Front Burner - How Shein dominates ultrafast fashion

Episode Date: May 13, 2022

Chinese fashion retailer Shein isn't just fast — it's ultrafast. The $100 billion company has captivated young shoppers by using social media to market its dirt-cheap clothing. However, despite all the success, not much is known about Shein's sales, supply chains or algorithms. Critics are now sounding the alarm over the environmental and social impact of Shein, and what its rise means for the future of fashion. Today, Vauhini Vara, a journalist who has written for the New Yorker, Wired and the Wall Street Journal, explains the alluring world of Shein, and what ultrafast fashion means for the planet.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hey, I'm Jamie Poisson. Tonight is going to be so much fun, you guys. We are going to be giving away so the app. It's like a big game.

Okay, so they're telling me in 20 seconds, a present's going to pop up on my screen. I got to collect, right? So yesterday, our producers, Sam and All Allie took me on this tour of the Shein clothing app they're like unveiling and it's cheap man um two bucks for like a hairpin seven bucks for sunglasses eight bucks for a purse it's pretty wild oh my oh my that's like a rhinestone chain lace-up crop top uh that you that you can have for nine dollars and really not like the website or app of any other clothing brand i've ever seen someone can play us for one or not what the hell is this ali oh it's a nurse cosplay cat costume so that your cat can look like a a nurse but also it has sexy like lingerie coming out of it so so you're like it's not just that you could scroll endlessly through crop tops and bathing suits and platform shoes and incredibly niche home appliances okay

so the first thing that you sent me it was a stainless steel waffle fry potato cutter which actually looks great who doesn't love it it's four dollars it's four dollars like it's practically it's practically free that all cost about as much as a sandwich. It's also all of this content. Live streams of Shein fashion shows. Influencers posting their Shein hauls. Oh my god, I bought $2,000 worth of stuff. And that is my box. My Shein box.

Check it out later. And that is my box. My Shein box. Check it out later. Today's video is actually a $700 Shein haul. I'm excited too. Y'all, the Shein package that I was waiting for arrived, so let's open it. And it's really heavy, so... Celebrity cameos.

We've got Khloe Kardashian, Christian Siriano. There's even a Shein reality show. These designers only have three weeks to submit a three-look capsule collection with the theme, Be Bold, Be You. If you've never heard of Shein before, I'm not going to call you old. Let's just say you're probably not the company's target demographic. Don't worry, I hadn't heard of them either until very recently. Over the past few years, seemingly from nowhere, this Chinese company has risen to become one of the largest fashion retailers in the world. In April, the company was reportedly valued at $100 billion. That's more than Zara and H&M combined, and more than the worth of any

other private company on earth, except for Elon Musk's SpaceX and ByteDance, the company that owns TikTok. For a company of that size, surprisingly little is known about Xi'an. But as it continues to grow, so do questions about its labor practices and environmental impact, and whether more needs to be done to rein in what are now known as ultra-fast fashion companies. Today, I'm speaking to Vahini Vara. She's a Canadian-American journalist who just wrote a deep dive on Sheehan for Wired magazine. She's also written and edited for The New Yorker and The New York Times magazine and others.. She's also written and edited for The New Yorker and The New York Times magazine and others. And she's also the author of the new novel,

The Immortal King Rao, which I'm very much looking forward to reading. Hi, Vahini. Thank you so much for coming on to the show. Hi, thanks for having me. So as I just said in the intro, I am not the target audience for Shein's clothes. I hadn't even heard of them until recently, but clearly they are reaching the consumers that they're hoping to reach. So who are those consumers and what are some of the things Shein is doing to market to them? So their sweet spot is people in their teens, people in their 20s. I'm 39, full disclosure, and I had not heard of Shein until recently, too. I think I first heard about them through like,

you know, my friend's kids. And these people, these consumers are hanging out on tiktok and they're on youtube and they're on instagram and they're scrolling through their friends feeds and they're scrolling through influencers feeds um to figure out like what's cool what they want to buy um and that's where she in is um she in is one of the biggest brands in the world on all these social networks in terms of like the number of influencers talking about them, the number of posts about them. So they're huge in these places. Fashion for me is to show that I can. And tell me more about the influencers here. I know that you visited a teen influencer who gets paid to promote the clothing of a brand

