Shein's rise: How the wildly popular brand became the most feared fast-fashion retailer in the world and found itself embroiled in multiple lawsuits

Shein sold wedding dresses before it became a fast-fashion retailer

Billionaire founder and CEO Chris Xu started the business in 2008 as an e-commerce site selling wedding dresses that were made in China, later adopting the name SheInside.

In 2015, Xu shifted the business to focus on fast-fashion apparel and rebranded as Shein, pronounced "she-in." But the company's rise didn't come until 2020, when quarantined shoppers gave a boon to e-commerce. 

Xu's background in SEO and marketing has benefitted the company's digital-first approach. Not much is known about Xu, who is even more private than the company he built. 

Fast fashion took off in the 1990s

People first began embracing cheaply made clothing in the 60s and 70s as fashion trends began to change more frequently and companies turned to offshore textile manufacturing to cut costs, Fashionista reported.

But it wasn't until the late 90s and early 2000s that H&M, Zara, and Forever 21 popularized the fast-fashion model as we know it today.

Shein's AI technology creates new clothing at a record pace

In the last few years, Shein has quickly become the world's biggest player in fast fashion. The company sells clothing that is cheaply and rapidly produced, then sold at incredibly low prices — many items are under $10. 

Shein gave fast fashion a whole new meaning by using AI technology to identify trends and an online-only model to churn out thousands of garments in record time. 

Analysts have dubbed Shein's business model "real-time retail" because new designs can take as little as three days to produce, Vox reported. Because of this, there are as many as 600,000 items listed on the site at any given time, according to BBC. 

 

Customer hauls on TikTok made Shein a huge success

Customers and influencers on TikTok have driven much of Shein's international appeal. Creating a #Sheinhaul is a rite of passage for many teens and 20-somethings. Shoppers dump piles of Shein-branded packages from large cardboard boxes onto the floors of their bedrooms, where you'll also probably see garlands of fake ivy and string lights hanging from the walls. One woman filmed a box truck delivering a giant box to her driveway after she said she bought $2,000 worth of Shein products. 

Shein is the second most-downloaded shopping app in the US, according to UBS Evidence Lab data. Shein has more followers on TikTok than any other apparel retail brand and is the most Google-searched apparel retailer in the US, according to UBS data. 

The average Shein shopper spends $100 a month on clothing

Shein's average customer is a 34.7-year-old woman who earns $65,300 in annual income and reports spending $100 per month on women's clothing. That's 60% higher than the average US woman, UBS reported. 

In 2022, Shein was worth more than H&M and Zara combined

In 2022, Shein raised $1 billion in a funding round that valued the company at $100 billion, more than H&M and Zara combined, the Wall Street Journal reported. 

In another fundraising round earlier this year, Shein's valuation dipped to $66 billion, the Wall Street Journal reported. The company generated $23 billion in revenue last year, the Journal said.

As of this writing, H&M's market cap was about $29 billion and Zara's parent company, Inditex, had a market cap of $122 billion.

Shein has faced a lot of backlash for its role in climate pollution

Along with Shein's colossal success, comes mounting criticism. The company is known for its secrecy and lack of supply chain transparency. It's come under fire for producing extremely high volumes of garments, which reports say contribute to overcrowded landfills and 6.3 million tons of carbon dioxide emissions per year. 

According to its 2021 Sustainability and Social Impact Report, Shein uses The United Nations Sustainable Development Goals (SDGs) as a framework for its sustainability efforts and social impact. On its website, Shein says that its digital supply chain limits excess inventory and reduces waste. It also says it uses digital printing methods that use less water and attempts to sell unsold inventory before donating it. 

But some critics say these efforts pale in comparison to the company's output of an estimated 314,877 new styles per year, according to a Business of Fashion article, which used data from retail analytics firm Edited. H&M produces a meager 4,414 new styles in comparison.

Critics question Shein's manufacturing and supply chain practices

Shein has headquarters in Singapore and in the manufacturing hub of Guangzhou, China. It works with over 6,000 suppliers throughout China. The company has been accused of using manufacturers that have violated labor rights.

A 2021 investigation by the Chinese digital publication Sixth Tone uncovered a pattern of "loose oversight and poor working conditions" at some of Shein's manufacturers. It discovered that Shein's suppliers often subcontract orders to small workshops inside rundown buildings to cut costs. Because these businesses don't deal directly with Shein, the company cannot verify their working conditions. 

Last year, Shein's sales took a tumble

Shortly after the company's $100 billion valuation in 2022, Shein's sales took a downturn. Business of Fashion reported that the company's sales declined for five months before slightly increasing in December, based on online spending data from Earnest Analytics.

In May 2023, the company raised $2 billion in funding and some sources say the company is eyeing an initial public offering as early as 2024, Bloomberg reported. 

The company's IPO plans could be delayed

US lawmakers have lobbied to delay Shein's public offering until they can verify that the company does not benefit from forced labor. 

An interim report by the House Select Committee on the Chinese Communist Party found that Shein and online retailer Temu are responsible for more than 30% of all packages shipped to the US every day without payment of import duties. Companies are exempt from paying US tariffs on products with a retail value less than $800 if they are shipped directly to individual customers.

This loophole, lawmakers concluded, makes it difficult to obtain data on Shein's suppliers to verify whether they are violating the Certa Uyghur Forced Labor Prevention Act (UFLPA), which prohibits international imports manufactured by forced labor, particularly in the Xinjiang region of China. 

Shein has repeatedly told the media it does not use manufacturers in Xinjiang.

Analysts say Shein could continue to grab market share

Despite the bad press, UBS analysts suggest that Shein could continue to take major market share from US apparel companies. In a June report, they attributed much of the company's success to its marketing prowess. Shein's loyal customers are not only driven by its low prices, but by a strong community bolstered by in-person events.   

An influencer trip to China in June proved to be a public relations catastrophe for Shein.

In June, Shein invited influencers to visit its innovation center in China. After posting glowing reviews of their trips, the influencers faced a lot of backlash for ignoring mounting allegations of questionable labor ethics and concerns about Shein's role in climate pollution. 

"In hindsight, it didn't go to the place we intended, which is that we're committed to more transparency," executive vice chairman Donald Tang said in an interview with Time.  "The influencers got very unfair treatment, which I very much regret."

Now as Shein battles rival Temu in dual lawsuits, designers are suing the fast-fashion company, alleging that it stole their artwork.

Shein has had a fair share of court drama lately. In December, Shein's parent company sued its e-commerce rival, Temu, alleging that Temu created fake accounts on Twitter under Shein's name and trademark. Shein recently sued Twitter to release data about the accounts in question. 

Now Temu is fighting back with its own lawsuit against Shein, filed last week. It alleges that Shein violated antitrust laws by intimidating manufacturers not to work with the Boston-based company, Reuters reported. Temu is a subsidiary of a Chinese commerce company.

In July, a group of designers filed a federal lawsuit against Shein that alleges copyright infringement and racketeering. They say that the company stole their designs and sold them as products on its site. The court filing alleges that copyright infringement is central to Shein's business model and that the company passes the blame onto third-party vendors. 

Shein vowed to defend itself, telling CNN in a statement: "Shein takes all claims of infringement seriously, and we take swift action when complaints are raised by valid IP rights holders. We will vigorously defend ourselves against this lawsuit and any claims that are without merit."