Shein is trying to take on Amazon. Some say it should be cleaning up its act instead
Fast-fashion giant launching global online marketplace, selling from 3rd-party vendors
There's a buzz in the air as young people line up for Shein's Montreal retail pop-up.
"It's cheaper," said Diana Quentero, who lined up to shop. "I can find everything … If I want something for a special occasion, I go Shein."
The line on Thursday was hundreds of people long and snaked around the corner of an outdoor mall. Online fast-fashion giant Shein, founded in 2008, doesn't have any brick and mortar stores other than a few in Asia. So a pop-up is novel for shoppers.
Shein, a Chinese company based in Singapore, has seen its popularity explode on social media for its $3 tops, $5 dresses and nearly endless webpages of styles. According to Business Insider, Shein has more than 74.7 million active shoppers, and in 2022, the company was worth $100 billion US.
Now, the company is expanding from selling its own branded apparel to become a global online marketplace to compete with some of the biggest online e-commerce brands. Its online marketplace will see third-party vendors sell everything from housewares to appliances, directly to the consumer, similar to Amazon.
It's one of many companies moving into the marketplace business. This week, The Wall Street Journal reported that TikTok is also building an Amazon-like marketplace. And Temu, a Chinese owned e-commerce platform, launched in the U.S. in 2022 and in Canada this February.
But some say Shein needs to clean up its act first. The company has faced tough scrutiny over its environmental impact and its human rights track record, and an expansion could make things worse, say experts.
"The fashion industry is already complex enough. There are already enough problems for Shein to solve to improve," said Sheng Lu, an expert in the global textile and apparel industry at the University of Delaware.
In its May press release, Shein said it's expanding to meet consumer demand. Shein did not respond to CBC News' request for an interview.
"Shein is committed to delivering the best shopping experience for customers," Sky Xu, Chief Executive Officer, said in the release.
A rival to Amazon?
Shein became the largest fast-fashion retailer in the U.S. in 2021, according to Ernest Analytics. And now, with its sights set on expanding, some experts say that looks to be just the beginning.
"I don't think there's any reason why another company couldn't rival what Amazon is doing … It seems like Shein is trying to do that," said Elizabeth Cline, a New York-based author and journalist who covers fast fashion and sustainability.
It's already launched its online marketplace in Mexico, Brazil and the U.S., and plans to roll out in Europe later this year. There is no word yet on when the marketplace could roll out in Canada.
Shein's ability to deliver on dirt-cheap prices will make a stiff competitor in the e-commerce space, said Cline.
"Amazon is known for speed and low price, but you can always go lower," she said.
Shein's already-established popularity could help propel its new marketplace, said Dave Xie, expert at Oliver Wyman consultancy focusing on China's retail sector. Shein already has brand recognition, he said, and can charge merchants commission.
"It's kind of easy money for the platforms to make, but only under the condition that as a platform you have a very big traffic base," said Xie. "So basically I think that's the strategy of lots of platforms, for example, Amazon.com."
And it can lean on its ability to detect trends in the retail sector, allowing it to understand what will sell well, and what won't, he added. He says the company has the ability to scrape data from social media and other websites to detect new trends.
"New design, new colour, new theme, even new fabrics are available and then designers from Shein will combine those design elements …to produce the newest product."
Pressure on supply chain
Xie says Shein is able to keep up with demand by using a "small order, quick response" model, which allows it to have a tight command of its supply chain, only mass producing the highest-selling items on its site.
"They're just ordering very small batches of clothing and then if there's demand for the product, they'll scale it up," Cline said.
But Cline says Shein's business model creates pressure on its supply chain to make clothes for cheap, which ultimately causes factories to cut corners on environmental and human rights standards.
In 2021, Shein emitted about 6.3 million tons of carbon dioxide equivalents, according to The Business of Fashion. And a recent U.S. Congressional report raised concerns that the company had links to forced labour in its supply chain.
Last September, Shein committed to reducing its supply chain emissions by 25 per cent by 2030. In comparison, Zara recently announced its plans to cut emissions along its value chain by 50 per cent in 2030 and to achieve net zero by 2040.
Cline questions how Shein's newly announced sustainability plan will play into its new marketplace, and how far down the supply chain its sustainability initiatives will really go.
"There are concerns around how Shein creates this kind of culture which encourages consumers to keep purchasing cheap clothing and dump them," Lu said.
Lu says amid all the scrutiny, Shein should take the opportunity to revisit its business model.
Ultimately, Cline says Shein presents a lot of different tensions.
"People are kind of grappling with that," said Cline. "What does that mean that we live in this age of sustainable awareness and we've also somehow fed and created the world's biggest, fastest, cheapest fast fashion company."
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