London calling: Unpicking Shein’s likely IPO

Sign up to receive the Vogue Business newsletter for the latest luxury news and insights, plus exclusive membership discounts. Nothing is confirmed, but fast fashion giant Shein looks increasingly likely to launch an IPO in London with a valuation of at least £50 billion. This follows an attempt in late 2023 to go public in the US, abandoned after pushback from US lawmakers and multiple regulatory hurdles. Since its 2008 launch in Nanjing, China, Shein has upended the fast fashion category with a tech-driven, on-demand business model and innovative marketing strategies, including TikTok hauls and the offer of an astonishing 6,000 new styles daily. In 2023, Shein posted profits of more than $2 billion — nearly double the $1.1 billion figure from 2021. Analytics firm Globaldata named Shein the world’s largest apparel retailer in 2023, overtaking Inditex’s Zara. Amid this eye-watering growth, Shein has faced a wave of negative press — covering everything from its environmental record to questionable working practices and the broader issue of accelerating fast consumption. Both American and European governments have been vocal in their criticism and scrutiny of the fast fashion sector — and US administrations have been particularly wary of companies emerging from China (including Shein, TikTok and Temu). In Europe, the pressures are growing. A report by Swiss advocacy group Public Eye in 2021 claimed that a number of Shein employees across sites in China were working 75-hour weeks. In March 2024, the French Parliament voted unanimously in favour of a bill to ban fast fashion advertising and establish ecological penalties for fast fashion producers. Forthcoming EU regulation could further ramp up the pressure. Analysing the choice of the UK Against this backdrop, factors now favour a UK listing. But what are the implications for Shein and the UK — and fast fashion more widely? On the surface, the English capital looks like an unusual choice for Shein, which is now based in Singapore as opposed to China. London’s Stock Exchange has struggled to retain large-cap companies, and a Shein IPO would make for a substantial business coup for an incoming government (the Labour Party is anticipated to win national elections on 4 July). Put simply, a London IPO allows both parties to claim a “win-win scenario”, says James Campbell, co-founder of digital agency Tong. Despite its reputation and a rise in anti-Chinese rhetoric, Shein’s planned flotation has received cross-party political support in the UK. Finance minister Jeremy Hunt held talks with Shein executive chairman Donald Tang in February, while three Labour Shadow ministers for business, industry and the creative industries are reported to have all met Tang in recent months. “The opportunity is there for Shein to influence and set policy [here] as the UK looks for positive news in the post-Brexit climate and a divesting from Europe,” Campbell explains. The upcoming election might offer a window of opportunity to offset challenges. Shein has benefited from a cross-border model that allows it to exploit tax exemptions in the US and the EU. It delivers products directly to customers, taking advantage of tax-free shipping for low-value packages. In May, Germany announced intentions to scrap some of the tax breaks for cheap packages. Currently, parcels bought online from a country outside of the EU are exempt if their value is under €150. How an IPO might kick up trouble However, an IPO in London might hold Shein to account. Working standards were investigated by the UK’s Channel Four in a TV documentary titled Untold: Inside the Shein Machine, which alleged that workers endured long days, little time off and extremely low wages. Shein challenged many of the findings, but ultimately launched an inquiry and admitted that two of its sites breached local labour violations. It announced a $15 million sum to improve working standards and is rolling out ESG (environmental, social and governance) investment. According to the British Chamber of Commerce in China, ESG investment is experiencing rapid growth in China. By the end of 2023’s third quarter, ESG investment reached RMB 33 trillion (approximately $3.6 trillion), marking a record high, with a 34.4 per cent increase from the year prior. It’s a sign that the Chinese industry is taking ESG increasingly seriously. In September 2023, Shein committed a total of $35 million towards social-impact activities focused on women, young people and underprivileged communities. Supply chain transparency is an issue for many fashion corps, and for a business the size of Shein, it’s simply huge. Dr Christina Dean, founder and CEO of The R Collective — a social impact business based in Hong Kong, focused on “recycling fashion’s waste” — claims Shein has “thousands of suppliers dotted in China, where environmental and social regulations are, largely, still in the dark ages”. For a potential listing on the London Stock Exchange, Shein must comply with stringent ESG reporting requirements that are on a rapid upward trajectory. “Stock exchanges and investors are demanding greater disclosure of ESG-related data — and, with this, performance — a trend that continues to gather pace around the world, including London,” says Dean. Premium listed and large companies are subject to the most detailed requirements. The UK government requests that certain companies publish an annual statement setting