owned by Shein. And like, what is she doing? Yeah, so Shein has collaborated with some like pretty big celebrities like Katy Perry and Lil Nas X. From here, Shein family, get ready for Lil Nas X. Nas X. But its sweet spot seems to be people with like medium sized followings by, you know, by influencer standards. So I visited this young woman named McKenna Kelly, a teenager in Fort Collins, Colorado. She's famous for ASMR content, which is like, like really whispery sounds and soothing sounds. Right. Welcome back to my channel so she'll like tap on boxes or she'll trace words in the snow outside her house

um and she's got like on instagram she's got hundreds of thousands of followers on youtube she's got more than a million followers um hundreds of thousands of followers on YouTube she's got more than a million followers and a couple of years ago she started filming these haul videos which is the which are these videos where an influencer will like sort of like rip open a bag of clothing you know dump it on the ground and then wear each item one by one while telling you how much they cost and giving you links in their profile so that you can buy those things. Okay, so this is one of my favorite outfits from this bunch. It is this really cute, like, kind of orange, like, brownish dress with this black lace,

and it has, like, little bows on it, which is super, super cute. So I visited her while she was filming one of these hauls. I went to her house. Her mom was there. Her mom sort of doubles as her manager. And there was this big pile of clothing on the floor and her mom sort of whisked it off to the bathroom to steam it. And then she put on some music and she set up her camera. It was like an iPad. And then she went off into the bathroom. And then for the next half hour or so, she just came out with one outfit after another and just sort of like pranced around in front of this camera. And she gets paid for this. So she gets free clothes from this brand Romwe. And then she also gets a flat rate for these posts. And she wouldn't tell me how much

she makes, but she said she makes more like filming one of these halls, you know, a couple hours of this work than some of her friends with regular after school jobs make in like a week. Yeah, I mean, first, I will say I'm really I feel like I'm really aging myself in this conversation. But I, for the life of me, do not understand the appeal of ASMR. But when I was on the app, I saw tons of videos just like this, like of young girls, young women filming these hauls. And then all of a sudden I found myself like in this whole media ecosystem in there, right? Like scrolling through thousands of different pieces of clothing. It's almost like that addictive, endless scroll feeling you get on like Twitter or Instagram. And like, tell me about your experience with that.

Yeah. So I tried the Shein app for the first time after I started reporting out the story on Shein for Wired. So it was like, the sun was still up. It was starting to get dark. My husband was putting our kid, our six-year-old to bed. I sat down on the couch and I opened up this app and I was like the sun was still up it was starting to get dark my husband was putting our kid our six-year-old to bed I sat down on the couch and I opened up this app and I was like I'm just going to check this out for a minute um and I started by like I clicked on the dresses section and I sorted by price because I wanted to see like just how cheap these clothes were and I picked like this dress that was two dollars and fifty cents um and then I found in the sweatshirt section, this like pretty cute looking pullover, this like color block pullover for $4.50. And I put those both in my cart. But then every time, as you know, from trying it, every time you put one of these things in your cart,

you sort of get this endless scroll of additional items that like look kind of similar to the one before. And then you're also getting these messages inside the app saying, if you buy a little bit more, you get this discount, or you get points toward a free gift if you buy enough clothing. So they're sort of gamifying the shopping experience so that there are these incentives to keep shopping and shopping and shopping. So the sunset and the room darkened, and I just couldn't bring myself to stand up from the couch and turn the light on. So my husband comes up from putting my kid to bed and is like, what are you doing? I sort of was like, Oh, nothing, nothing, nothing. Um, and then in the end I bought like, I bought 14 things for $80 and 16 cents. Oh my God. 14 things were 81 that's crazy you mentioned that the gamifying that's i think that's such a good way to put it like there was

this one kind of reality live show that that they were running i was watching last night where like if you kind of stayed on you could collect points like during during the show that you could put towards i don't know these incredibly cheap uh clothes and items for a company of its size it's so. There's really not much that's known about Shein and they don't appear to release a ton of information about themselves. But I know that you've been able to get some insights here, in part by interviewing some executives of the company. And also, you spoke to two of the co-founders of the company that eventually turned into Shein. And what do the two of them tell you about the company's origin story? Yeah. So the company these days describes itself as having

