Today, Explained - Shein wants to go public

Episode Date: December 21, 2023

The Chinese apparel company Shein, a favorite of Gen Z shoppers and the latest frontier in US-China tensions, has indicated it plans to go public in 2024. In an episode we first released earlier this year, Vogue Business editor Hilary Milnes explains all the drama surrounding the ecommerce giant. This episode was produced by Haleema Shah, edited by Matt Collette and Amina Al-Sadi, fact-checked by Laura Bullard, engineered by David Herman and Patrick Boyd, and hosted by Noel King. Transcript at vox.com/todayexplained Support Today, Explained by making a financial contribution to Vox! bit.ly/givepodcasts Learn more about your ad choices. Visit podcastchoices.com/adchoices

Chinese fashion behemoth Shein is one of the fastest-growing companies in the world, which means the people of planet Earth like it. But it has so many critics. Designers say Shein steals from them. Shein straight up just stole my pirouette-squirt design. Influencers say they've been misled. I make mistakes. I'm imperfect. I'm forever growing and evolving,

and that's probably one of my favorite things about myself. Danny, sorry about that trip to China. Congress said Sheehan's being deceptive about who makes the clothes. Consumers don't, all things being equal, want to purchase goods that are contaminated by slave labor or forced labor. And a Vogue editor says the clothes are just not that good. These are not very well-made clothing. They are not made to last. On Today Explained, as Sheehan flirts with going public, an episode we first ran earlier this year on why this hated company is so beloved and why this beloved company is so hated.

Get groceries delivered across the GTA from Real Canadian Superstore with PC Express. Shop online for super prices and super savings. Try it today and get up to $75 in PC Optimum Points. Visit superstore.ca to get started. It's Today Explained. I'm Noelle King with Hilary Milnes, the Executive America's Editor at Vogue Business. She does not shop at Shein. I have to say that the user experience on the website, it's just not for me.

It's fine. She works at Vogue. But the user experience on the website is for so many people that Shein dwarfs other fast fashion companies like H&M and Zara and is valued today at $66 billion. That's more than Zara and H&M combined. And so I think when people bucket them together, what doesn't really come into play or isn't really that common of knowledge if you don't know the fashion industry that well is just how big Shein is compared to these other companies. And at the core of its business model is a very reactive, technology-based, algorithm-driven response cycle that can pick up trends very quickly as they're happening. They're tapped into what's happening on social media, on the internet, and regurgitating these trends as they're coming into popularity. And a big thing that Shein often talks about is that they then seed some styles onto the website. And then only if they start to perform will they mass produce them.

So that's something that other fast fashion companies have done as well. But Shein is uploading like 10,000 products a day. So it's just a massive operation. Give me an example of one of the trends that they've jumped on. The parachute pant. We're seeing that. That's very popular. I know a lot of Gen Zs are really into that Y2K style.

And so you'll see the baggy low-rise jeans, the parachute pant, the crop top. It's weirdly reminiscent of the mall fashion that we were all shopping. But you can look and see, you know, Kendall Jenner's spotting wearing, you know, a designer's parachute pant. We actually recently wrote about the designer that, you know, first became popular with the ones that were being worn by Kendall Jenner and Bella Hadid, then that filters its way directly to Shein. And that used to take time, and it now takes no time at all. A thing can show up in photos and it can be like, wow, that looks really good. That should be a trend. That will be a trend. But it's supposed to take time to then make the thing. How does it make these things so quickly? Shein has accumulated a network of

thousands. I saw 3,000. I saw 6,000. Exactly how many, I'm not sure, but they have a really big network of manufacturers that are making clothing under the Shein label. And I don't think you can talk about Shein without talking about their labor practices. And that is where a lot of the criticism, controversy and scrutiny comes from because there have been exposés, documentaries, looking into the working conditions for Xi'an. It is zero time off, 75-hour work weeks and accusations of forced labor and modern slavery.

