‘De minimis advantage – the elephant in the room for Shein, pre-IPO?’

Peter Pernot-Day, head of strategy and corporate affairs at Shein, has been on a PR push over the past few weeks presenting Shein in the best possible light before its proposed IPO.

But in all his presentations and interviews, he never speaks about the elephant in the room—the distribution advantage of direct delivery of individual packages to customers.

This process avoids paying customs and import duties because of the de minimis rule, whereby parcels under the value of £135 in the UK, and under $800 in the US, are exempt from these taxes. That advantage is now under the spotlight because of President Trump’s tariff obsession.

What makes Shein so attractive to shoppers is its very low prices. No matter what income band you are in, why pay more when there is a cheaper option—as Aldi and Lidl have shown in grocery.

Shein’s test-and-react model is not unique. Inditex’s Zara has been using it for 50 years with its in-house design teams and local manufacturing. However, like traditional fashion retailers, Zara has the expense of stores and traditional distribution and, where it does source globally, buys in bulk and pays import costs.

As a result, it has higher price points, but they’re acceptable to consumers because of the fashion, style, quality and value of the products and the store experience, making ranges good value, highly attractive, and less disposable as a result.

Shein has enhanced this model using technology. The casualties of its success have been low-price, fast-fashion retailers such as Boohoo and H&M—not so much the mid-market operators such as Next, Marks & Spencer and Uniqlo who, like Inditex brands, appeal to consumers who want consistent quality at a good price as well as style.

“These are not sweatshops—they are highly sophisticated manufacturers.”

Being able to produce at very low prices is not unique. Far East manufacturers have become far more automated and skilled at production than in the West, as well as having the advantage of lower minimum wages.

Recent TikTok reels highlight how cheap it is to manufacture in China, and the huge mark-ups luxury brands add to these goods. Having come from an industry background I have been in factories in the Far East producing for high street retailers as well as luxury brands. These are not sweatshops—they are highly sophisticated manufacturers.

The problem is perception—some consumers think that Primark must be using child labour because it can sell T-shirts at £3.00, but that is far from the truth. It benefits from keeping its costs low and buying in volume, which creates greater efficiencies.

A luxury brand invests more in elevating its brand status. Though I could never justify buying a white T-shirt from Balenciaga at £600 or so, others can. As a public company, Primark has operational and ESG transparency for investors—something Shein is pushing before launching its IPO. Yet for the customer, price is always key. Ethics and sustainability are not a priority, no matter what consumers say.

But now that Shein’s (and Temu et al) distribution advantage is under pressure, so is the model. Apart from the 145% tariff the US has put onto Chinese imported goods, the de minimis duty exception is being abolished by the US on May 2. This impacts other online businesses selling to customers in the US, hence the many questions regarding tariffs on the Asos half-year conference call.

Chancellor Rachel Reeves is talking about eliminating this in the UK as well—though previously it was considered to involve too much paperwork to do so and, as Brexit has proved, the UK is not great at processes.

It would be an advantage for UK retailers if she did eliminate it and, at the same time, reintroduce the VAT-free tourist benefit. Yet the continual uncertainty of what President Trump will decide next means wait and see, and plan for everything, is the best strategy.