After exploding during the pandemic, achieving triple-digit growth, things look a bit darker in Shein's future.
It faces 5 main challenges:
- Decreasing purchasing power.
Gen Z, Shein's largest audience, are for the most part still students and so particularly sensitive to inflation.
- Gen Zers will eventually grow up.
The web-only model led to incredible success, but it's also very sensitive to trends. In fact, Shein made a bid to acquire TOPSHOP TOPMAN in order to establish an offline presence. It didn't win, but it's an indication that the current business model might not be sufficient.
- Regulation changes.
Shein takes advantage of a loophole in the US law that spares low-value shipments (under $800) from high customs duties. But this might change soon in light of new tensions with China.
- Concerns around forced labour.
The US have recently taken further steps to fight forced labour in China. Shein might face a backlash in the west, just for being Chinese.
- Concerns around sustainability.
"Throw-away-fashion" is under scrutiny for its environmental implications. It's ironic how Shein's largest audience is Gen Z, who is also the most sensitive to climate issues. Will consumers eventually boycott it?
Can you think of any other challenge/risk?
Sources: Bloomberg, Economist