Shein IPO: What it could mean for the fashion industry

Last week, ulltra-fast fashion brand Shein confidentially filed for an IPO. The eleven year-old company is known for creating very low cost garments that it can produce quickly for its predominantly Gen Z customers. Today the company has a private-market valuation of $66 billion but is seeking a valuation as high as $90 billion during the IPO process. On this week’s episode of Most Innovative Companies, we spoke with Shein’s head of strategic communications Peter Pernot-Day to learn more

Senior Staff Writer Elizabeth Segran also came by to give us more context on the company’s controversies. Allegations against the company have included that it uses forced labor in the manufacturing of its clothes. Like other fast fashion companies, Shein has also been criticized for its clothing’s negative environmental impact.

Here are a few insights about the business from Pernot-Day, in his own words.

On Shein’s business model

“Our business model is something we call the on-demand model. We make small batches of garments, typically about 100 to 200 pieces. We’ll then load those designs up onto the site, and we’ll see how our customers interact with them. Are they responding positively to these new designs and these new features? If they are, we’ve got a demand signal. We can go back to our network of third-party suppliers and make more to meet what we expect demand will be. This frees us from having to do seasonal collections. It [also] means we have extremely low inventory levels and so we waste virtually nothing.”

On Shein’s PR effort to bring influencers to its factories that generated a lot of negative headlines

“One of our values as a company is to try to be as transparent as we can be. Our desire to show that was why we did the influencer trip. Some people have criticized us for that. One thing that I don’t think is fair is that the influencers themselves were personally attacked. The intention was to show people that we are a responsible company, and we treat our suppliers with respect. It remains our intent to this day to share our supply chain and how it works with our customers.”

How Shein describes working conditions in its factories

“We have a supplier community empowerment program where we invest both in the physical infrastructure of our suppliers and in the human capital component. We want to make sure that workers at supplier facilities have access to educational opportunities, access to safe working environments, and access to educational and childcare opportunities for their children. When you’re looking at garment production on a global scale, that really means that you have to have access to high-quality suppliers and that those suppliers have to have access to the best people. Our suppliers are compensating their garment workers much more than the average around the communities that they work in. I believe a garment worker in China or Brazil or Turkey is likely paid less than a garment worker in Los Angeles, but I do think that our suppliers’ compensation structures are fair and are designed to exceed the markets where they compete for labor.”

How Shein thinks about fast fashion regulations

“When I talk about regulations, I think I’m more interested in directional positioning. For example, pushing recycling products so that recycling capabilities are more available to customers. So that if you wanted to recycle a garment, there’s a civic engagement [campaign] to take that into your recycling bin the same way you would a plastic water bottle. I [also like] the idea of public-private partnership on funding some of these technical developments. How do we invest in chemical recycling? How do we invest in research and development to get new fabrics and new fibers available for production? Those are ways in which we could really see some dramatic changes in benefits.”

To hear more from Pernot-Day and get some analysis from Elizabeth Segran, listen to the latest episode of Most Innovative Companies.