With a number of notable retail chiefs in the UK, Europe and the USA expressing anti-Shein sentiment, along with the UK government pledging to delve deeply into the integrity of Shein’s ethical claims, it may well be, as mooted, that Shein will give up on its plans to list in London.
Given that Shein has already invested in a new UK HQ up in Manchester; established a network of new suppliers in Turkey; as well as defended its business rigorously at every turn, this may still not be enough to sway the UK government to greenlight an LSE flotation. The backlash from the British fashion industry won’t be going away any time soon. And, it is hard to envisage how Shein can continue to generate high profits if it has to operate under the same strict rules as its UK, EU, and/or US competitors.
Shein will need to raise its environmental standards across the board, in line with all legal requirements. It will need to clean up its entire supply chain, banning all manufacturers who exploit child and other forced labour. It will need to import its merchandise in bulk into the countries it operates in, paying the respective duties, manage the returns and lawful disposal of waste. It will need to file accounts in each of those countries and pay corporation tax in each of those countries. It will also need to be open to full audit of its operations in line with each country’s legislation.
With Reuters reporting that Italy’s anti-trust agency has launched an investigation into Infinite Styles Service Co Ltd., the Dublin based entity which manages the Italian website for Shein, over possible misleading environmental claims made on the site. The US government talking about taking a firm stance against Shein’s import duty avoidance which is achieved by shipping individual orders direct to US consumers – Shein along with Temu, Alibaba and JD.com are subject to much greater scrutiny in the US market. Inevitably, other countries will follow this lead. There might also now be much tougher controls on the quality of the products these companies each ship to their international customers as, currently, way too much of the volume ends up in landfill creating a problem for every country these companies ship to.
Given that these huge Chinese concerns have taken a massive slice of trade from local competitors in markets where they are active, avoiding duty and local taxes, albeit (currently) lawfully, removing the loopholes will have a major impact on their profitability. Stricter environmental controls will require that they rebuild their supply chains. Their glory days may well now be numbered.
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