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By News Editor

Fast-fashion titan, Shein, has been making waves in the retail world with its trendy designs and jaw-droppingly low prices. This digital-native brand rose to fame during the Covid-19 pandemic, capturing hearts (and wallets) worldwide. Today, it boasts a staggering valuation of $66 billion, and rumors have been swirling around its potential public offering.

Yet, as it gears up to compete with retail giants, Shein finds itself embroiled in a web of complications that may hinder its Wall Street debut. Ties to China, allegations of forced labor in its supply chain, labor law violations, environmental harm, and design plagiarism are just some of the obstacles it must hurdle.

Shein’s current challenges are further complicated by heightened scrutiny for businesses with origins in China. In fact, the company is under investigation by the newly formed House Select Committee on the Chinese Communist Party due to concerns over its sourcing practices.

According to Matt Kennedy, a senior IPO market strategist for Renaissance Capital, “IPO investors right now want to see a straightforward story”. Some might steer clear of this deal until these issues have been resolved.

Despite these hurdles, if Shein can maintain its innovative approach that has fueled its success thus far while addressing these pressing issues effectively, it could still emerge victorious on Wall Street.

Shein’s executives are taking steps to address these concerns and demonstrate their commitment to U.S. regulators and Congress. Marcelo Claure, Shein’s group vice chair and former SoftBank CEO emphasized their commitment to complying with local laws and cooperating fully with investigations.

In response to allegations of forced labor in their supply chain, Shein has employed third-party supply chain firm Oritain to test cotton fibers and trace them back to specific farms. As of July 2021, 2.1% of Shein’s cotton tests were positive for unapproved regions but the company asserts that it is working diligently towards a zero percent positive test rate.

However, some critics argue that forced labor issues could still plague other parts of the supply chain. Shein relies on thousands of contracted manufacturers, primarily in China, to produce and ship their products.

In 2022, Shein conducted audits on a portion of its manufacturers, which resulted in the termination of 28 suppliers due to violations such as child labor, forced labor, and wage violations. However, these audits covered less than half of their total suppliers, leaving questions about the full extent of potential violations within their supply chain.

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