Online fast-fashion retailer Shein is apparently worth $100 billion, according to its latest funding round. This figure beats the combined market cap of H&M and Zara, propelling Shein to the third-most valuable startup in the world after ByteDance and SpaceX. Who knew selling backless tank tops and sexy mesh miniskirts was so lucrative?
Shein knows exactly what buttons to press. It scours consumer data and social media to determine which designs have the largest mass market appeal and commercial value. It partners closely with clothing manufacturers to deliver products from the factory floor to consumers in a few days. Its team of nearly 800 designers toil day and night to put out thousands of new items daily. It has a battalion of young influencers parading their newest purchases online, some of them earning commissions from its affiliate program. Just check out #sheinhaul on TikTok and #shein on Instagram. The aggressive internet expansion has paid off. Shein has catapulted into the top spots on Google searches, on par with H&M and Zara.
Ultimately, Shein’s rock-bottom prices are the biggest lure for consumers. It makes fashion accessible for everyone. Where else can we find 18K gold-plated jewellery for less than $10? How else can we get dupes of designer bags for $20? When we browse Shein and see a pretty necklace glowing under immaculate studio lighting, this tangible object pushes aside our vague notions around environmentalism and labour rights. The pretty necklace convinces our monkey brains to buy it. After all, it’s only $10! What harm can it do?
Despite all the hype around ethically-produced fashion, money talks in the end. It’s addictive for consumers to buy cheap and trendy clothing, and investors are eager to capture their coin. Sadly, the most effective economic solution – higher prices – eliminates one of Shein’s biggest selling points. Low prices do not factor in negative externalities in the clothing industry, such as water pollution generated from garment production or landfills created by improper textile waste disposal. The most direct way to internalise these externalities is raising clothing prices so that they reflect the complete cost of production.
However, that will most likely be unpopular among Shein’s customers drawn to the brand for its affordable designs. Profit-driven companies and investors cannot risk alienating most of their customers, especially in an industry as competitive as fashion, unless there are tangible benefits such as higher quarterly revenues. At most, Shein will continue posting non-committal statements on using recycled textiles and energy-efficient logistics systems, if only to ride the tide of fashion retailers claiming to care about the earth.
Looking past the veneer of gaudy satin and plastic organza, Shein calls into question the eternal struggle between impulse and reason. Should we give in to our monkey brain telling us to buy cheap shiny trinkets? Should we pause and think about the true cost of our purchases beyond what we’re spending on our clothes and shipping? How much are we willing and able to pay for internalising all these externalities?
Clearly, investors believe that our monkey brain will win. They think that Shein will continue profiting from a sufficiently significant group of consumers craving lightning-fast fashion at rock-bottom prices – enough to warrant a $100 billion valuation.
On the other hand, Shein is well-positioned to lead the way towards more sustainable fashion practices. Suppose Shein is truly able to capture the hearts and wallets of consumers through astute analytics and social media strategy. Then it should still be able to attract and retain customers if it raises prices to reflect the higher cost of ethically-produced clothing and also show measurable outcomes from changing their production practices. If successful, this pivot could even become one of the greatest moments in fashion, given Shein’s massive cult following. Will Shein’s investors and management be bold enough to take the next step?
