SHEIN, a global cross-border e-commerce unicorn, is being "encircled and suppressed" by global fast fashion brands.
At the beginning of 2024, SHEIN ushered in two lawsuits. On January 16, Japanese fast fashion giant Uniqlo took SHEIN to court, and on January 22, American fashion brand For Love & Lemons sued SHEIN for infringement. Previously, SHEIN was also sued by well-known American brands Levi's and Stussy, and Swedish fashion retailer H&M, which can be described as troublesome.
Not only that, but the road to listing of this cross-border e-commerce rookie is also quite bumpy.
Although SHEIN has repeatedly denied that it has plans to go public, rumors of SHEIN's listing continue to be exposed in the market, dating back to January 2022 at the earliest. According to recent news from Bloomberg, investors' valuation of the company has fallen to $45 billion due to uncertainty about SHEIN's listing, well below the $66 billion in May 2023.
In just two years, valuations have plummeted and lawsuits have continued, what happened to SHEIN?
Repeatedly caught in infringement storms
Just over a month after 2024, SHEIN ushered in two lawsuits.
On January 16, Fast Retailing, the parent company of the Japanese brand Uniqlo, announced on its official website that Uniqlo had filed a lawsuit against three entities under SHEIN in the Tokyo District Court on December 28, 2023. The reason is that Uniqlo determined that the form of imitations sold by SHEIN was very similar to that of its own product, "dumpling bags" (round mini shoulder bags).
It is reported that this nylon shoulder bag retails for $19.9 in the United States, making it one of the best-selling bags of the Uniqlo brand since its establishment. UNIQLO believes that SHEIN's sale of counterfeit products has seriously damaged customers' high confidence in the UNIQLO brand and the quality of its products, and has violated the Unfair Competition Law, and requires SHEIN to immediately stop selling counterfeit products and compensate it for losses of 160 million yen.
Uniqlo also said that Fast Retailing firmly opposes any infringement of its intellectual property rights and will respond with appropriate measures, including legal action.
Source: Internet
A week later, a fast-fashion brand from the United States also took SHEIN to court.
On January 22, according to information released by the federal court of California, the American fashion brand For Love & Lemons sued SHEIN for infringement, and sued SHEIN's Singapore headquarters, Hong Kong company and California distribution company (Roadget Business Pte, Ltd., oetop Business Co. Ltd., SHEIN Distribution Corp.) to the District Court for the Central District of California.
It is understood that For Love &Lemons is a fast fashion consumer brand in the United States, mainly selling women's dresses and underwear, and is favored by overseas female consumer groups with girly designs. The lawsuit against SHEIN is mainly to protect the intellectual property rights of its original design, and the litigation materials submitted by For Love &Lemons list a number of cases of suspected infringement of SHEIN, including T-shirts, underwear, etc.
For Love & Lemons filed an infringement case in the lawsuit Source: Internet
In fact, SHEIN's growth has always been accompanied by intellectual property disputes.
As early as 2018, Levi's, an American casual clothing brand, sued SHEIN for infringement in the District Court of California. Levi's said that before filing the lawsuit, it had sent a letter to SHEIN asking to stop selling the infringing products, and SHEIN replied that it had suspended the sale of the products in question. However, Levi's found that SHEIN was still selling infringing products, and had no choice but to file a trademark infringement and unfair competition lawsuit against SHEIN.
In June 2021, Dr. Martens, a British martin boots brand, sued SHEIN on the grounds that SHEIN not only copied its own products, but also used the original photos of Dr. Martens to induce consumers to buy imitations on the SHEIN website. However, SHEIN denies plagiarism.
In March 2022, Stussy, an American fashion brand, sued SHEIN, alleging that SHEIN "intentionally" infringed on Stussy's interests by using its trademark without authorization. As of now, SHEIN has not responded to this matter.
In July 2023, Swedish fashion retailer H&M sued SHEIN for copyright and trademark infringement, alleging that multiple products sold by SHEIN in the United States infringed its trademarks and copyrights.
In July 2023, three independent designers filed a 52-page complaint in federal court in California, alleging that SHEIN had stolen and sold exact copies of their creative work without consent and were also involved in systematic and criminal copyright infringement, in serious violation of the Scam Impact and Corrupt Organizations Act.
According to the Wall Street Journal in July 2022, SHEIN has been named as a defendant in at least 50 federal lawsuits in the United States over the past four years, alleging trademark or copyright infringement, according to public records. These brands also include UGG, a mid-to-high-end footwear and apparel brand in the United States, ZARA in Spain, Tribe Tropical, an Australian swimwear brand, Ralph Lauren in the United States, and Chrome Hearts, a luxury brand in Hollywood.
