A potent mix of ultra-low prices and seemingly never-ending variety has helped fast-fashion retailer Shein climb to the top of the retail industry. But as ethical violations against the fashion giant mount, some of its Gen Z target consumers are questioning the company’s environmental and business impact.
Shein (pronounced “she-in”) may not be well known to older shoppers, but the online retailer’s sales rival those of H&M and Zara — and without the presence of physical stores. By marketing clothing that can cost as little as $3 a piece and tapping social media influencers to promote its brand, the company has quickly built a following among Gen Z, a generation of consumers mostly in their teens and being in their early twenties.
“Shein has been really good at creating wants and must-have items,” GlobalData retail analyst Neil Saunders told CBS MoneyWatch.
Shein lawsuit accuses fast-fashion site of RICO violations
Behind Shein’s marketing success lie legal allegations of copyright infringement and intensive US investigations into alleged forced labor and inhumane conditions for the workers who produce the extraordinarily cheap clothing.
The US-China Economic Security and Review Commission earlier this year flagged numerous “controversial” business practices by Shein and its rival Temu, a Chinese shopping app. In an April report, the commission described their growth as “a case study of Chinese e-commerce platforms outsmarting regulators to grow a dominant presence in the US market.”
What is Shin?
Extremely low prices and its expertise in ever-changing clothing trends propelled Shein to become the world’s largest online-only retailer, according to GlobalData’s Saunders. Aggressively marketing its apparel to young shoppers on social media sites like Instagram and TikTok has seen the brand skyrocket to the top of the American consumer landscape.
According to the website, Shein, as we know it today, was founded in China in 2012 by four co-founders, but little is known about the man believed to run the company, Chris Xu, who is described in a lawsuit as “a mysterious technical genius”. The tight-knit e-commerce company moved its headquarters to Singapore in 2022.
To sell the wide selection of items it offers, the company has developed a production model that allows it to quickly process thousands of new designs per day. By offering a seemingly infinite variety of new fashions at such a low price, it attracts young customers eager to buy cheap and trendy new clothes.
Despite some fresh cracks in its popularity, Shein remains a top brand among young shoppers.
One of those customers, a content creator who once promoted Shein clothing but says she has since cut back on their products, said the retailer’s low prices make it a no-brainer for many young consumers.
“The thought process is that cargo pants aren’t going to be around forever, so why not buy Shein’s $21 pair to get through fall and half of winter?” said Mia Meltzer, 22, a content creator in New York City.
IPO challenges
As a privately held company, Shein is not required to disclose details such as sales, employment, or other information that U.S. publicly traded companies must openly share, and much about its ownership and governance remains obscure.
Despite transparency and other challenges, rumors continue to circulate that the company plans to go public, along with rumors of business plans to expand its production from China to Mexico and Brazil. However, the company may lose its luster. A recent funding round valued Shein at $66 billion, or about a third lower than a year ago, according to the Wall Street Journal.
As questions arise about Shein’s business, its popularity appears to be waning among young consumers, with the proportion of Gen Z adults considering making a purchase on the clothing site falling 7 percentage points over the past year, a study found. a recent survey by Morning Consult.
In May, a bipartisan group of two dozen lawmakers asked the Securities and Exchange Commission to stall an IPO by Shein until it verified that it did not use forced labor of the country’s predominantly Muslim Uyghur population.
Shein did not respond to requests for comment from CBS MoneyWatch.
Why is Shein clothing so cheap?
“Shein has led the way in low prices, which is achieved through their cheap model and inappropriate labor practices, and the end result is a low price to a consumer and that is key,” said Saunders.
He describes Shein’s model as “real-time fashion.” Equipped with its own in-house design team that accurately analyzes trend data, Shein is able to design, prototype and ship products in-house, delivering ephemeral clothing styles significantly faster and for far less money than its fast-fashion competitors. According to Saunders, Shein releases as many as 2,000 new pieces every day.
“Shein is dropping a huge amount of new products, and it’s an addictive model for consumers,” Saunders said. “There is a disconnect between people’s needs and wants, but we are consuming way beyond our need level.”
The ethic of fast fashion
While Shein has gained fans, it has also attracted critics who have raised concerns about its environmental impact and questionable business ethics.
“Most environmental waste and damage comes from overconsumption, so to be really green and sustainable, you don’t want people to buy that much,” Saunders said. “Shein are the ones taking fast-fashion to superspeed, which leads to a huge amount of unnecessary and disposable consumption, and that’s not good for the environment.”
According to energy and sustainability expert Jasmine Schmidt of consultancy ICF, the fast-fashion model can be harmful to the environment due to the huge amounts of textile waste and the natural resources required to produce their items.
Clothing waste has doubled since 2000, and according to Schmidt, the United States and Europe produce 90 million tons of clothing waste annually. Less than 1% of those clothes are recycled, she added.
“One of the biggest problems with Shein is their lack of disclosure,” Schmidt said. “They are one of the largest privately held companies and they do not disclose their production volume, where they source materials and their emissions.”
Garments in landfills
When clothing is discarded in North America, it often ends up in landfills in the global South and Southeast Asia, such as Chile’s Atacama Desert, a garbage dump visible from space, Schmidt said.
According to Schmidt, these communities are often forced to burn the discarded clothing, leading to local air and water pollution. Recycling is not always an effective alternative, as separating different materials for one garment is complicated. Reprocessing systems are unable to break down certain synthetic clothing fibers or remove dyes.
“It’s such a strain on the system, and the impact will increase tenfold over the next 20-30 years if we don’t address it fully now,” Schmidt said. “We need to be able to understand the huge amount of waste we produce.”
It’s a critical time for lawmakers to step in with stricter regulations for the fashion industry, Schmidt said. For example, states could introduce extended producer responsibility (EPR) laws, which already require producers in California, New Jersey and Washington to take responsibility for the environmental waste created by their products.
Buy forever
While companies are primarily responsible for creating fast-fashion waste, they’re also responding to consumer demand, giving shoppers some responsibility to think before they buy, Schmidt said.
“We have to be very careful with our purchasing power,” Schmidt said. Buying less, the first “R” in “reduce, reuse, recycle,” may be the most direct way to consume ethically, she added.
“It can help to buy from companies that have transparent policies and sustainable practices,” Schmidt said. Additionally, buying second-hand at stores like Plato’s Closet, Rent the Runway, and Depop may be viable options for finding trendy clothes without adding to environmental waste—something Schmidt and Meltzer suggest consumers do.
“You have to take the adjective out quickly when you think about fashion,” Schmidt said. “Consumers should consider whether they want their legacy to be known as ‘quick, wasteful, unknown’.”
