China’s superfast fashion giant Shein is under threat from European hurricanes. The platform that revolutionized textile consumption with exorbitant prices and unprecedented production speeds now faces an unrelenting regulatory front. The European Union is investigating the company for deceptive business practices, France suspended access to its website following a scandal over the sale of sex dolls resembling young girls, and Italy fined it €1 million in August for lying about the environmental impact of its products (known as a “strategy”). green washing) and distributors in several countries, including the Spanish Retail Association (ARTE), are demanding a level playing field. The model that helped conquer Europe’s Gen Z closets is now colliding with the wall of norms and values with which Brussels is trying to protect its digital economy.
Shein doesn’t design clothes, he designs consumption patterns. Data is the key to the company’s business. Its powerful algorithms can predict dozens of market trends in real time based on user behavior, allowing you to adjust inventory supply according to demand in seconds. Combining artificial intelligence, flexible suppliers, and ultra-low prices, this gear has transformed competitive rules around the world into dynamism.
The company, which does not sell products in China and focuses on sales overseas, recorded revenue of $37 billion (about 32 billion euros) in 2024, according to the latest data released by parent company Roadjet Business, cited by Reuters. The company expects net profit of $2 billion (1.734 billion euros) by 2025, according to sources cited by Bloomberg, suggesting profits could almost double compared to last year’s $1.1 billion. In comparison, rival Inditex had sales of 38.6 billion euros and net profit of 5.9 billion euros, while H&M Group had sales of 22 billion euros and profits of 1 billion euros.
Shein’s monthly user numbers in the EU increased to 146 million as of mid-year, a 16% increase over mid-last year. Low-cost exports from Shein and other major players such as Temu and Alibaba continue their upward trajectory. The total so far this year is $20.5 billion (about 17.8 billion euros), almost five times more than in 2020, according to Reuters.
Founded in 2008 in Nanjing, China, the company moved its headquarters to Singapore in 2022 with the idea of accelerating international expansion. Its business model takes the idea of ultra-fast production to the extreme. To achieve this, the company leverages a network of small textile workshops and negotiates lower prices in exchange for loyalty and order volume.
According to official data, the Panyu district of Guangzhou, the capital of China’s Guangdong province, is one of the manufacturing centers, with more than 7,200 companies specializing in clothing and another 27,000 companies selling clothing. Many of them are concentrated in the Nancun area, known as “Shane Town” due to the large number of Chinese giants and companies offering similar platforms such as Temu.
The town of Shein is a maze-like downtown area. Many workshops are held at street level. There are also many 4- and 5-story buildings. The walls are covered with advertisements for textile companies looking for employees, salary details and fabric orders. They ride transport bikes carrying large amounts of fabric curlers. A bag with clothes is moved from one place to another. In the workshop, employees sew, fold and iron finished products. Shein logos, bags and packaging are often seen in this area.
Luo Weijun, an immigrant from Jiangxi province who runs one of these stores, said last spring that he was satisfied with the Shein model. To him, it seemed “more human” than others like Tem or Amazon, he told EL PAÍS while visiting Panyu and packing branded clothing. According to his testimony, Mr. Schein usually avoids equal competition and leaves the production of each model to his workshop. Other businessmen, on the other hand, expressed further concerns because the profit margins from working with Shayne were so small.
People in this region work long hours for very low pay. A 2024 study by the Swiss organization Public Eye stated that “illegal working hours and piecework wages remain common in the daily lives of the workers interviewed.”
In February, when questioned by British lawmakers, Shein admitted there were two cases of child labor among its suppliers, but insisted it had immediately stopped them. The company faced questioning from lawmakers at a time when it was considering going public in London for 50 billion pounds (about 56,900 euros), but the plan fell through. According to Bloomberg, the company is currently considering moving its headquarters from Singapore back to China in preparation for a possible IPO in Hong Kong.
Its business model is also based on its ability to take advantage of tax and customs loopholes. These holes have led to conflicts with the United States and the European Union. so-called exemption minimal This was one of US President Donald Trump’s tenacities in tightening tariffs. In May, Republicans rescinded this exception that allowed low-value packages (less than $800 or about 685 euros) to be brought in without taxes or duties, greatly benefiting China, the largest sender of these packages.
The European Union has a similar provision for parcels valued at less than 150 euros, which Brussels plans to abolish in March 2028 within the framework of its current customs reform plan. Some lobby groups, hurt by the rise in low-cost exports from China, are calling on the European Commission to speed up the plan.
Community leaders have also increased surveillance around Shein in recent months. Under the Digital Services Act (DSA), approved in 2022 and fully implemented from 2024, the EU requires large platforms in the digital universe to comply with additional administrative requirements to ensure that what they offer is compliant with the law. Major product retailers will be required to refrain from selling weapons that they are not authorized to sell or dolls that incite pedophilia.
Since then, Brussels has tightened its siege. In June 2024, we asked the company to provide more information about the steps it has taken to comply with the DSA on issues such as the transparency of its advisory system and the protection of minors. It returned to the fray in February, demanding internal documents and more detailed information on issues such as the presence of illegal products and risks related to consumer protection. The process could expose files and result in millions of dollars in fines.
Additionally, the European Commission, in cooperation with national consumer authorities, is coordinating an investigation into possible sheining practices at European level. These include false discounts, false purchase deadlines, and sales pressure due to incomplete, inaccurate, or misleading information. Brussels notified the company in May that it had discovered violations of EU law and requested further information. Investigation is ongoing.
The Chinese government has so far avoided the issue. In response to a reporter’s question about Shein’s suspension in France, Chinese Foreign Ministry spokesperson Mao Ning on Thursday referred to “competent authorities.” He added that the Chinese government requires companies to operate in accordance with laws and regulations and fulfill corporate responsibilities. “We also hope that all parties concerned will respect the principles of the market economy and provide a fair, transparent and non-discriminatory business environment for businesses in all countries,” he concluded during his regular appearance.
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