Shein, a Chinese-founded online fast fashion giant, has obtained approvals to re-enter India. It has secured a stringent licensing agreement with Reliance Industries Ltd., owned by Mukesh Ambani. Reliance’s retail arm will completely own Shein’s domestic business in India.
Shein’s return results from the stringent licensing agreement with Reliance Industries. It will provide production support and training to over 25,000 local suppliers. This initiative aims to empower local manufacturers by equipping them with Shein’s necessary support and training.
Moreover, this collaboration will enhance the capacity of local suppliers to produce Shein-branded products on a global scale. This depends on local manufacturers meeting one-fourth of the company’s global demand.
Additionally, by increasing the share of made-in-India goods on Shein’s platform, the potential for exports from India stands at around Rs 50,000 crore ($6.1 billion).
The agreement aims to tap into India’s burgeoning consumer demand and boost exports.
According to reports, both Shein and Reliance representatives chose not to comment on the matter.
Shein was Banned in India
Notably, Shein was previously banned from India three years ago following border clashes. Nevertheless, the company took steps to create distance from China by relocating its headquarters to Singapore in 2021. Its re-entry into India is part of its broader strategy to diversify manufacturing sources. Moreover, the company has bolstered local production in various countries, including Brazil and Turkey.
Shein will ensure that all data generated through its app and operations in India remains stored within the country. India’s strict data security requirements necessitate data storage within the country. The agreement involves a license fee paid by the Indian entity. Payments will be made solely from the profits generated by the Indian entity.
Will the return benefit India?
Furthermore, India aims to establish itself as an alternative manufacturing hub, reducing reliance on China. Prime Minister Narendra Modi seeks to increase annual exports to $2 trillion by the decade’s end. The deal has the potential to lead to significant exports from India. Made-in-India goods on Shein’s platform are expected to increase, potentially leading to significant exports.
As of May 2022, Shein is the largest fast-fashion firm globally. According to a survey, the company ranked as the second favourite e-commerce website among American teenagers in 2022. The Brand’s success can be attributed to its ability to appeal to Generation Z and offer affordable clothing.
Amid the COVID-19 pandemic in 2020, the company’s revenue reached $10 billion, marking seven consecutive years of over 100% sales growth. By November 2021, its valuation had doubled from $15 to $30 billion.
In April 2022, it raised $1 billion to $2 billion in private funding, capturing 28% of the US fast fashion market. The company’s valuation soared to $100 billion.
Its business model reportedly benefited from the China-US trade war, gaining tax advantages. They also faced controversies related to trademark disputes, tax evasion, human rights violations, and safety concerns. But that doesn’t stop them from growing in the market.
Notably, Shein’s revenue in 2022 amounted to $24 billion, nearly matching Zara and H&M.
Moreover, the company leverages big data and efficient Chinese manufacturing to swiftly produce low-cost garments. A Fortune article described Shein as catering to Generation Z consumers through data-driven design and rapid Chinese manufacturing.
The company utilizes a manufacturing partner and supplier network, producing items as quickly as three days after identifying a trend. It limits orders to small batches of about 100 items, allowing them to gauge customer interest efficiently compared to competitors like Zara, who order larger quantities.
Furthermore, the company became the world’s largest online-only fashion firm and utilized TikTok as a promotional tool.
In summary, Shein has emerged as a dominant force in the fast-fashion industry, boasting significant revenue and popularity among young consumers.