If you want to take a day off or go back to your hometown, your wages will be deducted. This is completely unreasonable because there's no rest at all. I feel really, really tired, exhausted. Rotherton Bunch says most of the apparel stems from the Xinjiang province, an area where the U.S. State Department says there's a genocide happening. Members of the Muslim minority Uyghur population, often forced into prison and labor camps, produce the very goods that enter the U.S. through the apps. Sheehan says that it has implements in place, internal teams that ensure that none of the suppliers that they're working with are practicing forced labor or sourcing cotton from regions that have been accused of practicing

forced labor. It's difficult to confirm because lots of what's wrong with Shein, I guess you could say, is that it is so incredibly non-transparent and it's hard to know exactly what is all laddering up to what we then ultimately see on the website. What we do know, though, is that in the U.S. and some other countries around the world, they've started calling for investigations into their labor practices and wanting to really cut down on Sheehan's presence in the country. Tell me about some of the criticisms about sustainability

and what it means to have very, very, very fast, very, very, very cheap fashion. There is no way that you can make these clothes at this volume in a way that's sustainable. I think a lot of companies, and this is across fashion, it's not just Shein, they look at regenerative or organic cotton. They look at alternative materials that put less plastic out into the wash whenever you wash them. Sheehan could overhaul its entire material source, but at the end of the day, if they are still producing at the volume that they're producing at, it's never going to be sustainable. It outpaces the amount of production that could ever be healthy for the planet and within planetary boundaries. They've been hit with lawsuits around the toxic lead that is found in their products and the amount of carbon emissions that their facilities produce. And then you bring in the human rights issues in the supply chain from top to bottom. It's not a sustainable company. Fashion is not

a sustainable industry as a whole, but Shein is basically as far as you can get. When you look at survey and polling data, you find that Generation Z cares more about sustainability than older generations. They're really concerned with climate change. How does Shein hold on to them if it's doing things that are documented as really bad for the planet? I think what it comes down to is no matter who you are, the allure of cheap, trendy clothing is pretty hard to resist when you don't have the means to spend on more expensive fashion. And I think over time, clothing itself has become separated from quality. That's just not what people buy clothing for. They're not thinking about what can last. They're thinking about what they'll look the best wearing and what event they're

going to and what they need a new outfit for. And I think where we have seen a new type of customer behavior pattern come up with Gen Z, they are very into resale. They're very into secondhand shopping and thrifting has gone online. And so I think people will justify new purchases by saying, oh, I can just resell it. And then that even comes down to the Shein purchase, even though ultimately these are pieces of clothing that are disposable. So it's very contradictory. And I think it's like the hive mind versus the individual urge that's at play. All right. This company has been around since 2008, but all of a sudden I'm reading about it everywhere in Forbes, in Bloomberg, in the New York Times, in the Wall Street Journal,

and in Vogue. Why have we hit like peak Sheehan here? Why is everyone talking about it right now? Where it like blew up into public consciousness was on TikTok. I spent $500 on Shine. If you look at Shein's rise in the U.S., it's pretty in step with TikTok. It's over the past, you know, three years or so. And the Shein purchase behavior is, like, perfect for the TikTok haul. I kinda wanna do a a try on haul. And so you have creators, influencers on TikTok who will buy, you know, if you buy hundreds of dollars in Shein clothing, that's a massive haul.

And then they're trying it on. The hashtag Shein haul is trending everywhere. I heard Shein's getting banned or something or sued or something. So I had to get my last big order in and let's do a haul. And I got this pink case and this pink shirt. I love it. Now we have this houndstooth set. I'm obsessed with it.

Love it. So I have a few more things coming because I just kept ordering and I couldn't stop. So there's definitely going to be a part two. It's kind of normalized that behavior, even though it's overconsumption kind of flying in the face of the sustainable ethos or thoughts that Gen Z is said to be having. At the same time, you have the pushback. And so that gains momentum as well, because, you know, a lot of people don't agree with Sheean's behaviors. And at the same time, that's gone up to lawsuits and potential congressional action against Xi'an as well, which I think also goes back to the TikTok question, because we're seeing some more scrutiny around Chinese-based companies over data and privacy. And so they've already

kind of brought TikTok in front of Congress for that. And so the question is, is Shein next? And it wants to go public. That's right. So there are rumors that Shein is considering an IPO, which is an initial public offering, which means that it would be a publicly listed company on the New York Stock Exchange or NASDAQ or Wall Street. And Shein has not confirmed or commented on whether or not they actually are considering an IPO. But we do know that they have spent hundreds of thousands of dollars in lobbying efforts in the U.S. so far this year.