out the steps they take to prevent modern slavery in their business and in their supply chains; a requirement under Section 54 (Transparency in Supply Chains) of the Modern Slavery Act 2015. Fast fashion’s impact on the environment is another major issue. More than 80 per cent of clothing produced ends up in landfill or disposal by incineration within a year of production, according to environmental movement Earthday.org. “The last thing the fashion industry and our global environment and UK landfills and incinerators need is the further expansion of ultra-fast fashion. Shein’s meteoric growth will only put more pressure on this,” Dean says. “At a time when global fashion leaders are rightly focused on making our sector more socially, environmentally, and economically sustainable, the government’s courting of Shein to list on the London Stock Exchange and Shein’s decision to do so is of significant concern to UK fashion designers and retailers,” says Caroline Rush, CEO of the British Fashion Council, in a statement. “While we appreciate that Shein has committed to meeting acceptable industry standards, questions remain about the ethicality and sustainability of a business model and supply chain that consistently undercuts British designers and retailers, and these still need to be answered.” She adds: “The only cautious optimism that can be expressed on behalf of the UK fashion sector concerning this listing is that it will increase scrutiny of Shein’s respect for the environment, the rights of workers and designers’ IP rights by government, investors and fund managers in the UK.” A Shein statement asserts: “As a major global e-retailer, we know that we have an important role to play in supporting the communities where we work, source and live, and the planet we all share.” In April, Annabella Ng, senior director of global government relations at Shein, spoke at the UBS Action Showcase during Ecosperity Week in Singapore, arguing that the move towards a circular economy is about more than just one company, requiring effort from the entire ecosystem — comprising brands, retailers, investors, manufacturers and customers. As the rumours swell, Campbell reflects on London’s possible role in forcing change on the e-commerce giant: “A listing in the UK would force them to address some of the thorny issues like Xinjiang cotton in the supply chain or expose it to more scrutiny, which will be helpful… But the [UK] regulators will take a more pragmatic view than those in the US.” “Shein is investing millions of pounds in strengthening governance and compliance across our supply chain,” says a spokesperson for Shein in an emailed statement. “Our regular supplier audits are showing a consistent improvement in performance and compliance by our supplier partners. This includes improvements in ensuring that workers are compensated fairly for what they do.” “As a result of our efforts, research conducted by our third-party auditors across more than 4,000 workers at Shein supplier facilities in China has found that they earn basic salaries (before overtime) that are, on average, two times higher than the local minimum wage, and more than 50 per cent higher than the Global Living Wage Coalition’s 2022 living wage for Shenzhen. Furthermore, in 2023, we organised 133 group workshops and 276 one-on-one training sessions for suppliers, with participant numbers totalling over 5,200.” The spokesperson did not comment further. The influence of a disruptive model Shein’s exceptional growth is indicative of society’s powerful digital transformation. US-based Lawrence Lenihan, co-founder and chairman of Resonance, which uses a proprietary cloud-based platform to design, sell and make products on demand, says Shein’s business model is so radical that this moment “will ripple through every industry”. Shein is now branching into reselling, offering an integrated, online peer-to-peer resale platform across Europe and the UK. As of 2023, over 4.2 million new users joined the platform in the US, with over 115,000 pre-owned items listed. Shein has an estimated 88.8 million active shoppers globally, non-profit Labour Behind the Label estimates. Its no-inventory approach addresses the issue of overproduction, one of the sector’s biggest costs. “This is a company that is super sophisticated and will make every single brand look at their structure,” says Lenihan. “Manufacturers all over the world are sitting on inventory they can’t sell or are massively discounting or throwing it away. It’s ice water to the face.” He paints a picture of brands shutting down operations due to “choking on inventory” as well as companies working to outdated 18-month cycles. Lenihan thinks H&M is “already dead” as a competitor, but Zara might fare better due to its more responsible and transparent approach. Shein’s app uses an AI-supported analysis of customer data to drive a flood of new styles, while responsive sourcing and shipping have transformed consumer expectations in terms of choice and time frame. Whether all of this resolves — or exacerbates — the issues facing a planet with diminishing resources remains to be seen. Comments, questions or feedback? Email us at feedback@voguebusiness.com. More on this topic: Shein wants to sell its supply chain to brands. Here’s why that matters How a TikTok unboxing video is promoting a fast fashion bill Shein wants in with fashion students. Not so fast

Make better business decisions

Make better business decisions