Shein looks to India and Mexico in diversification push

Fast-fashion phenom Shein is trying to get ahead of potential pressures, by finding a user base that can continue to fuel its ambitious growth plans amid concerns about rising geopolitical tensions.

Across the world, Shein’s profile is changing, according to reports, with the company considering a Mexican production operation in order to protect its US and wider Americas business, while the company appears to be targeting India as its next source of growth in Asia.

Why it matters

Shein plans to IPO in H2 of this year, according to the Financial Times, but the China-founded, Singapore-headquartered firm appears to be struggling to retain its momentum in existing markets. Until now, it has been using a famous formula that WARC covered back in 2021: find what people want and then make it and sell it to them quickly.

Its Gen Z audience has tended to be more open to new brands but less loyal (and affluent) than older cohorts – as a result, the company needs a new pool of customers. It has serious ambitions: by 2025 it aims for revenues of $58.5bn up from $22.7bn in 2022, so it needs growth.

What’s going on

Mexico nearshoring: Reuters reports that Shein is exploring plans to build a manufacturing facility in Mexico, to add to its announced Latin American manufacturing presence in Brazil. There are two ostensible reasons for this:

• The first is that proximity to the end consumer improves on Shein’s lightning fast offer and strengthens one of its core benefits.
• The alternative view is that, like many other companies with strong supply chain links to China, it is diversifying its production base in order to protect itself should the US, in particular, pursue a policy of commercial decoupling from China that could damage the business.

Indian partnerships: Despite having been banned in India since June 2020, the result of a border dispute with Shein’s native market of China, the company is now targeting the 1.4 billion-strong country through different means:

•  Mukesh Ambani’s Reliance Retail has signed a partnership with Shein to operate in the country, in a deal that includes sourcing, warehousing, and logistics as well as online properties, LiveMint reports.
•  Of course, the story isn’t without its political context, and numerous countries are concerned that the fast fashion company’s emergence has implications both for the environment and for other businesses.

Sourced from Reuters, LiveMint, FT, WARC