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Shein Dominates the Headlines

2022 was the Year of Shein, even if Russia’s invasion of Ukraine in February scuppered plans of selling shares at a valuation of $100 billion—more than H&M and Zara owner Inditex combined. Economic headwinds, including turmoil in the global equity market, have also done little to tarnish the Chinese e-tail juggernaut, which was still worth between $65 billion to $85 billion in October, according to those in the know.

Not that the rapidly growing company, which sells cheap and trendy clothing to the TikTok generation, isn’t facing headwinds. Slackening consumer confidence and high inflation in Europe and the United States—two of Shein’s biggest markets—could dent its profits. Growing regulatory scrutiny could also create additional pitfalls.

Then there are the controversies. Shein, which is pronounced “she-in,” short for its original name, SheInside, is frequently dogged by accusations that it works with suppliers that regularly flout Chinese and international labor laws. It’s often savaged on social media for copying small (and sometimes not-so-small) designers. Several investigations have uncovered higher-than-allowed levels of lead and other toxic substances in some of its garments. While Shein has turned into the world’s most Googled brand, it has also become the poster child of even faster fast fashion. For its harshest critics, it’s near-synonymous with overconsumption and pollution.

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But the Christian Siriano collaborator has tried to alleviate some of the concerns. In April, it debuted EvoluShein, a “purpose-driven” collection of women’s tops, dresses and bottoms that features inclusive sizing and so-called “responsibly sourced” materials such as recycled polyester derived from used plastic bottles. A few months later, Liz Ricketts, co-founder and director of the Or Foundation, told a stunned audience at the Global Fashion Summit in Copenhagen that her nonprofit had inked a $50 million, multi-year agreement with Shein to tackle clothing waste in the global South. Some praised the pseudo-extended producer responsibility fund for pouring money into an underlooked but vital issue. Others warned of potential greenwashing.

It was around that time that Shein also released its first CSR report, though the publication raised more questions than answers. While Shein wrote that it had audited 700 of its production sites, which are concentrated in Guangzhou, in 2021, it also noted that 83 percent of them require corrective action. By its own admission, 27 percent of its audited factories are ill-equipped for a potential fire. Some 14 percent had violations over working hours.

“From what we know, [Shein has] an expectation of extreme speed and flexibility,” David Hachfeld, textiles expert at Swiss watchdog group Public Eye, which published a report on the dire state of Shein’s working conditions in 2021, told Sourcing Journal at the time. “[It expects its] suppliers to be able to deliver products within a few days. And this, of course, is creating a lot of pressure, especially [with] working times.”

Similar exploitation is taking place at Shein’s warehouses in China, one independent researcher told Sourcing Journal in September, auguring ill for the brand’s expanding fulfillment footprint in the United States. Logistics workers at several facilities, he said, alternate between excessively long day and night shifts every two weeks, disrupting their sleep patterns and diminishing their sense of well-being. Product shelvers and pickers easily walk 70,000 to 80,000 steps a day, shredding new shoes in a matter of weeks. Because many of them work for piece wages, they have to work at a “very high intensity to chase a relatively higher salary,” the researcher added.

Shein made headlines again in October when an undercover exposé by Britain’s Channel 4 found that workers at two factories it contracts in China frequently work 18 hours a day—with only one day off per month—for as little as 3 cents per hour.

The investigation caused the Rolling Stones to immediately distance itself from the retail phenom by requesting a termination of its licensing agreement. An audit by Shein ended up “refut[ing]” most of the documentary’s claims, including ones that the factories withheld salaries or deducted wages if mistakes were made or targets unmet. Allegations that workers only earn “mere pence” per completed garment were also “not factual and misrepresent[ed] the wage structures used by these suppliers,” Shein said.

What the e-tailer did confirm, however, was a problem with working hours. It said it has given both suppliers until the end of December to rectify the situation and “reserves the right to take action against them if they fail to do so by then.”

Meanwhile, Shein said that it plans to shell out $15 million to upgrade hundreds of its factories over the next three to four years on improvements such as a multi-channel feedback system for workers. It also plans to double the $2 million it currently invests in its Shein Responsible Sourcing program, increasing the frequency of independent factory audits, including unannounced spot-checks, and training on its code of conduct.

October also saw Shein dip its toe into resale—and into law enforcement trouble when New York State fined parent company Zoetop Business Company $1.9 million for failing to “properly handle” a data breach that compromised the names, email addresses, hashed passwords and credit card information of 39 million Shein accounts and 7 million Romwe accounts, including those of more than 800,000 New York residents.

Shein also continued to boost its connections throughout 2022. Besides joining the United Nations Global Compact and the Responsible Labor Initiative, it’s now a card-carrying member of the American Apparel & Footwear Association, the Sustainable Apparel Coalition and Textile Exchange. The day before Earth Day, the online purveyor signed a non-binding agreement with forestry nonprofit Canopy to eliminate ancient and endangered forests from its garments and packaging. To lobby on its behalf in Washington, Shein has hired Hobart Hallaway & Quayle Ventures and Akin Gump Strauss Hauer & Feld.

The Singapore-headquartered firm also said in September that it would funnel $7.6 million into the Apparel Impact Institute, a spinoff of the Sustainable Apparel Coalition, to implement programs at more than 500 partner factories to generate a 10 percent greenhouse-gas emissions reduction per facility per year. It’s part of the Amazon-dethroning app’s ambition, it said, to slash its overall supply-chain emissions by 25 percent by 2030.

But November brought more controversy. Shein got sued again for copyright infringement, with the plaintiff refusing to settle for any amount. Two lab tests commissioned by Bloomberg News found that Shein apparel shipped into the United States contained cotton from China’s Xinjiang Uyghur Autonomous Region, in contravention of the Uyghur Forced Labor Protection Act, which President Joe Biden signed into law last Christmas. Before the month closed, Greenpeace warned that Shein was “flooding” Europe with products laden with hazardous chemicals at levels breaching European Union regulatory limits.

What’s next for Shein? A memo to investors obtained by the Wall Street Journal in December suggests that it could soon allow third-party merchants on its platform, à la Amazon. Whatever happens in 2023, Shein is bound to keep the industry guessing—and everyone watching.