How Shein came crashing down

On August 31st Shein plans to list on the Hong Kong stock exchange—reportedly at a valuation of just $27bn. Its business has deteriorated dramatically. In 2024 it generated $39bn in revenue, up by 21% from the year before. In 2025 sales grew by only 8%, to $42bn, and in the first quarter of 2026 they increased by a mere 1%, year on year. In 2024 the company’s net profit reached $3.4bn. It is now operating at a loss. What went wrong?

Shein’s business model was undoubtedly inventive. The prospectus for its listing says that it offers more than 2m distinct items of clothing, with 4,700 new ones added every day. Its 280m customers worldwide—excluding China, where it does not sell its wares—put in four orders a year, on average, suggesting many are not perturbed by the dubious quality of its products.

The success of the model encouraged copycats—one reason for the company’s mounting troubles. In 2022 PDD, a Chinese e-commerce company, set up Temu, a Shein-like business, in America. Then in 2024 Amazon, the world’s biggest online marketplace, launched Haul, its own ultra-cheap offering. Meanwhile TikTok, a short-video platform beloved of youngsters, has also been expanding into e-commerce with TikTok Shop, which has overtaken Shein in sales in America.

Perhaps an even bigger reason for Shein’s slowing sales and deteriorating profitability is the closing last year of a tax loophole in America and the European Union known as the de minimis rule, which had allowed packages below a certain value to be imported free of duties. That, in combination with the higher tariffs on Chinese goods levied by the second Trump administration, has hit Shein’s business in America especially hard. The percentage of its revenue it generates there fell from almost 30% in 2023 to around 23% in the first three months of this year.

Shein has responded by diversifying its manufacturing base. Last year, for example, it established a partnership with Reliance, an Indian conglomerate, to produce clothing in the country, which Shein reportedly plans to sell both locally and abroad. Yet Shein’s prospectus is almost blank on the topic of supply-chain diversification. That may in part reflect its desire to avoid antagonising Chinese officials, who are keeping a close eye on the share of its digital operations that are run from abroad. They may be unhappy to see manufacturing jobs also leave the country.

Shein has spent years sounding out various potential stock markets. Its original plan, to list in New York, was abandoned amid pushback from American lawmakers over the alleged use of forced labour in the company’s supply chain (which Shein denies). It then flirted with a London listing, for which it obtained approval from Britain’s regulator in April last year. The switch to Hong Kong came after China’s government failed to bless the London option. The collapse in the company’s valuation since it began efforts to go public has forced it to pay settlements to investors who have experienced precipitous losses. It is hardly the debut for which the once-mighty company would have hoped.