Exclusive: Fast-fashion giant Shein plans factory in Mexico – sources
May 23 (Reuters) – Online fashion giant Shein plans to build a factory in Mexico, one of its manufacturing hubs outside China, sources familiar with the matter told Reuters.
The factory, which will produce Shein items and is part of the retailer’s efforts to localize production, could shorten shipping times and reduce distribution costs for Shein customers in Latin America. It follows the announcement of the construction of a manufacturing network in Brazil to serve global customers.
Shein was founded in China and manufactures most of its products there, but is now looking to branch out. The company sells $10 dresses and $5 tops and has taken market share from other affordable fashion retailers.
Now based in Singapore, Shein competes with Temu of PDD Holdings (PDD.O), which sells low-cost items ranging from clothing to electronics from China in the United States.
The final location of the Mexican site has not yet been decided, said the sources, who requested anonymity because the discussions are private.
Shein will use funds from its recent $2 billion fundraising round with investors including Mubadala (MUDEV.UL) and Sequoia China to fund the expansion, as it considers an initial public offering in the United States despite A valuation reduced to $66 billion in its latest round of funding, the retailer is still showing 40% annual revenue growth, one of the sources added.
Shein, in an emailed statement, declined to comment on the plan, but said he was committed to localization as it expands into new markets.
“SHEIN’s localization strategy allows us to shorten delivery times to customers while expanding product variety and supporting local economies,” said Marcelo Claure, president of SHEIN Latin America, in the statement.
Shein “continues to explore options close to home,” he added, referring to manufacturing closer to the point of sale.
Shein recently offered an online marketplace platform in Brazil, allowing third-party merchants to sell their own products on the Shein app and website. A similar marketplace would then launch in the United States before rolling out globally.
The upcoming Mexican factory will not house items from third-party vendors, sources said. Claure confirmed that Shein plans to bring its “market model to other markets in Latin America”.
Shein has come under fire in markets including India, Brazil and the United States for its supply chain ties to China. A bipartisan group of two dozen U.S. officials in May called on the Securities and Exchange Commission to suspend Shein’s initial public offering until the company verifies that it is not using forced labor, Reuters reported.
Shein has previously said it has a “zero tolerance” for forced labor and requires suppliers to adhere to core conventions of the International Labor Organization. A spokesperson referenced the same comments on Tuesday, when asked for a response to it.
Rights groups and governments have accused China of forced labor and internment of the predominantly Muslim ethnic minority in the Xinjiang region. Beijing denies any violation of rights. Shein denied shipping from the Xinjiang region.
Reporting by Krystal Hu and Arriana McLymore in New York Additional reporting by Kate Masters in New York and Daina Beth Solomon in Mexico City; Editing by Matthew Lewis and Muralikumar Anantharaman
Krystal reports on venture capital and startups for Reuters. She covers Silicon Valley and beyond through the lens of money and people, with a focus on growth-stage startups, tech investments, and AI. She previously covered mergers and acquisitions for Reuters, publishing on Trump’s SPAC funding and Elon Musk’s Twitter funding. She previously reported on Amazon for Yahoo Finance, and her investigation into the company’s retail practices has been cited by congressional lawmakers. Krystal began a career in journalism writing about technology and politics in China. She has a master’s degree from New York University and enjoys a scoop of matcha ice cream as much as a scoop at work.
Arriana McLymore is a New York-based journalist covering e-commerce, online marketplaces, alternative revenue streams for retailers, and in-store innovation. She previously reported on telecoms and legal affairs.
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