There's definitely a precedent for Chinese companies doing very well in the U.S. But we'll see, I guess, if the mood changes around it and if they decide, like, okay, this would really open us up to scrutiny. Hilary Milnes of Vogue, coming up, is Sheehan really stealing from designers? And if so, how is it doing it? A designer is going to walk us through it. Thank you. and put money back in your pocket. Ramp says they give finance teams unprecedented control and insight into company spend. With Ramp, you're able to issue cards to every employee with limits and restrictions and automate expense reporting so you can stop wasting time at the end of every month. And now you can get $250 when you join RAMP.

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Join the ACLU at aclu.org today. I'm Joanna Cosentino. I am a crochet designer where I sell my crochet plushies, accessories, and I also design clothing and then I sell the pattern. I think my designs get popular because nowadays, the trend I would say is color and expressing yourself through color. My patterns, they're simple, but they are colorful and sometimes have a fun graphic on it. And I think people like that. It was,

I believe the summer of 2021, a follower had messaged me on Instagram and they said that they were online and they saw my strawberry vest. It's like a circular kind of shape. It has mint green on it with pink trim at the bottom and like pink trim around the shoulders. And then in the middle is like a really plump red strawberry with some green leaves. And they sent me a screenshot of this strawberry vest that Sheen was selling. It was mint green with a pink trim, strawberry in the center. The exact same color scheme and design as mine, except it was made with like a fake knit stitch. So it was clearly mass produced

with a much cheaper material. I sell the PDF pattern to Make It Yourself on Etsy for about $10. But if I were to make the strawberry vest by hand and sell it, I usually sell it for anywhere between 90 to to $100 just based on the materials, the labor. They were selling the finished piece for $12 and obviously this wasn't actually crocheted by hand. It was a machine mock knit stitch. The fact that they were selling it

for $12, which is only $2 shy of just the pattern for it, says a lot about how exploited the labor is. That was designer Joanna Cosentino. Hilary Milnes is our co-pilot this half hour. She's an editor at Vogue Business. So, Hilary, Joanna says she stole a vest pattern from her. This is how I learned we're doing vests again. And they sold it for cheaper than she could. When this happens,

is there ever accountability for the big company? It's definitely not new for designers to accuse fast fashion companies of ripping off their designs. And historically, the most that really happens is that the fast fashion company gets some bad press. It's very hard to kind of get, you know, any sort of copyrights around fashion IP. And this has been, you know, just a longstanding

fact or factor in the fashion industry when it comes to who owns what design. This had been happening to like so many crocheters that I follow, like mutual designers in the community that I wasn't surprised when they sent me this message. And then I posted on Instagram a side-by-side of the screenshot of Sheen's design and my design with me wearing it next to it. And I just announced it to my followers that, hey, this happened to me. Sheen is like this really shady company. Like if you can just do not support them. And the picture kind of blew up. That said, there are some interesting nuances about the Sheehan lawsuit that stand out and make it feel a bit different. The most recent lawsuit, I think on the designer side, was a few coming together and they accused Sheehan of being in violation of the RICO Act, which was set up,

I think in the 1970s, to fight organized crime and racketeering. So this lawsuit is different in that it's not saying, look at my design, Sheehan ripped it off. This was a standalone offense, but it's saying that design theft is a core part of Sheehan's business model, basically implying that if Sheehan did not rip off design from other designers en masse, then Sheehan would have no business. Oh, because there's no Coco Chanel. There's the design house, but there's no designer. So the brains are coming from elsewhere, more or less. In this day and age, I think you could look at this and say, this company uses technology to identify trends, and then it makes them. How does that become illegal? It seems smart. It's not illegal on its own. We look at how many

companies and, you know, design houses themselves are starting to use AI and technology to help inform the design process. So the narrative is typically how is fashion combining art and science and how do you get the right balance? And a lot of fashion is creating the trends, not just following them, not just repeating them. So you need to have some element of, I know what my customer will want before they even want it. If you bring in too much data, then you're just going to kind of be in the same repetitive process. So Shein is not using its own customer data to inform its design trends and then bringing in exactly what you said,

that designer element on top that creates something new out of what they are predicting their customer will want. It is sourcing customer data from all over the internet in order to pick up on what trends the customer will want to buy en masse as close as possible to as soon as they're wanting it. So it's reactive. It's not leading any sort of design trend. You know, you mentioned, is it illegal?

