Shein, a prominent online fashion retailer, is considering the establishment of a factory in Mexico as part of its efforts to expand its manufacturing capabilities beyond China, according to insider sources.
This move is seen as a step towards localizing production, which could result in shorter shipping times and reduced distribution costs for Shein’s customers in Latin America.
The company’s decision to build a manufacturing network in Brazil, aimed at serving its global customer base, further underscores its commitment to diversifying its production hubs.
While Shein was originally founded in China and continues to manufacture the majority of its products there, it now seeks to explore new manufacturing options.
By offering affordable items such as $10 dresses and $5 tops, Shein has managed to capture market share from other budget-friendly fashion retailers.
Headquartered in Singapore, Shein competes with Temu, owned by PDD Holdings, which specializes in selling low-priced products from China, ranging from clothing to electronics, in the U.S.
The exact location for Shein’s factory in Mexico has yet to be determined, as per the anonymous sources who requested confidentiality due to the private nature of the discussions.
To finance its expansion plans, Shein intends to utilize the funds raised in a recent capital raise amounting to $2 billion, with investments from entities like Mubadala and Sequoia China.
Additionally, the company is eyeing an initial public offering in the United States, despite a valuation reduction to $66 billion during its latest funding round.
Nevertheless, Shein continues to demonstrate significant annual revenue growth of 40%, as confirmed by one of the sources.
Shein refused to comment explicitly on the ideas for the Mexico factory but declared its pledge to localization as it enlarges into new markets. Marcelo Claure, chairman of SHEIN Latin America, emphasized that the company’s localization strategy aims to not only reduce delivery times and expand product variety but also support local economies.
Claure also highlighted Shein’s present survey of nearshoring choices, which involves producing goods nearer to the place of sale.
In recent days, Shein has set out an online market stage in Brazil, making way for third-party merchants to retail their own products via the Shein app and website.
A similar marketplace is planned for launch in the United States before being expanded globally.
However, it is important to note that the forthcoming Mexico factory will not house items from third-party vendors.
Claure acknowledged that Shein is anticipating extending its source platform model to several mainstream markets across Latin America.
Shein has faced criticism in various markets, including India, Brazil, and the U.S., due to concerns about its supply chain links to China.
Both Shein and Temu have attracted increased scrutiny from Congress regarding their alleged exploitation of U.S. trade laws.
In April, a federal commission released a report criticizing both companies for utilizing the de minimis trade exemption, which allows them to avoid tariffs by directly shipping packages valued at less than $800 to U.S. customers.
The report also raised concerns about Shein sourcing cotton from China’s Xinjiang region, a practice banned in the U.S. due to its association with forced labor involving the Uyghur ethnic minority.
In response to these concerns, a bipartisan group of two dozen U.S. representatives urged the Securities and Exchange Commission to halt Shein’s initial public offering until the company verifies that it does not engage in forced labour practices.
Shein, in previous statements, has asserted a zero-tolerance policy towards forced labour and has required its suppliers to adhere to the International Labour Organization’s core conventions.
When asked for comment on these matters, Shein did not immediately respond to requests, and a spokesperson referred to their previous statements regarding the company’s stance on forced labour.