Source: Blog – Alliance for American Manufacturing

A screenshot of the SHEIN website taken on July 10, 2023, showcasing some of the home appliances offered for sale by the retailer.

Meanwhile, the company continues to exploit a trade loophole that allows it to dodge import duties and U.S. Customs inspections.

It seems like every day there’s new news about SHEIN, the popular Chinese e-commerce retail brand that’s dominated the fast fashion market over the past several years thanks to its use of sweatshop and likely forced labor to make extraordinarily cheap clothes with possibly stolen designs that possibly contain lead and are then marketed to Gen Z consumers via TikTok and shipped directly to the United States duty-free all while dodging U.S. Customs inspections via exploitation of a trade loophole.

Phew.

Anyway, here’s the latest in the ongoing SHEIN soap opera. The Wall Street Journal is out with a story about how SHEIN is pivoting to selling more than clothes, “offering everything from $1,200 commercial ice makers to 50-cent safety pins directly to consumers.” The move puts it in greater competition with companies like Amazon and Temu, another Chinese e-commerce giant that uses the SHEIN direct-to-consumer shipping model and sells an eclectic mix of products that have been linked by a Congressional investigation to forced labor.

WSJ reporter Shen Lu writes that SHEIN unlike with its clothing, SHEIN isn’t manufacturing their new products. Instead, the company is contracting with third-party sellers, a model also used by both Amazon and Temu.

But at the same time SHEIN is making this big pivot — and notably at the same time it appears the company is aiming to go public — there’s emerging evidence that SHEIN’s popularity is on the wane, Lu noting SHEIN “has lost some steam in the U.S.” Here’s more:

“…sales growth slowed to 13% year-over-year in the first five months of 2023, data from Earnest Analytics show. That compares with a 59% increase and a 223% surge in the same periods in 2022 and 2021, respectively. 

“In May, after its latest round of financing, Shein cut its valuation to $66 billion from $100 billion a year ago, the Journal has reported.”

That’s not all, folks! New polling from Morning Consult indicates that SHEIN’s popularity is decreasing among its critical Gen Z base, especially after an influencer trip to a SHEIN factory backfired:

“Compared with June of last year, net purchasing consideration among Gen Z adults, Shein’s core audience, is down 10 points. The share of Gen Z adults who said they are considering making a purchase from Shein also largely trended downward over the last year, falling from 49% in June 2022 to 42% in June 2023.

“A decline in purchase consideration among a historically reliable customer group is not positive news for Shein’s already razor-thin margins, especially as it eyes a U.S. IPO…

“…The brand’s net favorability among Gen Z adults now sits at 24, nearly 20 points lower than its June 2022 level (42). Meanwhile, the share of Gen Z adults with an unfavorable opinion of Shein shifted steadily upward over this period, climbing from 21% to 30%.”

Don’t count SHEIN out yet, though.

While Gen Z may be losing interest in SHEIN, that same poll found that millennial purchase consideration for the brand is on the rise. Diversifying its consumer base is likely one of the goal of SHEIN’s product expansion. Now heading into middle age, millennials like myself don’t really need crop tops to wear on a night out, — but we may be interested in an $8.96 portable blender! And SHEIN has a lot of money at its back to compete over the long term.

Which is why it makes no sense that current U.S. trade law is allowing the company to ship products to the United States duty free.

SHEIN’s direct-to-consumer shipping allows it to exploit the “de minimis” provision, which states that imports valued under $800 can enter the U.S. without paying import duties. That’s meant that SHEIN and rival Temu paid $0 in import duties in 2022, despite the fact that as a whole, they sent far more than that into the United States. Congressional investigators estimated, in fact, the two brands are responsible for 600,000 de minimis packages shipped to the United States every day. Every. Day.

Shipping goods via de minimis has also allowed SHEIN to dodge U.S. Customs inspections of products to enforce laws like the Uyghur Forced Labor Prevention Act. “There’s no question that they are using this loophole to escape being accountable for forced labor in China,” Rep. Earl Blumenauer (D-Ore.) recently explained on The Manufacturing Report podcast.

Blumenauer is one of the lead authors, alongside Rep. Neal Dunn (R-Fla.) and Sens. Sherrod Brown (D-Ohio) and Marco Rubio (R-Fla.) of new legislation called the Import Security and Fairness Act that aims to close this loophole. It’s a smart bill and Congress should pass it.

Will ending the de minimis loophole stop SHEIN’s rise? Probably not. After all, H&M paid $205 million in import duties last year, and that fast fashion brand is still doing well.

But as it stands right now, the loophole means that U.S. trade policy is essentially underwriting SHEIN’s dominance of the U.S. market. Why should it avoid paying duties while rivals like H&M pay their part? And, more importantly, why are we giving this company a leg up when American manufacturers and workers already face immense challenges competing against companies that don’t abide by the strict labor and environmental standards? That just doesn’t make sense.

Time will tell if Gen Z will continue to lose interest in SHEIN, or if the company’s pivot will allow it to attract new U.S. consumers. But whatever happens, SHEIN needs to start paying its fair share of import duties.

You can help: Tell your Members of Congress to support the Import Security and Fairness Act.

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