I think that's what we're going to find out whenever we see how these lawsuits go. But one thing that the recent lawsuit from the designers mentioned was that Shein was worse than TikTok in terms of how it protected or, you know, did not protect customer data and privacy, which, again, is notable considering TikTok was questioned by Congress in terms of how they used customer data in the U.S. Okay, so this company is facing just about every kind of criticism a company can face, up and down the ladder. Has it tried to fix its reputation? Has it done any sort of public outreach? Yeah, so I think the most notable example of Shein trying to change the narrative around its business and its practices was the June influencer trip. Oh, yeah. Essentially, Shein flew some influencers out to a couple of their manufacturing plants. Showed them around and really fed them topics to talk about.

Getting to see the whole process of Shein clothing from beginning to end with my own two eyes was so important. So they were showing basically how the technology is such a core part of Shein. And they were very complimentary in terms of like how advanced Shein was. And met some of the workers and talked about how well treated they were. Everybody was just working like normal, like chill, sitting down. They weren't even sweating. Now I can go home feeling reassured,

feeling confident in my partnership with Shein. It looks very clean. You know, it did not match any sort of notion of what we think a sweatshop would look like. Shein sent influencers to its factories to show them, I guess, that they don't abuse their workers. The influencers took their PR spin for gospel and reported back to their millions of combined followers. The takeaway was to be, oh, you know, this is just a very technology advanced company. They are treating their workers well and they are, you know, working in environments that are very safe and friendly and, you know, able to be toured in a very modern looking like office

environment. Okay, so all of this, and on top of that, the OG influencers, American Congress people are mad at Sheehan too. You have select committees in Congress who are calling on Sheehan to change its practices and wanting to dig into these forced labor allegations, as well as looking into Shein's shipping practices into the U.S. And so the way that Shein is able to get so much volume into the U.S., they've actually found a shipping loophole. So it's called de minimis shipping. And it basically says that any company that if you're shipping goods under $800 worth of value into the US, they will not be taxed import taxes, and they will also not be scrutinized as much as any other retailer might be. So it's not going through customs basically in

the same way. So this has really been a key mechanism for Xi'an when it comes to growing its business in the U.S. And I think Congress is now kind of picking up on the fact that Xi'an, as well as Timu, both building their businesses off of this practice. Bulk sales from China over $800 are subject to American tariffs. But because each Shein and Timu sale is processed individually and cheap, both companies are able to sell hundreds of millions of dollars worth of clothes in the U.S. tariff free. I'm an old millennial, so I heard about Shein not through the TikTok or through the Insta. I actually read news stories about it and heard like this is a company that potentially is doing some terrible things. And then I went on their website and I was like, oh my God, this is so cheap. This is so trendy. And I filled up a cart and then I thought through what was happening and I closed out. I didn't buy anything. I went to

L.L. Bean instead. And it makes me think, I mean, I am not the generation that Shein is meant to appeal to, but I wonder if you think, does the responsibility for ensuring that this company does better, does it just lie with the people who are going to go on and fill up their carts? Absolutely not. I don't think we can expect most people to have the Shein to L.L. Bean cart pipeline. And I think that a lot of the thinking around customers will vote for their dollars is kind of a myth when it comes to sustainability. When your dollar just isn't going that far and you either believe you don't have the extra money to spend on nicer clothing, or you're just someone who's young, you're in college, and you have a lot of events that you're going to. You're constantly seen on social media. You're

keeping up with your friends who are also buying the trends. It just becomes such a force that can't count on the customer to make those decisions to such an extent that it will put this company out of business. I think at the end of the day, it is going to come down to legislation, regulation, and kind of like the market forces to rewrite this company, because we just can't ask customers to take them down themselves. Hilary Milnes of Vogue, the magazine. Today's show was produced by Halima Shah. Editing by Matthew Collette and Amina El-Sadi. Facts by Laura Bullard. Engineering by David Herman and Patrick Boyd. I'm Noelle King. It's Today Explained. Thank you.