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European Obstacles Encountered By Shein's Pre-IPO Charm Offensive

European Obstacles Encountered By Shein's Pre-IPO Charm Offensive
The pre-IPO charm offensive being launched by online fast-fashion retailer Shein in Britain is meeting with resistance from politicians and the retail sector in Europe. European producers of clothing, shoes, leather goods, and fabric this week urged upcoming EU lawmakers to safeguard the 1.5 million jobs in the industry from low-cost items being "dumped" onto the market as voters in elections for the EU take place across 27 nations.
Utilising the same terminology used by EU authorities on Chinese overcapacity in electric vehicles, garment makers, retailers, and e-commerce businesses are attempting to bring inexpensive clothes, accessories, and gadgets from China on the table, with industrial policy becoming a major election issue.
With the world's largest luxury brands and fast-fashion behemoths Zara and H&M based there, Europe's textile, footwear, and leather sectors collectively generate more than 200 billion euros ($220 billion) in revenue annually.
As small and medium-sized businesses make up 99% of the sector's businesses, they are susceptible to "fierce" worldwide competition, according to a joint statement from the industry associations.
In a study, Poland's e-commerce organisation said that state subsidies from China are unfairly providing online marketplaces like Shein—which ships $5 T-shirts, $15 pants, and $1 earrings straight from China to buyers worldwide—with a competitive edge over its European competitors.
Although better-than-expected jobs numbers indicated a solid economy, concerns that the Federal Reserve would delay rate cuts led to a modest decline in Wall Street's major indexes on Friday.
A representative for Shein stated: "There is no truth to the allegation that Chinese state subsidies help support SHEIN's business and its expansion worldwide."
Shein manufactures the majority of the goods it sells in southern China, but it has been expanding its network of suppliers to include Turkey and Brazil. "We expect our Turkish supply chain partners to increasingly support us in serving the European market," said a spokeswoman.
Shein is also trying to boost its reputation in France, where members of the lower house of parliament passed a bill in March requiring fast fashion companies to pay for their environmental effects.
A key opponent of Shein, Raphael Glucksmann is an EU legislator who is supporting the Socialists party list in France's elections.
According to Shein, the law will only make things worse for French customers' ability to make purchases. Shein stated on Monday that, after launching it in the U.S. in late 2022, it would bring its used clothing resale platform, "Shein Exchange," to France initially, followed by the UK and Germany.
The e-commerce behemoth is also courting German officials; it has refrained from commenting on its ambitions for an IPO.
According to his LinkedIn post, Lionel Lim, associate director of global government relations at Shein, organised a "ESG breakfast roundtable" in Berlin last month that was attended by representatives of the government, trade groups, and corporate partners.
European retailers are growing more critical of tax breaks they claim favour Shein and other overseas e-commerce sites. Individuals can purchase packages online from overseas for less than 150 euros ($170) without having to pay import charges, according to EU regulations. The same requirement in Britain is 135 pounds.
Kari Luoto, managing director of the Finnish Commerce Federation, released a statement on Wednesday that said, "We are calling on the MEPs to be elected to the European Parliament on Sunday to ensure equal conditions for competition in Europe."
"The removal of the duty-free limit should be urgent."
"It's beyond belief that the government hasn't clamp down on a gaping tax loophole that allows giant companies from abroad to sell in the UK without paying customs, or contributing to the cost of the retail economy, at the expense of British companies that are paying their fair share," said Theo Paphitis, chairman and owner of UK retailers Ryman and Robert Dyas, in an interview with Reuters.
Germany has demanded reforms for the whole EU. The primary retail group, Handelsverband Deutschland, stated that Germany's Finance Minister, Christian Lindner, "has signalled that Germany will support the abolition of the 150-euro duty-free limit at the European level".
Shein claims that its performance is not dependent on the duty-free handling of low-value packages and that its flexible pricing structure and on-demand business strategy allow it to maintain cheap rates.
Notwithstanding the administrative difficulties involved in attempting to tax millions of tiny deliveries, Simon Wolfson, the chief executive of Next, has also urged the UK government to examine the loophole.
Shein has met with the British Labour Party, which is predicted to win an election on July 4 and go on to become the government. However, a few British MPs have questioned Shein's eligibility for a listing on the London Stock Exchange and demanded a closer examination of the company's employment and supply chain policies.

Christopher J. Mitchell

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