Previously, Emily Gratton, the founder of Tribe Tropical, even posted an article denouncing that SHEIN not only copied its children's swimwear design, but also sold it at a lower price. "It's very heartbreaking to see that big companies do this to small brands with no respect for everything we do. Emily Gratton said.
Source: Internet
Stumbled over "fast".
Why is there a steady stream of lawsuits against SHEIN?
Industry insiders believe that this may be related to its "aggressive" business model.
There is no doubt that "small single quick reaction" created the glory of SHEIN's early days, allowing it to achieve product iteration in "days". According to official data, SHEIN's clothing only takes 20 days from proofing to delivery to consumers, and during peak periods, SHEIN will launch 5,000-6,000 new SKUs every day, with an inventory turnover of 30 days.
SHEIN's ability to sell well overseas at low prices is also inseparable from the support of China's supply chain. It is reported that SHEIN's clothing supply chain is mostly distributed in the Guangzhou region of the mainland, relying on the low-cost and high-efficiency upstream supply chain in Guangzhou, when ZARA is priced at 30-40 US dollars, SHEIN can do less than 20 US dollars. "Almost one-third of China's apparel supply chain companies are supplying SHEIN. An industry insider once told the media.
But SHEIN was tripped by "fast".
In the face of the increasing demand for products, designers need to desperately dig for inspiration in order to continue to provide new designs. However, under the huge number of SKUs and the extreme turnover rhythm, SHEIN's original design "innovation" cannot keep up with the speed of "new", and can only rely on "copying" big-name "homework", so that it frequently falls into plagiarism lawsuits.
According to Lei Feng, an insider in the cross-border e-commerce industry said that SHEIN can control the process, but it cannot verify the source of inspiration for the designer. For fashion design, the line between "plagiarism" and "borrowing" is usually blurred, leading to SHEIN's repeated infringement disputes.
A SHEIN buyer once vaguely told the media that he often went to observe the current popular elements in the offline stores of major fashion brands, and was "kicked out" by the clerk for taking pictures.
In fact, the risk of infringement is a common problem for many fast fashion brands.
NOT ONLY SHEIN, BUT ALSO BRANDS SUCH AS FOREVER 21, URBAN REVIVO, AND ZARA HAVE ALSO BEEN EXPOSED TO SUSPECTED PLAGIARISM. For example, ZARA was sued by Diesel's parent company, OTB, and Diesel said that ZARA had copied the design of his company's jeans and sandals, and finally the court required ZARA to recall the infringing goods and stop selling, and pay compensation for each product.
The protection of intellectual property rights in the apparel industry is also not an easy task. Some analysts have pointed out that mainland garment enterprises generally attach importance to brand promotion, but the operation ability of intangible assets is weak, and the means of protection are not perfect, and the construction of intellectual property protection strategy is still in a state of enlightenment;
However, SHEIN's problem is not only infringement lawsuits, but also faces social "torture" in terms of ESG.
According to Jiemian News, the labor observation organization Public Eye pointed out in an investigation report that some of the factories used by SHEIN do not meet ESG standards, and some workers said that they need to work 75 hours a week and only have one day off per month. The Telegraph has also reported that SHEIN's products use a large number of chemical fibers and nylon fabrics.
The waste of resources, consumerism and labor problems associated with the fast fashion model are the "original sin" that fast fashion companies cannot get rid of, and it is even more out of place in the ESG era. In fact, many fast-fashion giants have already tried to make changes, such as Uniqlo and other brands to start using biodegradable fabrics, energy-saving and emission reduction manufacturing processes, and more environmentally friendly paper packaging.
The SHEIN team has publicly responded to environmental issues.
According to the 21st Century Business Review, Tang Wei, executive vice chairman of SHEIN, said: "This is not an area that the company is good at, but we still do some things, such as second-hand exchanges, providing customers with fabric options, etc. In addition, Tang Wei explained that SHEIN has established a partnership with Queen of Raw to reproduce surplus fabrics from the industry.
However, it is undeniable that from copyright disputes to environmental public opinion, SHEIN's brand image has been damaged, and its brand upgrade has encountered a lot of resistance.
Listing hangs in the balance
SHEIN has been repeatedly sued for infringement, and the road to listing may be affected.
According to China Business Daily, U.S. regulators will consider intellectual property rights when reviewing companies' listing applications, especially for companies that rely on innovation and unique designs, such as technology companies, fashion companies, etc., and SHEIN happens to belong to the category of fashion companies.
