Shein’s US push complicated by its Chinese roots

Donald Tang was holed up in Hawaii early in the Covid-19 pandemic when his wife struck up a conversation with a waitress, wanting to know where she had bought a face mask she found unusually attractive.

“On Shein”, the woman replied. Neither of the Tangs had heard of it. Before long, however, Tang’s wife became a committed customer of the on-demand fashion app, drawn in by prices she struggled to believe.

Soon Tang, himself, was advising Shein’s billionaire founder, Sky Xu (also known as Chris Xu or Xu Yangtian) and he has since taken on the role of Shein’s executive chair and the public face of its US expansion.

A fundraising in May cut Shein’s private market valuation from $100bn to $66bn, but a presentation seen by the Financial Times earlier this year showed the scope of its growth ambitions: it aims to lift its revenues from $22.7bn last year to $58.5bn by 2025.

Tang was born in Shanghai but has been a US citizen for decades and formerly worked at Bear Stearns as an investment banker. Shein also traces its roots back to China — to a business Xu launched in Nanjing in 2008 — but the US has become its largest market. It is, however, a market in which Chinese origins can be a political liability.

It is Tang’s task to help Shein navigate this environment where consumers’ enthusiasm is matched by the scepticism of legislators and campaigners about its labour practices and sustainability record. Expectations that it will soon seek a US listing raise the stakes.

Shein’s investment in America can be measured by its 500-strong marketing operation, its 1,400 warehouse jobs in Indiana, or its partnerships with 1,800 artists and designers.

But it is also investing political capital. Tang has set out to convince Washington that Shein is ready to play by US rules and is not the Chinese company they think it is. “You have to really look at the facts,” he says, pointing out that Shein was “born in China” but it has moved its headquarters to Singapore and now does business in over 150 countries.

“All of the kids I know in Hawaii and other places, I don’t think they really think of this as one particular country’s brand. They think this is a brand that’s very good value for money,” he says.

To a US consumer encountering it for the first time, Shein could be any other American ecommerce business. On a recent weekend, its website featured Black Friday discounts to kick off the US holiday shopping season, a Hispanic heritage collection, and a promotion with a former star of TV show The Real Housewives of New Jersey.

One recent survey found that US teenagers rank Shein as their second-favourite shopping site after Amazon, the US ecommerce pioneer.

Bargains such as $9 dresses and $12 pairs of loafers ensured that Shein could build a sizable US following just by relying on word-of-mouth recommendations. It did not need a US office until 2019, seven years after it made its first US sale.

Even so, building the US business Shein has today has required a methodical investment in marketing and distribution. Defending it may call for political skills that few other foreign investors have needed.

Just as US lawmakers have turned on Chinese chipmakers, as well as TikTok parent Byte­Dance and Shein’s rival Temu, so they have found plenty on which to challenge Tang’s company. Since May, two dozen members of Congress and 16 state attorneys-general have urged the Securities and Exchange Commission to ensure Shein’s supply chain was free of Uyghur forced labour ahead of any initial public offering.

Politicians have also queried the data Shein collects on consumers, the emissions in its supply chain, its intellectual property record, and its use of a “de minimis exception” in the Tariff Act of 1930 that lets importers avoid tariffs on imports under $800.

Tang has responded that Shein has “zero tolerance” for forced labour, has highlighted stricter supplier audits, and has offered to help Washington reform the tariff loophole.

Shein has pledged tens of millions of dollars to support suppliers, designers and non-profit groups. Data from OpenSecrets.org shows that it has also spent more than $1.5mn on lobbying this year, up from $280,000 in 2022.

“We wanted to make sure that all the stakeholders are being communicated with properly and effectively,” Tang says of its expanded Washington office. Asked if he thinks its message is getting through, he replies: “I think so. You know, there are only so many touchpoints that we can touch. But for the people that we have spoken to, yes, they’re very open minded.”

His message is that Shein’s on-demand model reduces waste, saves Americans money, and fosters an economy of small businesses.

“I think, at the end of the day, you have to look at the real benefit to the United States,” Tang says.

Shein’s virtual model takes physical expression in Whitestown, Indiana, where, in 2022, it opened a warehouse to handle the logistics needs of a business that redefines fast fashion. As it works to build political support, it has promoted a local economist’s calculation that the facility could boost the local economy by $175mn a year.

The company is planning a similar operation in California and is thinking about one on the east coast. Its 2,000-strong US staff could soon double.

Consumers around the world . . . don’t really think, “where is this company headquartered?”

Is it enough to make Americans think of Shein as a US company? Marcelo Claure, the former SoftBank executive who chairs Shein Latin America, suggests it is the wrong question. “This is the most global company I’ve ever experienced,” he says. “Consumers around the world, as long as you’re satisfying their needs, don’t really think ‘where is this company headquartered?’”

Claure is part of a push to diversify production, including building up new hubs in Turkey, India and Brazil. Though most of its suppliers remain in China, Shein is spreading its supply chain bets. But it is also trying to put down deeper roots in its biggest market.

“We’re in America, right?” Tang says of a recent partnership with US bricks-and-mortar retailer Forever 21.

“You know, all the malls, all the stores — we want to be part of that, part of the fabric.”