Could fashion brands adopt the Shein model to counter mounting tariff challenges? The idea sparked heated discussion among supply chain experts and industry veterans during a panel themed “The Age of Uncertainty” at the WWD x SJ Global Fashion and Business Conference in Hong Kong.
Discussions began with the Trump administration’s removal of the de minimis level for direct-to-consumer shipping into the U.S. market, which sparked a prolonged sense of uncertainty for global businesses.
For British brands — especially smaller ones — the removal of the de minimis, a duty-free exemption for direct-to-consumer shipments valued at $800 or less, has become a heavy burden.
“Brands now have to comply with additional customs, duties, paperwork and operations. There are genuine concerns now about the state of luxury and premium fashion retail in the U.S. and what impact the new trading structures there might have on their ability to place strong orders with British brands,” said David Leigh-Pemberton, deputy director of policy and engagement at the British Fashion Council.
David Leigh-Pemberton
Stanley Szeto, executive chairman at Lever Style Corporation, a Hong Kong clothing manufacturer that has been building new factories in several countries, said the Shein model — which Szeto summarized as a hyper-agile supply chain — could perhaps become brands’ saving grace and give them “a tremendous financial advantage.”
“Nobody can predict who is going to be next. So it’s about having the most versatile supply chain that you can just move within a couple of months — that’s probably the best strategy to counter tariffs,” Szeto said.
“Shein is basically Zara on steroids — it is ordering things today that are to be sold two weeks from now,” Szeto explained.
Stanley Szeto
For Leigh-Pemberton, in the context of direct-to-consumer trading on social media platforms, a faster produce-to-demand model akin to Shein’s could help brands capture volatile market needs.
“What happens if you’re trading quite steadily a garment and then suddenly a celebrity wears it on the red carpet, and your orders go up 100, 200, even 300 percent? How can your supply chain adapt to that change?” Leigh-Pemberton asked.
“Whether it’s Shein or whether it’s other manufacturing providers, I do think that brands are going to want to look at those programs in the next five years and go, yes, we do want to be able to produce to demand,” Leigh-Pemberton continued.
Szeto, a firm believer in the Shein model, noted that brands would first need to rethink their business mindsets to make it work.
“In order to produce in smaller batches, in quick lead times, it’s going to cost more, which goes against everything that we have been learning for the past decades,” said Szeto.
“For example, we have been working with a premium U.S. client that makes suits and shirts. They do weekly ordering based on what sold last week, then they replenish or introduce new styles. The CEO told me that just after they switched, they finally started making money,” Szeto said. “We believe that that sort of speed and agility is going to be applicable across price points — the trendy stuff, the Walmart stuff, and high-end products.”
However, Sally Peng, a seasoned trading attorney and senior managing director at FTI Consulting, a global consulting firm, pointed to regulatory risks, such as supply chain transparency and sustainability issues often associated with fast-fashion models.
Sally Peng
“There is a lot of intricacy under the current particular [Shein] model, and that can be something that trips people up. We want to collectively help the industry, but also drive the industry into a more sustainable model rather than just fast fashion,” said Peng.
For brands, Shein or no Shein, agility is key in tough market conditions.
Recently, Hong Kong Trade Development Council’s director of research Irina Fan detailed a “DEAR” strategy that helps navigate tariff troubles.
“D stands for diversify — 54 percent of industry respondents from a recent HKTDC survey mentioned that they will continue to diversify sourcing strategies; E is to expand to new markets; A is all about how to deal with America, the solution is to reduce sales to the market; and the last one, R, is to relocate production,” detailed Fan.
Irina Fan
According to the survey, after adopting the DEAR strategy, 86 percent of respondents said they did not see a big impact from the tariffs.
Apart from rethinking supply chain models, Leigh-Pemberton said brands can focus on key consumer markets with free trade agreements. For example, the BFC has forged agreements with India, a key sourcing market.
“Building a relationship with a supplier in your particular targeted market is a relatively stable approach to then reaching our ultimate consumer over the long run,” added Leigh-Pemberton.
