Caught between the rock of Trump’s protectionist tariffs in the US and the hard place of an EU crackdown on a “tsunami” of cheap goods, is Shein’s short-lived era of dominance over?
In the last few weeks, it seems the walls have begun to close in on the business models of brands like Shein. As countries abroad throw up trade barriers, the retail giant has postponed its long-awaited London float as it takes stock of what to do next.
In the US, Donald Trump’s protectionist policies have swung into force, with the president slapping a blanket 10% tariff on Chinese goods on February 4. He had also threatened to close the duty-free treatment for shipments worth less than $800 (£645) – known as ‘de minimis’ exemptions – although that move was suspended earlier this week.
This is more a stay of execution for brands like Shein, however, with Trump saying the exemption would be closed when there are “adequate systems in place to fully and expediently process and collect tariff revenue” in the future.
Separately, the European Union has also taken steps to clamp down on the wave of cheap, fast fashion and other ecommerce goods streaming into the region from the likes of Shein and Temu.
Unlike Trump’s tariffs, which appear to be motivated by nativism, the EU’s has couched its approach in terms of protecting its citizens from a “tsunami of cheap goods” flooding into the region.
However, whichever way they’re couched, one source says the effects of regulatory clampdowns on both sides of the Atlantic for retailers like Shein and Temu, and for their customers, will be the same.
“This will ultimately raise the price of almost everything – every single product – on ecommerce platforms like Shein and Temu,” the source said.
“I think you’re going to see customers, particularly in the key demographics for these brands of younger consumers – your 16-24 year-olds, walk away from Shein and Temu as a result”
For its part, Shein remains defiant in the face of these regulatory headwinds. Speaking at Retail Week x The Grocer Live last week, the brand’s head of strategic and corporate affairs in North America, the UK and Europe Peter Pernot-Day said there are “misconceptions” about the retailer’s supply chain and model.
“I think there is a misperception that our pricing advantage and our speed advantage are derived from us dodging tax loopholes or avoiding duties or things of that nature, and I’m here to tell you that we do not rely on customs policy to be successful,” he said.
“The way I put it to my team is that we don’t cheat, we compete, and we are here to compete fairly and call for a level playing field so that the entire industry can compete together to hopefully make British consumers, American consumers, and consumers in the European Union happy with the clothes they can wear.”
But other than that, Shein is keeping its cards close to its chest about how it will specifically respond to both the US and EU.
High noon with the high street
Another worry for Shein is that the chorus from some politicians, activists and other retail businesses for the UK government to follow suit is only growing.
Where once Amazon was held up by UK retailers as the epitome of the unfair advantage that pureplay businesses enjoy over bricks-and-mortar, Shein is now the focus of many high street operators’ ire.
The situation is symptomatic of the Labour government’s problems with the economy more generally. Prime minister Keir Starmer and chancellor Rachel Reeves have hung the future of their premiership on driving economic growth, and so far, have broadly failed to deliver it.
Desperate for a feather in its pro-economic growth cap, Labour has been courting Shein heavily in a bid to woo the Singapore-based retailer into floating on the London Stock Exchange.
As recently as the beginning of the year, the float looked all but a foregone conclusion. But the mood music has changed dramatically, culminating in the news last week that Shein had decided to pause its planned London float, citing US tariffs in particular.
Shein and the City of London is quickly turning into something of a lose-lose scenario for the government. Either it continues to back the bid and run afoul of both regulatory hawks and activists claiming the retailer’s supply chain is riddled with human rights abuses, such as Stop Uyghur Genocide, or it follows the US and EU in cracking down on the retailer, and misses out on a victory for its pro-growth agenda.
“They [Labour] are damned if they do and damned if they don’t”
one regulatory source said.
“Labour is in a tight spot with all of this. Since taking office, they’ve tried to stick to the middle road. But I’m not sure that’s going to work this time,” the source added.
Whether Shein decides to return to its London listing in the immediate future remains to be seen. But could this be the beginning of the end for the success of the pureplay giants and retailers like it in the UK?
“This isn’t the first low-cost approach we’ve seen in the West, and I don’t believe it will fail due to the hardening regulatory framework,” says ecommerce expert Florimond de Tinguy.
To skirt around the new international regulations and avoid customers paying more for the same products, de Tinguy does believe the Shein model may have to change however. He says Shein could pivot to become more of a marketplace for other providers, in contrast to its current end-to-end fulfilment model.
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