It is worth mentioning that Uniqlo and For Love & Lemons have invariably sued SHEIN's Singapore headquarters company, a company called Roadget Business Pte.Ltd., in their lawsuit against SHEIN. Tianyancha information shows that this company is the current holding entity of SHEIN.
Source: Internet
When did SHEIN become a Singaporean company?
According to public information, in recent years, SHEIN has staged a major shift in the holding entity in an orderly manner:
In 2008, SHEIN, a cross-border B2C Internet company, was founded in Nanjing, and Nanjing Lingtian Information Technology Co., Ltd. was the main operating company of SHEIN.
In 2015, Xu Yangtian, the founder of SHEIN, moved SHEIN from Nanjing to Guangzhou, and built his own supply chain relying on the Guangzhou garment industry belt, and established Guangzhou Shein International Import and Export Co., Ltd. in 2017;
Subsequently, SHEIN changed the holding entity to ZOETOP BUSINESS CO., LIMITED in Hong Kong;
In 2022, SHEIN relocated its headquarters to Singapore and established a Singapore-based company, Roadget Business Pte.Ltd.
And Xu Yangtian himself, according to media reports, has officially become a permanent resident of Singapore. As early as early 2022, Lianhe Zaobao published an article revealing that Xu Yangtian was considering changing his citizenship status to bypass the stricter rules proposed for China's offshore IPOs.
It is generally believed in the industry that SHEIN wants to seek overseas listing with the Singapore headquarters company as the main body.
A senior investment banker said in an interview with Top News: "At present, Southeast Asian companies are more active in the IPO and trading of US stocks, and it is more suitable for the development of international business of enterprises. ”
But according to the latest regulations of the China Securities Regulatory Commission, it is not so simple for SHEIN to want to go public.
The Trial Measures for the Administration of Overseas Issuance and Listing of Securities by Domestic Enterprises (hereinafter referred to as the "Measures") issued by the China Securities Regulatory Commission (CSRC) in early 2023 strengthened the reporting mechanism for overseas listings of Chinese enterprises, which clearly requires that "domestic enterprises issued and listed overseas shall file with the CSRC in accordance with these Measures, submit filing reports, legal opinions and other relevant materials, and explain the information of shareholders truthfully, accurately and completely." ”
The Measures also point out that if a domestic enterprise meets the following two conditions, it shall be deemed to be an indirect issuance and listing by a domestic enterprise, and shall file with the China Securities Regulatory Commission. One is the operating income, total profit, total assets or net assets of the domestic enterprise in the most recent fiscal year, and any indicator accounts for more than 50% of the relevant data of the issuer's audited consolidated financial statements for the same period;
SHEIN's operations are deeply dependent on China's supply chain, which falls under the second scenario listed in the Measures. Therefore, even if SHEIN "changes its vest" in the shareholding structure and seeks to go public as an overseas company, it must obtain the permission of the Chinese regulatory authorities.
Up to now, there is no SHEIN in the official website of the China Securities Regulatory Commission. According to the Wall Street Journal, Chinese authorities are conducting a review of SHEIN's supply chain in China, focusing on how it handles the information of its employees, partners and suppliers in China to determine whether SHEIN can ensure that it does not flow abroad.
In fact, SHEIN has repeatedly denied listing-related rumors.
However, in May 2023, a letter from U.S. congressmen jointly inquiring about SHEIN's listing with the SEC (Securities and Exchange Commission) was exposed by the media, revealing that SHEIN is actively raising funds and plans to conduct an initial public offering by the end of the year. The industry generally believes that this has confirmed the fact that SHEIN went public in the United States.
The letter of inquiry mentions that SHEIN's low prices may be "the use of algorithms to collect data, as well as forced labor to work overtime and low-wage labor problems." The letter also criticized SHEIN's business model, arguing that it manipulates a huge supply chain and collects and uses a large amount of consumer data to meet unreasonable market demand.
Source: Internet
Or due to the great uncertainty of the listing and the continuous outbreak of lawsuits from global brands, the capital market's pursuit of SHEIN has begun to heat up.
On January 25 this year, Bloomberg broke the news that investors in SHEIN were trying to sell their shares at a discount of about 30% in a private market transaction. According to people familiar with the matter, investors at SHEIN have valued the company at as low as $45 billion, well below the roughly $66 billion in a funding round in May last year.
Media reports also pointed out that even at such a low price, SHEIN is having difficulty finding buyers, which increases the likelihood of a further decline in its valuation.
Article source: Yiou New Consumption
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