started in 2012, but early on they said they started in 2008. So with a colleague, I found some business records from 2008 that show this company that was founded by the now CEO named Chris Hsu, along with two co-founders. So three guys, youngish guys. And at first, they tried selling all kinds of things. Like, they were selling teapots, they were selling cell phones. And then eventually, they added clothing. And this is according to these two co-founders. The company itself disputes, by the way, that this early version of the company was selling clothing. And so according to one of these co-founders, they put in place a lot of the practices that we recognize at Shein now.

So they started sending free clothes to influencers, for example, even though they're a really new company. They would send buyers to this wholesale clothing market in Guangzhou and they would purchase individual samples of clothing. And then they would post that one item, you know, a photo of it on some random website. It wasn't called Shein at the time. And then if somebody ordered it, they would rush back and make an order so that they could fulfill that order. And then one day they'd been in business together for more than a year. One of the co-founders shows up at the office and he finds that Chris Xu is gone and that some company passwords have been changed. And also Chris Xu had control of the PayPal accounts that they use to collect international payments. So this co-founder calls Xu, he texts Xu, there's no answer.

He goes over to his house, he can't find him. He goes to the train station, he can't find him. And it's like Chris Xu has sort of disappeared. But later, they find out that Xu has sort of defected, essentially, and restarted the company, you know, continued in e-commerce, essentially, without them. A spokesperson for Shien, by the way, disputes some of this. She says that Shu was not in charge of the company's financial account. And she also told me that Shu and this co-founder that I mentioned separated peacefully. So there are sort of some conflicting stories there.

Right, right. But whether that breakup was amicable or not, as you noted, the company that Chris Shu eventually built, Chien, seems to have kept some of the strategies from that original company that he left. And those strategies are part of this model that Shein has that's really different from Western fast fashion companies, starting with how they come up with designs, right? So for example, I know Zara and H&M are often deciding what styles they'll make based on what's like hot on the runways right now. How does Shein decide what they're going to sell? So Shein doesn't really rely on the runways. Part of what they rely on is like what's on Pinterest and what's trending on Instagram, right? Like just what's happening on social media. Also, unlike many sort of larger,

more established fashion brands, including in fast fashion, Shein is relying on suppliers actually to produce design. So normally a fashion company would, you know, create a design and then ask a supplier to make it. Now there are these emerging suppliers in China that actually do the design themselves. So Shein actually just, you know, picks out what it likes sometimes and buys that. It's also relying a lot on this custom software that it has that it also shares with suppliers, which quickly identifies what kinds of things are popular and then just reorders those. Or if something is selling and it's not popular at all, the software sort of automatically shuts down production on that without even the involvement

of humans. So it's like fashion by algorithm. That's right. Yeah. When we talk about fast fashion, Shein is part of a wave that's being called ultra fast fashion. I know there are also brands in this category like Fashion Nova and Zaful. But like in Shein's case, when we say fast, like how fast are we talking about here? So for context, in the olden days, you know, it would be like once a quarter or something, a brand would refresh its fashion. And then the first wave of fast fashion made that faster. It was like, you know, a couple of months, maybe a month. In Shein's case, to get from concept to production takes as little as two weeks.

How? How are they able to do that, to make clothes so fast? So it's partly that Shein doesn't have physical stores. It only operates online. So it doesn't need to like deal with swapping out racks full of clothing, like taking out one season, putting another in into physical stores. So it's able to kind of be more efficient and nimble. And then also relying on suppliers for design with the help of software just makes the work faster and more efficient because they don't have to do it all themselves. Huh. And I read, I think this is actually in your piece, there was a university professor out

of Delaware, and he looked at a recent 12-month period, and the Gap listed roughly 12,000 different items on its website. Zara, 35,000. And then Shein, 1.3 million in the same period. Yeah, it's wild. I feel like there's still so much I don't understand about this. But what else did you hear from people who you spoke to about how Shein is able to undercut their competitors. Yeah. So it, right. In addition to being really fast, they're also really cheap. And, and when, when you talk to Shein, they attribute that to like just the efficiency of

