Founded in 2008 in Nanjing by Chris Xu, and becoming the most talked-about brand on the main social platforms (YouTube, Tik Tok and Instagram) in 2020, over the last five years Shein has experienced unstoppable growth as the world leader in online sales of Chinese fast fashion, reaching a value of USD 30 billion.
Shein’s strength lies in working with multiple independent Chinese factories, which produce low-cost, often high-fashion-inspired garments, and only deal with foreign sales and customer service management. This business model therefore ensures a constant flow of orders to small entities that could not, on their own, boast such a turnover.
However, precisely because of the similarity of the products offered for sale by Shein with those of other companies in the fashion world, the Chinese company has often found itself at the centre of controversy and accusations of counterfeiting and unfair competition, such as those raised by Levi’s, Ralph Lauren and H&M.
Moreover, multiple allegations of human rights violations were also raised against Shein due to the working conditions suffered by employees, violation of user data, including the compromise of e-mail addresses and passwords, and complaints about products made of toxic materials.
Nevertheless, until recently, Shein was the leading Chinese fast fashion company with significant international profits.
The situation took a turn with the birth of Temu in July 2022, founded by Pdd Holdings and connected to the Chinese e-commerce Pinduoduo.
Within a year, the new Chinese platform, a bargain-price marketplace with a direct relationship between producers and consumers, soon started to make headlines, including at Shein.
It was precisely Shein that started a full-fledged battle against Temu, first by accusing it in the federal court in Chicago of working with several influencers to spread false and misleading statements about Shein in the major social networks.
Furthermore, Shein also accused Temu of engaging in deceptive practices, whereby consumers were allegedly misled through fictitious social accounts and links to download Temu’s app, so as to make people believe that the two were connected.
Temu’s spokeperson strongly denied the allegations and said that Temu will vigorously defend its rights.
However, the dispute did not end there: Temu staged a counter-offensive.
The allegation in this case concerned the violation of US antitrust laws and, in particular, the fact that Shein allegedly asked its more than 8,000 producers to sign exclusive agreements in order to exclude any form of collaboration with Temu.
Moreover, Temu claimed that Shein had levelled unsubstantiated copyright infringement charges against Temu, resulting in the removal of allegedly counterfeit products from the marketplace.
Considering that both Shein and Temu base their business on low-cost products from small businesses, should either actually obtain exclusive dealings, this would constitute an undue monopoly and market squeeze.
According to common local practice, it appears that such conduct has been going on for years in China. One only has to think of companies such as Meituan and Alibaba’s Taobao, which for years forced suppliers to sign exclusive agreements, until the local government explicitly banned this practice with the 2021 antitrust law.
The US litigation is still ongoing, but it could be just the beginning of a long legal battle between the fast fashion giants that could also extend to Europe, where Temu has been active and gathering support for some months now.
Lastly, many believe that such a focus by national authorities on these fast fashion undertakings could be a double-edged sword for Shein and Temu, which could see themselves subjected to in-depth scrutiny regarding compliance with intellectual property and privacy laws.