Shein, the Chinese fast-fashion powerhouse, made headlines in 2023 by amassing over $2 billion in profits, according to reports from The Financial Times, citing sources close to the company. This staggering figure represents a significant leap from its $700 million profit in the previous year, solidifying its position as a formidable player in the fast-fashion arena. Surpassing its rival H&M in profitability, Shein’s meteoric rise has caught the attention of industry observers and investors alike.
H&M, a prominent player in the fast-fashion landscape, reported a net profit of approximately $840 million in 2023, according to Barron’s. While H&M remains a key competitor, Shein’s exponential growth trajectory has positioned it as a force to be reckoned with in the global fashion market. Zara, under the umbrella of Inditex, continues to lead the pack with reported profits of about $5.9 billion, showcasing the fierce competition within the fast-fashion sector.
However, Shein’s remarkable financial success is juxtaposed against growing concerns over the environmental and social impacts of fast fashion. The industry’s reliance on cheap labor and its significant carbon footprint have drawn scrutiny from environmental advocates and policymakers. According to a United Nations Environment Programme report, the fashion industry is responsible for up to 8% of the world’s carbon emissions, highlighting the urgent need for sustainable practices.
Critics have singled out Shein for its lack of transparency regarding its supply chain, environmental pollution, and alleged violations of labor rights. Despite these controversies, Shein continues to attract a loyal customer base, primarily comprising millennials and Gen Z consumers. Surprisingly, a report from The New Consumer and Coefficient Capital revealed that over half of Shein’s customers prioritize environmental consciousness, with 67% expressing a willingness to pay extra for environmentally friendly products.
Nevertheless, Shein’s appeal lies in its affordability, with the average unit price for its products reportedly at $7.90 in 2021. This affordability factor has been a key driver of its popularity among budget-conscious shoppers, further fueling its rapid expansion and market dominance.
As Shein sets its sights on going public, its unprecedented financial success raises questions about the future of fast fashion and the industry’s commitment to sustainability. Amidst mounting pressure to address environmental and social concerns, Shein faces the challenge of balancing profitability with ethical considerations in its quest for continued growth and market leadership.
Duality of Shein buyers
The dichotomy between stated preferences and revealed preferences, a concept often discussed in economics, sheds light on the contradictory behavior observed in consumers’ environmental consciousness and their actual purchasing decisions. While surveys indicate a strong preference for sustainability among Gen Z consumers, their overwhelming patronage of fast-fashion brands like Shein reveals a disconnect between rhetoric and action.
As highlighted by Jadrian Wooten, an economics professor at Virginia Tech, stated preferences refer to what individuals claim to desire, whereas revealed preferences reflect their actual behavior and choices. This discrepancy underscores the complexity of consumer decision-making and the influence of various factors such as convenience, price, and social pressures.
Recent research conducted by Sheffield Hallam University in England reinforces this notion, revealing that while Gen Zers express a preference for sustainable practices, a significant majority still gravitate towards fast fashion. This paradoxical behavior underscores the allure of fast-fashion brands like Shein, which offer trendy, affordable clothing that resonates with young consumers.
Recognizing the importance of its customer base and their concerns, Shein has made efforts to address criticisms surrounding labor practices and sustainability. For instance, the company sponsored influencer tours of its factories in Guangzhou, China, in an attempt to showcase its commitment to fair labor practices and environmental sustainability. Despite mixed reactions to this public relations campaign, it demonstrated Shein’s awareness of its audience’s values and priorities.
Additionally, Shein has pledged to invest more resources into its third-party manufacturers and implement environmentally-friendly practices in its apparel production. While the impact of these initiatives remains uncertain, they signify a growing recognition within the fast-fashion industry of the need to address social and environmental concerns.
However, the enduring popularity of fast fashion suggests that consumer demand for affordable, trendy clothing continues to outweigh environmental considerations for many individuals. As such, the future trajectory of the fast-fashion industry remains uncertain, with ongoing debates surrounding sustainability and ethical practices. Despite these challenges, Shein and other fast-fashion brands are poised to continue their upward trajectory, catering to the preferences and behaviors of young consumers worldwide.