this business model, relying a lot on designers, having great software that simplifies the process. I talked to somebody named Simon Irwin, who's an analyst at Credit Suisse, and he covers a lot of fast fashion companies. And he was not convinced that that was the only reason that Shein's prices could be so low. There's some clever ways that Shein takes advantage of how the international trade system is set up. For example, it often costs less to ship small packages from China to the U.S. than from other countries and even sometimes from within the U.S. itself just because of a quirk in how the international postal system works. don't apply to shipments that are worth less than $800. This is another sort of loophole in tax law. And Shein, notably, rather than sending clothes to the countries where it's got customers on big shipping containers and then having those get sent to customers or to stores,

what Shein does is it just wraps up a package in a warehouse, generally in China right now, and then ships that directly to a customer-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years.

I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo, 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Cups. Of course, there are also a lot of concerns about what producing clothing so quickly for so little money means for the people making them, right? Our producers also spoke to a researcher named David Hochfeld from a Swiss human rights NGO called Public Eye, who put out a report on Xi'an,

and they worked with a couple of researchers who checked out some of the small independent garment workshops and factories making Xi'an's clothing in Guangzhou. And they didn't see what you might consider, you know, worst case scenario, sweatshop conditions, But workers they spoke to said they were working way more hours than is legal in China, about 75 hours a week with only a day off a month. A week with one day free in a month and an additional evening free in a month. So it's an incredible huge workload that it's a workload of actually two full-time jobs. According to China law, it's clearly illegal, these kind of working hours. Also, China has a limit of 40 hours per week.

And they also have concerns about fire safety, which can be a real danger at garment factories. They said they saw workshops with clothing piled all over the floor, blocking corridors with no fire exits, and in some cases, barred windows on the upper floors. And David said this isn't to suggest that Sheehan is alone in employing these kind of labor conditions. This is, of course, a wider issue in the industry.

But when you spoke to executives at the company, did they say anything about these allegations? They did. So I spoke to somebody named Adam Winston, who's the director of environmental, social, and governance at the company. And he told me that after learning about this public eye report, Sheehan, quote, took it upon ourselves to investigate. He also told me about a sustainability and social impact report Sheehan was working on, it published soon afterward. And in that report, notably, they audited 700 suppliers. And Sheehan itself found that 83% of these suppliers

were operating with, quote, major risks. These were things like fire and emergency preparedness, working hours. But in 12% of cases, suppliers had committed what they call zero tolerance violations, which could include things like underage labor, forced labor, severe health and safety issues. And I did ask the company what exactly they had found, but she didn't elaborate on that. I know another concern that some experts have raised, especially because Xi'an isn't particularly transparent about several elements of its business, is whether or not they use textiles produced in Xinjiang, which is an area of Western China that's reportedly using forced labor by the Uyghur Muslim population there. And you asked Xi'an executives about this as well.

What did they say about that? And you asked she and executives about this as well. What did they say about that? Yeah, so I asked the same person, Adam Winston, if she and suppliers use textiles from Xinjiang. And his answer was pretty vague and careful. He said, we have a program in place to identify the origin of cotton. We do transparency exercises. We talk with our suppliers.

And we make sure that all of the product that we're sourcing and buying is compliant with the market that that product is going into. And then he paused and she and spokesperson who was on the phone line suddenly interjected and said, we're not going to say anything else on are worried about the use of forced labor in Xinjiang, but the Chinese government denies that there's a problem in Xinjiang. And so she's referring to that sort of tricky political situation. But certainly I didn't get a straight answer. Let's talk about the environmental concerns here. So we talked about 1.3 million new items in a 12-month period. Obviously, churning out millions of pieces of clothing, especially clothing that isn't necessarily built to last, isn't great for the planet. Yeah, so they sell a huge amount of disposable clothing. of clothing, especially clothing that isn't necessarily built to last, isn't great for the planet. Yeah.

