ESG Is So Hot Right Now

The fast-fashion business model of Shein, a top global startup, is also its biggest threat

- By James E. Ellis

Like many Shein customers, Jaleesa King doesn't expect the Chinese fast-fashion giant's clothes to last longer than it takes to post a good selfie on Instagram. The 26-year-old reckons she spends as much as $500 twice a month on about 20 to 30 clothing items she'll barely wear. Maybe just once or twice, that's all, she says, laughing, as she browses Shein's San Francisco pop-up shop, a special marketing event for the usually online-only retailer. If I can get a good picture, definitely at least once.

Turbocharging fast fashion's business model has turned Shein into the face of the industry and one of the world's top startups. But as environmental, social, and governance issues become important to investors, the retailer's embrace of disposable fashion may become the biggest threat to its future. A vast network of contract manufacturers allows Shein to pump out thousands of youth-friendly styles daily at barely believable prices-a few dollars for a dress and even less for a pair of bike shorts.

With sales of at least $16 billion in 2021, up from $10 billion in 2020, and a valuation of about $100 billion, the company has catapulted into the same league as Elon Musk's SpaceX and TikTok parent ByteDance Ltd. But Shein's business model is also the source of a potentially toxic image problem that's sparked allegations of environmental damage, worker exploitation, and copyright theft. Indiana University, which announced a Shein partnership just months ago, has put new plans on hold as a result of concerns about the company. While many of its young customers don't seem to care, the people and institutions with real power over Shein's future-investors, regulators, and politicians have little choice but to pay attention.