Why Shein is trying to clean up its image in Europe

Last week, Shein announced a new initiative in Milan. On the occasion of World Creativity and Innovation Day, the Chinese fast-fashion brand will organize a "exclusive event", quoting the press release, at the Palazzo dei Giureconsulti, in front of Milan's Duomo, to "celebrate Italian creativity between innovation and design." A move that raises several questions, especially considering that the relationship between the mega-brand and the world of creativity and fashion is more parasitic than collaborative, and that the brand’s leadership, presenting itself to the European public amid a stock market valuation that has been delayed month after month, has not been shining in terms of transparency and availability. Just last week, for example, Tapestry accused Shein of selling counterfeit Coach bags – not copies, not "dupes," but outright counterfeits. Also, last week, a recall of a batch of children's pajamas sold by Shein in Canada was issued after they were found to be flammable. At the beginning of the month, the Daily Mail published an investigation accusing the company’s AI algorithm of copying the work of a series of independent British designers for lingerie, swimwear, and accessories. In February, not only had an internal audit revealed two cases of child labor, but an investigation in South Korea, later published by Elle, revealed the presence of numerous toxic chemicals in the brand's clothing. This is without mentioning an article by Reuters from last June, which mentioned at least 90 lawsuits filed against Shein for plagiarism, copyright violations, and so on. But why is the brand trying so fiercely to clean up its image?

As explained in a long article by the magazine Follow The Money, Shein has been paying a number of politicians and lobbyists for years to promote the mega-brand's agenda in the main European political courts: the seasoned German politician Günther Oettinger, former French interior minister Christophe Castaner, two Brits Kamella Hudson and Peter Mandelson (the latter is also a former British ambassador to the USA), and the current head of the FBI Kashyap “Kash” Patel, who resigned but still holds millions of dollars worth of shares in the company. However, the efforts of all these lobbyists have not yielded huge results. In fact, Shein has faced a difficult financial year, with a nearly 40% drop in profits in 2024, as reported by the Financial Times, seeing its net profit decrease to about 1 billion dollars, a value much lower than the initially forecasted 4.8 billion dollars for the year. Despite a 19% increase in sales, which reached 38 billion dollars, the company has struggled to cope with the growing competition from Temu and other market pressures, with a particularly difficult last quarter further exacerbating Shein’s challenges in getting listed on the London stock exchange. Recently, the company's new CEO, Donald Tang, who took over in August 2023, has tried to address the company's image problems personally, through a series of lengthy interviews in major European and American business publications, where he has attempted to reframe the narrative. He told The Times that they want to "embrace the responsibility and transparency of being a public company" and told the French Le Journal du Dimanche: "We are not a fast-fashion company. Fast fashion imposes trends defined by the brand, with mass production. Our model is based on on-demand production: we produce what customers want to wear."

Anyway, even though GlobalData reported that Shein was the brand with the greatest market expansion last year, alongside adidas and Chanel, the drop in profitability highlights the obstacles Shein is facing in obtaining regulatory approval for its listing in London. The company was valued at 66 billion dollars in its last funding round in 2023, but as Jing Daily reports, investors and other stakeholders are now pushing for a lower valuation, with some suggesting a figure around 30 billion dollars. According to Donald Tang, who spoke about it to the Financial Times, there have been "zero discussions" on this valuation. Anyway, a cut in the market valuation could facilitate the completion of the IPO, potentially in the first half of the year, delayed due to evolving trade policies in the United States, though it is currently suspended. And any further delay of the IPO beyond July would force Shein to submit documents again to the British authorities. Initially, the company had sought to list in New York at the end of 2023 but shifted its focus to London after facing resistance from the U.S. Securities and Exchange Commission. Now it must face the scrutiny of regulatory authorities not only in the UK but also in China, as reported by The Economist. The competition with Temu has further complicated Shein’s financial position, which has taken some suppliers from Shein and increased costs for logistics and marketing, forcing the company to revise its strategies. To counter Temu's threat, Shein temporarily expanded its product range beyond fashion at the end of 2023, but this move negatively affected profitability, leading the brand to refocus on its core business.

Now, the battle that Shein is fighting moves on two fronts. The financial and legal one is happening among the higher echelons of politics – but in fact, it is just a reflection of the broader prejudice that the public has towards a brand that has entered the market so explosively in recent years that it has driven some competitors into bankruptcy in the low-cost clothing segment (Forever21 went bankrupt mainly due to competition from Shein and Temu), but has also quickly become synonymous with poor-quality clothing and a very unclear production system. This very prejudice is the second front of the battle. Even the founder of the company, Xu Yangtian, better known as Chris Xu, is still considered a figure shrouded in mystery and secrecy – and perhaps that is why the new CEO has been so eager to provide the company with a public and reassuring face. Shein's repositioning strategy, based on penetrating the emerging designers market segment, offering them a platform and visibility, perhaps serves to wash the hands of a company that has become so enormous in the market by exploiting the lowest dynamics to the maximum. And that Shein wants and can organize celebrations of innovation and creativity (to be fair, their production system and algorithm must be something honestly genius, though unsustainable) is a dual testimony to the problem we have with fashion in the West: on one hand, there is a demand from the public, made ravenous by continuous marketing strategies designed to make a continuous consumption model desirable, initially aimed at products that a large portion of the public can no longer afford, with decreasing quality; on the other hand, a scene of young creatives so oversaturated and eager for an “entrance ticket” that they have to turn to Shein to emerge. But in a world where money is everything, whoever has more simply has the right, because everything is for sale – and can even afford to host events dedicated to creativity in the heart of the fashion capital of Italy.