Shein: A Look at the Lawsuits Facing an Ultra-Fast Fashion Giant

If there was a void in the market for fast fashion, it was not glaringly obvious until Shein came along. For decades, multi-national retail titans like Zara and H&M (and then a newer batch of digitally native companies like Missguided, Boohoo, and Fashion Nova) held the crown when it came to providing consumers with inherently trendy and remarkably-low-priced apparel and accessories. These revolutionary companies took over the market, generating billions of dollars in annual revenue thanks to a model that saw them regularly turning out hundreds of new products in their brick-and-mortar stores and/or on their e-commerce sites, tempting consumers with the ability to constantly appear on-trend without having to break the bank. Then Shein started inching into consumers’ consciousness.

Founded in Nanjing, China in October 2008 by entrepreneur Chris Xu, Shein first started catering to American consumers in 2014 when its shopping app became available in Apple’s app store. While its rise to the top of the U.S. retail totem pole was initially a quiet one, over the past few years, Shein’s success has been almost impossible to ignore. After overtaking Amazon as the No.1 app in the shopping categories of iOS and Android in the U.S. in May 2021, the company subsequently nabbed a reported valuation of $100 billion following a funding round that included private-equity firm General Atlantic along with existing investors Tiger Global Management and Sequoia Capital China. (That valuation has since slipped to $64 billion, CNBC reported in March 2023.)

Privately held Shein is estimated to have generated $23 billion in revenue in 2022, up from a reported $10 billion in revenue in 2020. (For some perspective, Inditex, the Spanish retailer that owns Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, and Zara Home, reported €32.6 billion in FY2022 revenue for its entire group.) Sources said this spring that Shein is angling to boost revenue by 40 percent this year.

Winning over millennials and Gen-Z shoppers with trendy $5 top and $20 jeans, Shein is proof that a clothing company from China – which leverages the nation’s “well-developed garment-manufacturing industry and efficient logistics system to sell online and ship to customers around the world at low cost,” per the WSJ – can build a brand that is in-demand in the West. At the same time, Shein is facing mounting challenges. Its eye-watering growth has put it under the microscope of regulators, lawmakers, and consumer plaintiffs, alike, and in turn, the company is providing a real-time demonstration of the tribulations that come with an effort to build a China-founded retail behemoth. (In 2022, Shein moved its global headquarters from China to Singapore in what has been viewed as an endeavor aimed at boosting its reputation and also maintains a domestic headquarters in Los Angeles.)

Plagued by controversy amid reports that it will list on a U.S. stock exchange later this year, regulators are taking issue with the innerworkings of the allegedly-shadowy Shein empire – from accusations that it is exploiting a U.S. trade loophole in order to avoid paying import duties to recurring claims that the company’s supply chain is heavily tied to the Xinjiang region of China, where human rights abuses – including forced labor – against the Uyghur minority have been widely documented.

Case in point: In an August 24 letter, attorneys general for sixteen states alerted U.S. Securities and Exchange Commission (“SEC”) chairman Gary Gensler that Shein’s business has been built on “nefarious business practices,” including “forced labor, human rights violations … and the peddling of clothing made with potentially hazardous materials.” The AGs’ letter followed from a call by two dozen U.S. representatives this spring, which called on the SEC to halt Shein’s reported initial public offering until it verifies that it does not use forced labor.