So they sell a huge amount of disposable clothing. And then also the company discloses so little about its production that it's hard to even start to gauge its environmental footprint. So some other companies are starting to talk about what their carbon emissions might be or how much material they're using in aggregate. And Shein just doesn't disclose any of that. Designers have also accused Shein of copying their work. There's even this hashtag Shein stole my design that's got more than 6 million views on TikTok.

My name is Devin. I'm an artist and a small business owner. And Shein has stolen my design and they are profiting off my work and creativity. Guys, I'm sad because Shein stole my photo. That's me modeling our handmade scrunchies. This is our product on our site. Bienvenido a otra vez a Shein steals it again. What did you hear from designers you spoke to about this?

Yeah, I talked to some designers with really interesting stories. The most striking one to me was this musician named Katie Bailey. She's in a band called Southbound 17. And she had hired this designer over the internet to design a T-shirt for her band. The T-shirt hadn't been made yet. It was still in the works. And then one day she gets a text from her best friend with a link to Shein. And she looks at it and it's her T-shirt hadn't been made yet. Like it was still in the works. And then one day she gets a text from her best friend with a link to Shein and she looks at it and it's her t-shirt.

It's like the same t-shirt she'd gotten designed that as far as she knew didn't exist yet. And they'd been selling it for months for $9. And so she posted about this on social media. And then later she got an Instagram message from Shein and they apologized. And they acknowledged that these were unlicensed items. And they said that these had been sent to Shein by a supplier who had promised that there were no copyright issues. They promised that they would make it better. They said they would remove the shirt from the site, that they wouldn't work with the supplier anymore, and that they'd be more careful in the future. But then a month later, the same t-shirt resurfaced on Romwe,

the Shein brand we talked about with just with some slight edits. And by then Katie Bailey was just exhausted. And so she dropped the issue and didn't do anything about it. But I did also talk with another artist, a photographer named Leah Flores, who found that Sheehan had copied several photos of hers. She found eight of them. And so she sued Sheehan. And last June, she obtained a $40,000 settlement. She gets her first settlement check. And a couple of days later, she finds four

more of her images on Sheehan and Romwe. And so she went after Shein again and settled again. This time she couldn't tell me how much it was for, but she said it was substantial. And by the way, Shein didn't respond to a request for comment on this. Okay. What about the products themselves? Has there been controversy around what the company is selling? Yeah. So there was a swastika necklace. There was a Muslim prayer mat sold as a decorative rug. And Sheehan removed these items, but only after people complained. I also spoke with a former employee of Sheehan who saw that children's clothing seemed not to meet safety standards that are set by the U.S. Consumer Product Safety Commission. And in fact, in July of last year, the Safety Commission in the U.S. announced a recall of thousands of Sheehan branded children's sleepwear sets that violated the federal flammability standard.

And then in December, Health Canada recalled a Sheehan children's jacket after a CBC investigation found that it contained dangerous amounts of lead. So it wasn't just this employee. A lot of people have raised alarms about this. They believe that Sheehan's business model allows them to shirk some of their responsibility for the problems that we're talking about here because they're largely outsourcing the design and production and other steps of the process to small third party suppliers. copyright infringements and there are many then it was not sheen then it was you know some some individual designers that said make a fault and did not respect uh a guidance from them if something happens in the supply chain this is what sheen uh is telling us uh then you know the supplier did the fault was never never never sheen from what you've seen in your reporting, to what extent is Sheehan taking responsibility when these issues have come up? So I would say that Sheehan is starting to feel the pressure. They have since last fall posted a bunch of job listings for things like director of sustainability, senior product safety and labeling council, intellectual property council. So that suggests that they're concerned about the,

you know, that they're hiring people who can address these kinds of issues. The audit that they conducted with suppliers suggests that they feel like they need to do more diligence with suppliers and be somewhat more transparent about that. Also in that sustainability and social impact report that we talked about, Sheehan did commit to using more sustainable textiles and disclosing its greenhouse gas emissions. So these are promises. These aren't things that the company has necessarily done yet, but they seem to point to a sense of urgency, some sense of urgency on Sheehan's part. I also was able to review this October guidance document that Sheehan's lawyers wrote. And they write, it appears that our suppliers are searching the internet, including Instagram and

