties in memo
Shein’s supply chain is largely rooted in southern China’s Guangdong province, a major manufacturing hub where some of its largest suppliers from a national network of more than 3,000 sell e-commerce. But recent lab tests conducted for Bloomberg News indicated that the clothing shipped to the U.S. from Shein had cotton originating from China’s Xinjiang region, which has been banned since June under the Uyghur Forced Labor Protection Act (UFLPA) due to evidence of products which contaminate forced labor en masse. of the area
In its note, the company told investors that Shein does not have any suppliers located in Xinjiang and that company policy prohibits working with any of the groups identified on the UFLPA Entity List.
To address concerns about forced labor, Shein said in the memo that all manufacturing suppliers are required to adhere to their code of conduct “based on International Labor Organization conventions as well as local laws and regulations.” The code of conduct includes compliance requirements on working hours, human rights and social welfare standards.
“As a global organization, Shein engages with various agencies in the markets we operate in, including the US, to ensure we comply with local laws and regulations,” the company said in the note.
According to the WSJ report, Shein told investors that raw material suppliers are also required to provide the company with an official certificate of origin. Shein said it has a zero-tolerance policy toward forced labor and has a system for tracking raw cotton that requires suppliers at every step to show production records, warehouse records, delivery notes and sales orders.
Shein also said it regularly sends yarn samples from its cotton suppliers to Oritain, a materials verification company that tests cotton fibers to determine the provenance of the raw material.
In the wake of other negative reports about the company’s factory conditions, the treatment of warehouse workers and worker pay, Shein recently pledged to spend $15 million over the next three to four years to improve hundreds of factories.
The investment focuses on making physical improvements to its suppliers’ factories and is part of Shein’s Supplier Community Empowerment Program (SCEP). More than 30 projects will be completed by the end of this year, 100 by the end of 2023 and up to 300 within four years.
Shein has also tried to combat critics by creating an internal team to monitor and audit its supply chain partners, as well as engaging independent agencies such as Intertek Group PLC and TUV Rheinland, which provide inspection and certification services, to conduct unannounced audits. of supplier factories, the company said in its note. In early December, Shein said in a statement that testing and quality control agencies had conducted more than 2,600 independent audits in the past 12 months.
In the memo, Shein also said it has made “significant investments to improve working conditions at our suppliers’ facilities,” citing an Intertek study that found 96 percent of its workers are paid above the industry average in the same municipality as Guangdong Province. .
Shein remains in growth mode
Criticism aside, Shein’s rapid growth in popularity has been fueled by the company’s low-cost business model, which financial publication Nikkei Asia estimated produced up to 1,000 new product launches a day by 2021. Suppliers are reportedly willing to accept orders as small as 30 pieces, allowing Shein to test ideas cheaply, quickly replenish what works and change with fashion trends.
The retailer uses proprietary software to track production in real-time and measure customer preferences and demand-harness algorithms that incorporate sales, in-app browsing behavior and other data.
The company has had to expand its North American distribution network in response to growing demand, further building out its Indiana distribution center that opened in April and developing plans for additional facilities in California’s Inland Empire and the northeastern United States. . In November, Shein said it opened a 170,000-square-foot office and distribution facility in Toronto.
The potential market wouldn’t be the only new venture from Shein, who recently entered the circular economy with the Shein Exchange. The fast-fashion giant’s proprietary survey showed that nearly half of participants had bought (47 percent) or sold (53 percent) their used products on sites such as Depop, Poshmark and ThredUp.
The mobile-first peer-to-peer experience is currently only available in the US. USA, integrated into the Shein app so that customers interested in reselling their Shein purchases can quickly access their purchase history and fill out a form with all relevant data related to it. product
Based in Singapore, Shein is on track to generate $24 billion in revenue this year, according to the WSJ report. But the retailer’s $100 billion valuation has jumped amid a slowdown in global financial markets in 2022 and expectations of a full-blown recession. In October, the Financial Times reported that Shein’s valuation was between $65 billion and $85 billion.