What Shein's IPO means for customers

After years in the making and a couple of failed attempts, ultra-fast fashion company Shein made its debut on the Hong Kong Stock Exchange on Tuesday. Once worth about $100 billion, the company went public with a value closer to $27 billion.

For more on how Shein got here and what going public changes, “Marketplace Morning Report” host Kimberly Adams was joined by Ken Pucker, a former chief operating officer at fashion retailer and manufacturer Timberland and professor at the Tuck School of Business at Dartmouth and the Fletcher School at Tufts University. The following is an edited transcript of their conversation.

Kimberly Adams: The Shein IPO has been years in the making. The company first tried to go public in 2020. Why did it take so long?

Ken Pucker: You're right. It is years in the making. They first tried in New York, then London, and now have successfully gone public in Hong Kong. They ran into challenges, principally related to A) being a Chinese company, B) being a Chinese company that was supplying fashion at prices that undercut most local producers in different markets, and C) they had a series of challenges with issues related to the environment and labor practices, privacy issues, and copyright issues as well. And so, they became a target for lots of activists.

Adams: Did they resolve any of these issues, or is it more so that they found a more permissible place to IPO?

Pucker: I think the markets that we described prior — so New York represented the U.S. and London and Europe broadly — have imposed a series of duties and tariffs on Shein that have increased their selling prices in these markets, which has slowed their growth considerably. And then the other issues around sustainability and copyright and working hours and things like that — it's unclear whether those issues have been resolved. And in Europe and actually in the U.S. as well, fines have been imposed on the company that are related to these challenges.

Adams: Let's get a bit of the sort of market landscape that Shein is entering, because people probably know companies like Zara and H&M as fast-fashion companies. Where does Shein sit in that?

Pucker: I think Zara and H&M, around the year 2000, pioneered a new model: Instead of delivering product twice a year or maybe three times a year, they started delivering product almost weekly to stores. Shein actually amplified that model considerably. They combine speed and newness with price, enabled by a supplier network of about 7,500 suppliers. They combine that supplier network with artificial intelligence to figure out what's selling. As a result of that combination, they're able to deliver about 5,000 new styles a day at half the prices of the average Zara and H&M garment, and, as a result, have gained a big, big foothold in U.S., Europe, and many other markets.

Adams: How might the customer experience be different moving forward in a post-Shein IPO world versus how the company operated before?

Pucker: I think there's two parts: One is prices will certainly go up to a certain extent if they're going to maintain their margins. What consumers don't see may be more worrisome, which is the separation of consumption from production allows players like Shein and many others to be less than transparent on what's going on in their supply chain. When you're making your clothes 85% from polyester nylon, polyester nylon comes from oil; they come from fossil fuels, and those products, when they're done with their useful life — which is pretty short given you're talking about a $10 or $12 item — end up in a landfill for generations. So the consumer will see higher prices. What they may not see is kind of the social-environmental impact of this business model, which is really powerful commercially, but it also causes enormous social and environmental challenges.