Shein attempts makeover under a barrage of criticism

Fast-fashion giant Shein is attempting to revamp its public image — and the view of an industry that has been heavily criticized for its environmental and labor practices.

Why it matters: The timing of Shein's IPO and the company's longevity may depend on its ability to reduce headline risk and shift the tide.

The big picture: Shein is one part of a larger industry that contributed 7.73% of the 146.1 million tons of waste that made it into U.S. landfills in 2018, according to the most recent data compiled by the EPA.

• Per the EPA, 66% of all garments eventually make their way to a landfill.
• Fashion also contributes to water, air and ground pollution via tanneries, fabric dyeing and cotton cultivation.
• The apparel industry has long been a contributor to poor labor conditions going back to the beginning of the industrial revolution.

Plus, the textile industry yields less landfill waste than other categories, such as food (24.14%), plastics (18.46%), paper and paperboard, metals and wood.

Flashback: The fast-fashion concept was originated by apparel brand Zara, founded in 1975 and owned by Spain-based fashion conglomerate Inditex.

• Zara arguably pioneered the short production times fast fashion is known for today.

Zoom out: Despite environmental and labor concerns, fast fashion's trendy styles and low prices appeal to younger generations with less expendable income.

Zoom in: Shein is rapidly taking apparel market share, growing 50% year over year to achieve $23 billion in global revenue in 2022 while generating $800 million in net profit.

Driving the news: Singapore-based Shein has served as a poster child for bad actors in fast fashion as of late, with forced labor allegations levied at it alongside criticism that it encourages consumerism and skirts import tariffs.

• The company's most recent attempt at an image makeover — a brand influencer trip to its Guangzhou, China, factory, filmed on TikTok — faced backlash, with critics questioning the authenticity of the commentary.

What they're saying: Shein's global head of strategy, Peter Pernot-Day, pushes back on labeling the brand as fast fashion, which he describes as copying luxury designers via a high-waste production model.

• With its designs, the e-commerce brand is not reacting to runways, but to what customers are telling Shein they want, he says.
• "We’re looking to correct public misperceptions of brand," he adds.

How it works: The company attributes its growth to its model of making small batches of between of 100 and 200 garments of specific designs that are A/B tested, Pernot-Day says.

• If a design proves popular, the company will continue to produce it, so it's not a scarcity play akin to either luxury or competitor Zara, he says.
• Unsold inventory is reduced to less than 2% of all garments produced by Shein, leading to less waste, according to the Boston Consulting Group.

Yes, but: Shein is both cheaper and small batch — historically an "impossible" problem to solve without abusing something in the supply chain, Forrester retail analyst Sucharita Kodali tells Axios.

Of note: Outside of Oritain, which certifies the cotton used by Shein in its garments, it does not have additional third-party certification for the sourcing of manufacturing or materials.

• The company says about 2% of the cotton fibers tested that end up in its supply chain are from unapproved sources, including from the Xinjiang region in China, an area noted for forced labor practices.
• If the cotton is detected, Shein takes several steps including immediately suspending production, halting shipments, and removing the product listings, according to the company.
• The company says it audits the factories it sources garments from for the presence of relocated Uyghur workers, an oppressed minority group in China.

Reality check: It's been almost 10 years since China stopped publishing intra-country shipping data, and that lack of transparency makes it difficult to verify Shein's claims, notes Kearney partner Brian Ehrig.

What's next: Shein recently launched an integrated global marketplace for third-party sellers, Pernot-Day says.

• While most of the company's production is concentrated in China's Guangdong province, some has already been moved to Brazil and Turkey, with facilities planned for Mexico, he says.
• Shein's aims to have a localized manufacturing and distribution hub for each market and to have all of its clothing production be circular by 2050, Pernot-Day says.

Be smart: Shein's timeline trails companies such as Adidas, which have plans to be sustainable by a much earlier date, Ehrig says.

State of play: The latest fast-fashion entrant to make headlines — and a fierce competitor to Shein — is e-commerce marketplace Temu.

• Shein's $23 billion in revenue would place it among the largest producers of apparel in the world, alongside LVMH, Nike, Adidas, Richemont and Kering.
• Among fast-fashion players, Inditex currently ranks the largest, while Shein and H&M are in second and third, with Uniqlo's parent Fast Retailing in fourth.