As online fast fashion retailer Shein steps up its pre-IPO pitch in the UK, it is also facing growing backlash from European retailers and lawmakers.
As citizens across 27 countries vote in the European Union (EU) elections, European textile, clothing, leather and footwear manufacturers this week called on future EU policymakers to protect 1.5 million jobs in the sector from low-cost products being “dumped” on the market.
With industrial policy a key election issue, apparel makers, retailers and e-commerce companies are trying to put cheap Chinese-made clothing, accessories and equipment on the agenda, using the same language used by EU officials about China's electric vehicle excess capacity.
Home to fast-fashion giants Zara and H&M as well as some of the world's biggest luxury brands, Europe's textile, footwear and leather industries have annual sales of more than 200 billion euros ($220 billion).
In a joint statement, industry groups said 99 percent of companies in the sector are small and medium-sized enterprises, leaving them vulnerable to “fierce” international competition.
Poland's e-commerce association argued in a report that Chinese government subsidies give online marketplaces like SHEIN, which ships $5 T-shirts, $15 jeans and $1 earrings directly from China to customers around the world, an unfair advantage over European rivals.
“The allegation that Chinese government subsidies support SHEIN's business and global expansion is untrue,” a SHEIN spokesperson said.
Most of the products Shein sells are made in southern China, but the company has built a supplier base in Brazil and Turkey. “We look forward to our supply chain partners in Turkey increasingly supporting us in serving the European market,” the spokesman said.
Shine is also trying to improve its image in France, where lawmakers in March passed a bill calling for fast fashion companies to be fined to offset their environmental impact.
Raphaël Glucksmann, an EU lawmaker who is the top French Socialist in the election, is a supporter of the bill and a prominent campaigner opposed to Mr Chein.
Shein argues that the bill will only worsen the purchasing power of French consumers. On Monday, Shein announced that its second-hand clothing resale platform, Shein Exchange, which first launched in the U.S., will expand to France in late 2022, followed by the U.K. and Germany.
The e-commerce giant, which declined to comment on its initial public offering (IPO) plans, is also courting German authorities.
Lionel Lim, Shain's deputy director of global government relations, hosted an “ESG breakfast roundtable” in Berlin last month that brought together participants from governments, industry associations and business partners, he said in a LinkedIn post.
Tax loopholes
European retailers have become increasingly critical of tax loopholes that favor SHEIN and other overseas e-commerce platforms. Under EU rules, individuals don't have to pay import taxes on packages they order online from abroad that cost less than 150 euros ($170). In the UK, the equivalent threshold is also 135 pounds.
“We call on everyone to be elected to the European Parliament on Sunday to ensure a level playing field for competition in Europe,” Kari Luoto, executive director of the Confederation of Finnish Business, said in a statement on Wednesday. “The removal of the duty-free restrictions should be done as a matter of urgency.”
“It is hard to believe that the government is not cracking down on the huge tax loopholes that allow large overseas companies to sell in the UK without paying customs duties and contribute to the cost of the retail economy at the expense of UK businesses that pay their legitimate taxes,” said Theo Paphitis, chairman and owner of British retailer Lyman & Robert Dias.
Germany is pushing for EU-wide reform. The country's main retailers' association, the German Traders' Association, said Finance Minister Christian Lindner “indicated that Germany supports the abolition of the 150-euro duty-free limit at European level.”
Shayne said duty-free treatment for low-value packages isn't essential to success, and that an on-demand business model and flexible supply chain help keep prices low.
Next chief executive Simon Wolfson has also called on the UK government to review the loophole, despite the administrative complexities that would come with trying to tax millions of small deliveries.
Britain's Labour Party, widely expected to take power in the July 4 general election, has met with Shain ahead of the London listing. But some British lawmakers have questioned whether Shain is suitable to be listed on the London stock exchange and have called for greater scrutiny of its supply chain and labor practices.
By Helen Reid and James Davie, edited by Peter Graff
