The fast fashion retailer Shein has a clear and effective business model, which has enabled it to make great inroads into this market within just a few years of its founding. Although it is based in China, it does not sell its products there, seeking to avoid the intense competition in that market. Rather, it appeals to an international clientele with inexpensive, constantly changing fashions; it introduces about 6000 new products daily on average. Consumers must purchase those product digitally, because Shein has no physical stores, which keeps its overhead low. It relies on a vast web of suppliers, mostly located in China, to get products ready and shipped promptly.
As a result of its efficiencies and drive to be faster and cheaper, Shein has gained remarkable success. After a recent funding drive, in which it obtained about $2 billion in funding, the company was valued at $100 billion—more than its fast fashion competitors Zara and H&M combined. This status marks its remarkable and rapid growth, especially compared with its 2020 valuation of $15 million.
Thus, its business model seems to be working extremely well. Except … to be faster than anyone else and constantly source new ideas, Shein appears to be crossing some ethical boundaries when it comes to intellectual property.
In the past three years, it has been subject to more than 50 lawsuits alleging copyright infringement—and that’s just from rightsholders who have the resources to bring suit. Hundreds of individual creators and artists have complained to Shein, asking that products featuring their designs be removed from its site. In many cases, Shein agrees to comply, and it has settled a lot of lawsuits out of court. But in other cases, it denies any infringement, or it assigns the blame to its third-party suppliers, pointing to its existing ethical codes and review procedures as evidence that it complies with intellectual property laws.
In a sense then, the feature that contributes most to Shein’s success also might represent the greatest risk to its survival. By sourcing and offering so many products, so quickly, it may be impossible for the retailer to keep track of every item that suppliers add to its inventory. But for artists, both struggling and famous (e.g., Nirvana LLC sued to get Shein to take down clothing featuring its album covers), such explanations are insufficient. Because consumers can get versions of their work for cheap prices from Shein, those creators have less chance to sell their own work and creative ideas for a profit.
Discussion Questions:
- What is Shein’s ethical responsibility with regard to ensuring the designs it sells do not infringe on copyrights?
- Do consumers care? That is, if they can get a great price, are they willing to support copyright infringements?
- Is Shein’s business model likely to spread? Why or why not?
Source: Dan Strumpf, “China’s Fast-Fashion Giant Shein Faces Dozens of Lawsuits Alleging Design Theft,” The Wall Street Journal, July 3, 2022; Miriam Gottfried and Charity L. Scott, “Shein Valued at $100 Billion in Funding Round,” The Wall Street Journal, April 4, 2022