Etsy and copying other people's works, then selling them to us. And they acknowledge in that document that the legal and PR costs of that fall on Sheehan and it's hurting its reputation and it's a problem. So, you know, internally in this kind of documentation, they're also acknowledging the problem. What about the labor issues? Regarding labor, you know, the first step for any company is to figure out what's going on in its supply chain. And so, you know, it is trying to do some of that. It's certainly trying to do some of that. However, at the same time, when I talked to labor rights activists, they did point out that that's a little bit of a bandaid on the problem. There's an underlying issue, which is that if you're asking your suppliers to produce

clothing really cheaply and really quickly, there's a sort of inevitability to the fact that workers are going to be pushed really hard and corners may be cut. Over the past few months, what kind of regulations have been proposed in various countries that might impact Xi'an's business model? So there have been a lot of them. In December, President Joe Biden in the U.S. signed a law barring the import of products that are made in Xinjiang, and it goes into effect in June. the import of products that are made in Xinjiang, and it goes into effect in June. And then in January, the U.S. Congress introduced a new act, which if signed into law, would get rid of that tax exemption for packages from China worth less than $800, which would, of course, affect the company. In March of this year, the European Commission introduced a proposal specifically meant to address fast fashion's environmental damage. So that included things like setting standards for how durable and reusable clothes have to be, requiring companies to include information about sustainability on labels.

And this would affect, you know, not just companies that are based in those countries, but companies that are based elsewhere and try to sell into those companies. It all makes me think like in the last few years, we've heard a lot about a move away from fast fashion. There's been like a huge rise in brands explicitly marketing themselves as sustainable and more transparent like cotton and Everlane. And there are now all these like really popular reselling sites for secondhand clothing. I even saw a market research report from 2020 that predicted that the secondhand clothing industry would be twice the size of the fast fashion industry by 2029. But what do you think Sheehan's popularity and their $100 billion valuation actually says about the future of this industry? You know, investors are good at what they do generally.

And if investors are pouring money into this company, there's a prediction embedded in that, that the company is going to be even bigger in the future than it is now. that the company is going to be even bigger in the future than it is now. And so while it may be true that the second hand clothing industry is seeing a lot of growth, I think it's also the case that Shein and companies like it will continue to be successful based on my reporting so far. Vahini, thank you so much for this. This was super interesting. Thank you for coming on. Thank you for having me. All right. So before we go today, I just wanted to shout out a few reporters that made this episode possible. Louise Matsakis, Megan Tobin, and Wenci Chen. They wrote this amazing piece for Rest of world that

helped us a lot in our understanding of this topic. And they're all amazing reporters doing great work. Also, as you know, we've been putting special episodes of nothing is foreign in our feed on Saturdays. I hope you've been checking them out. The show is super good. Even though I consume a probably unhealthy amount of news, I still always look forward to their episodes. This week, Tamara Ken Dacker talks to this incredible man, a torture survivor in the Philippines. He was brutalized by the Marcos regime. And on Tuesday, the son of the former dictator just scored a landslide election win. What was life like for most Filipinos under Marcos Sr. from what you remember? Contrary to what the son of the dictator is saying now,

those years were not the golden years. In fact, Filipinos suffered much. His father, Ferdinand Marcos Sr., a charismatic president turned brutal dictator who ruled the country for 20 years. It's estimated that thousands were killed, jailed and tortured under his watch. There was widespread impoverishment, social services were lacking, and graft and corruption characterized the government to the point that in mid-1975, government did encourage Filipinos, especially those who were unemployed, to go out of the country and seek proverbial greener pastures abroad. All right, so listen, the full episodes aren't going to show up on Saturdays anymore,

which means you got to follow the show. Do it now. It'll take a second. You won't regret it. You can listen to full episodes of Nothing is Foreign and subscribe wherever you listen to podcasts. New episodes are out every Friday morning. FrontBurner is brought to you by CBC News and CBC Podcasts. Our producers are Simi Bassi, Imogen Burchard, Ali Jane, Sam Connard, Katie Toth,

Levi Garber, and Derek Vanderwyk. Our sound design this week was by Mackenzie Cameron, Nooruddin Karane, and Sam McNulty. Joseph Shabison does our music. The executive producer of Front Burner

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