Fast-fashion giant Shein said it would invest 250 million euros ($271 million) over the next five years in British and European designers and circular economy initiatives, combat a regulatory crackdown targeting “fast fashion” and rally support for a possible IPO in London.
The innovative Singapore-based e-retailer announced on Tuesday that it plans to launch a €200 million circular fund focused on fiber-to-fiber recycling and related innovations, and is inviting other companies and financial institutions to co-invest. Shein said it would set aside a further €50 million to help fashion companies in the UK and EU join its marketplace, and to support its Shein X incubator programme, which connects emerging designers in the region to its supply chain.
The moves are part of the company's efforts to address criticism and controversy that have thwarted its ambitions to go public and made it the focus of regulatory scrutiny that could cripple its future growth prospects.
The company reportedly filed confidential documents with Britain's markets regulator in June to prepare for a London listing. The company declined to comment on its plans.
Founded in Nanjing, China in 2012, SHEIN is now one of the world's most popular clothing brands, its growth driven by a pioneering, ultra-efficient test-and-learn manufacturing model that enables it to produce a dizzying assortment of new styles in small quantities and sell them at bargain prices. Its gross merchandise value, a measure of the value of goods sold on its website, is reported to reach about $45 billion in 2023. Its London IPO could be one of the world's largest public offerings this year.
Though the majority of the company's manufacturing still takes place in China, earlier plans for a New York listing were derailed as tensions between the U.S. and China escalated. And the company's fast, low-cost business model has come under fire from regulators, who have fiercely criticized it for issues including labor practices in its supply chain, product safety, piracy and its environmental impact.
The company is seen as a key target of proposed and upcoming restrictions aimed at fast fashion in Europe, which is moving to protect domestic producers from an influx of cheap Chinese goods and address criticism that new green rules penalize companies in the trading bloc. Those rules also include efforts to address loopholes that allow foreign companies like Shein, which deliver low-value packages directly to consumers, to avoid import tariffs and hefty fees for fashion retailers that produce large quantities of clothing.
“Compliance and circularity are our first priority when we wake up in the morning,” said Donald Tang, SHEIN's executive chairman, adding that the company wants to operate as “on-demand” fashion rather than “fast fashion”.
Tan said the online retailer makes many styles, but in small batches of each, ramping up production only when demand is clear, avoiding the wasteful overproduction that many of its established mass-market rivals do. Shein said the circular fund is moving toward taking more responsibility for what happens to clothes at the end of their life — a tougher challenge for a company that has been accused of encouraging overconsumption.
While the €200 million fund is only a fraction of the more than $2 billion in profits the company said it generated last year, Shayne said it could have a bigger impact by leveraging its size and scale to support innovators through things like off-take agreements and other commercial arrangements.
Tan said he has been speaking with the venture community and fund managers in recent weeks and has received “very enthusiastic feedback,” but building out the fund's structure, and particularly staffing it to oversee it, is still a work in progress.
“Waste reduction is a tradition and hallmark of Shane,” says Tan. “This is just the start of our journey.”
