Shein and its low valuation: from traceability to tariffs, here are the threats to its business

The issue of supply chain oversight is crucial: as Public Eye points out, the document states that responsibility for working conditions, product quality and regulatory compliance is largely delegated to manufacturers, traders and other business partners, who are also required to indemnify Shein in the event of any breaches. Violations of workers’ rights and other abuses are treated as business risks, and there is no direct oversight, even though Shein operates a ‘Responsible Sourcing Programme’ – a system of third-party audits – whilst acknowledging that it ‘cannot guarantee that these audits will always identify non-compliance’.

Over time, several investigations have uncovered serious irregularities within the Shein system: “Untold: Inside the Shein Machine” is the title of the documentary by reporter Iman Amrani for the British broadcaster Channel 4, which details the working conditions in two factories producing for Shein in Guangzhou province, with endless working hours and meagre wages. These findings echo those of another investigation, carried out by the BBC in 2025: visiting the Panyu area – also known as ‘Shein village’ due to the high concentration of manufacturers working for the group – journalist Laura Bicker found that in some cases workers were putting in as many as 75 hours a week, compared to the 44-hour limit that should not be exceeded under Chinese law, fuelling a system of on-call and extremely precarious work that is, however, very much in line with Shein’s on-demand model.

This is the ‘Large-scale Automated Test and Reorder’ system, through which Shein aims to eliminate overproduction by recording customer requests and passing them on to manufacturers – a system upon which it bases much of its sustainability strategy: However, given the 4,700 new ‘styles’ launched every day, it cannot be ruled out that what is ordered is actually sold and does not end up in stock, only to have to be disposed of later. And so, as Public Eye notes, Shein may ultimately be accelerating the very mechanism it seeks to dismantle.

Shein has been publishing its sustainability report since 2022, and in March 2026 it dedicated a specific report to ‘circularity’, a key theme in its strategy EvoluShein: in the same year, starting in the United States, Shein launched its resale platform “Shein Exchange”, where, according to the document, 83,700 products were listed in 2025 – equivalent to just 0.01 per cent of the total of 1.078 billion new orders received in the same year. And despite investments in the textile recycling supply chain, the Hong Kong IPO prospectus also states that in 2025 Shein recovered 10.5 million metres of waste fabric, a figure that is almost laughable when one considers that many Italian textile companies alone produce over a million metres of it each year.

No less important – not least because it poses real risks to the company’s business – is the issue of the customs duties imposed by the United States and the European Union to limit the influx of billions of small parcels from China, typically those from Shein and Temu, into their markets: the European Union has imposed, with effect from 1 July, new tariffs which increase the cost for those ordering them, following on from measures already introduced in the United States last year. According to Shein, these measures ‘may have a negative impact on business’ – an effect that has in fact already been felt in the United States, a market that accounts for 24 per cent of the Chinese company’s sales and where losses in the first three months of 2026 reached $99 million.

A negative impact is also anticipated from European regulations concerning Extended Producer Responsibility, the Corporate Sustainability Due Diligence Directive, and the Ecodesign Regulation and the anti-fast-fashion law passed by France last June, which provides not only for an increase in customs duties of up to 50 per cent of the price of the imported product, but also restrictions on marketing and advertising by platforms such as Shein and Temu.

In France, the first European country where Shein launched in 2015, Shein was forced to abandon its plans to open high-street shops last November, following fierce protests following the opening of a shop-in-shop within the historic BHV department store, partly due to the discovery by the anti-fraud authority under the Ministry of the Economy that erotic dolls with childlike features were being sold on the platform. Shein subsequently improved its customer age verification system, and the request to suspend sales on the platform in France for three months was rejected by the authorities.

In 2020, India went so far as to block Shein, along with dozens of other Chinese apps, over privacy concerns; this ban lasted until last year, when Shein returned thanks to a partnership with Reliance Retail, albeit with strict restrictions. “We have grown rapidly since our inception,” Shein writes in the document, “but there is no certainty that our growth will continue.” The stock market – even the ‘friendly’ one in Hong Kong – will make its own assessments.