Litigation continues, valuations plummet.
Shein, a global cross-border e-commerce unicorn, is being "encircled and suppressed" by global fast fashion brands.
At the beginning of 2024, SHEIN ushered in two lawsuits. On January 16, Japanese fast fashion giant Uniqlo took SHEIN to court; On January 22, American fashion brand For Love &Lemons sued SHEIN for infringement. Previously, SHEIN was also used by the well-known American brand Levi'S, Stussy, Swedish fashion retailer H&M, etc., have been in trouble.
Not only that, but the road to listing of this cross-border e-commerce rookie is also quite bumpy.
Although SHEIN has repeatedly denied that it has a listing plan, SHEIN listing rumors continue to be exposed in the market, dating back to January 2022 at the earliest. According to recent news from Bloomberg, due to uncertainty about SHEIN's listing, investors' valuation of the company has fallen to $45 billion, well below the $66 billion in May 2023.
In just two years, valuations have plummeted and lawsuits have continued, what happened to SHEIN?
Just over a month after 2024, SHEIN ushered in two lawsuits.
On January 16, Fast Retailing, the parent company of the Japanese brand Uniqlo, announced on its official website that Uniqlo had filed a lawsuit against three SHEIN entities in the Tokyo District Court on December 28, 2023. The reason for this is that Uniqlo determined that the form of imitation sold by SHEIN was very similar to that of its own product, the "dumpling bag" (round mini shoulder bag).
It is reported that this nylon shoulder bag retails for $19 in the United StatesAt $9, it is one of the best-selling bags of the Uniqlo brand since its inception. UNIQLO believes that SHEIN's sale of counterfeit products has seriously damaged customers' high confidence in the UNIQLO brand and the quality of its products, and has violated the Unfair Competition Law, and requires SHEIN to immediately stop selling counterfeit products and compensate it for losses of 160 million yen.
Uniqlo also said that Fast Retailing firmly opposes any infringement of its intellectual property rights and will respond with appropriate measures, including legal action.
A week later, a fast-fashion brand from the United States also took SHEIN to court.
On January 22, according to information released by the federal court in California, the American fashion brand for love & lemons sued SHEIN for infringementand SHEIN's Singapore headquarters, Hong Kong company and California distribution company (Roadget Business Pte, Ltd.).，oetop business co.ltd.,shein distribution corp.) in the District Court for the Central District of California.
It is understood that for love&lemons is a fast fashion consumer brand in the United States, mainly selling women's dresses and underwear, and is favored by overseas female consumer groups with girly designs. The lawsuit against SHEIN is mainly to protect the intellectual property rights of its original design, and the litigation materials submitted by FOR LOVE &LEMONS list a number of cases of suspected infringement of SHEIN, including T-shirts, underwear, etc.
In fact, SHEIN's growth has always been accompanied by intellectual property disputes. Back in 2018, the American casual clothing brand Levi's sued SHEIN in California District Court for infringement. levi'S said that before filing the lawsuit, it had sent a letter to SHEIN requesting that it stop selling the infringing products, and SHEIN replied that it had suspended the sale of the products involved. But levi'S found that SHEIN was still selling infringing products, and had no choice but to file a trademark infringement and unfair competition lawsuit against SHEIN.
In June 2021, the British martin boot brand DrMartens sued Shein on the grounds that Shein not only copied its own product, but also used DrThe original version of Martens induces consumers to buy imitations from SHEIN. However, SHEIN denies plagiarism.
In March 2022, the American fashion brand Stussy sued SHEIN, claiming that SHEIN "intentionally" infringed on its trademark without authorization, infringing on Stussy's interests. As of now, SHEIN has not responded to this matter.
In July 2023, Swedish fashion retailer H&M sued SHEIN for copyright and trademark infringement, alleging that multiple products sold in the United States infringed its trademark and copyright.
In July 2023, three independent designers filed a 52-page complaint in federal court in California, alleging that SHEIN stole and/a** exact copies of their creative work without consent and also engaged in systematic and criminal copyright infringement, in serious violation of the Scam Influence and Corrupt Organizations Act.
According to a July 2022 report by Wall Street**, according to public records, SHEIN has been named as a defendant in at least 50 federal lawsuits in the United States in the past 4 years for alleged trademark or copyright infringement. These brands also include American mid-to-high-end footwear brand UGG, Spanish fast fashion brand Zara, Australian swimwear brand Tribe Tropical, American outdoor brand Ralph Lauren, and Hollywood luxury brand Chrome Hearts.
Previously, Emily Gratton, the founder of Tribe Tropical, even posted a denunciation that Shein not only plagiarized its children's swimwear design, but also carried out it with a lower **. It's very heartbreaking to see that big companies do this to small brands with no respect for everything we do. Emily Gratton said.
Why is there a steady stream of lawsuits against SHEIN?
Industry insiders believe that this may be related to its "aggressive" business model.
There is no doubt that "small single quick reaction" has created the glory of SHEIN's early days, allowing it to achieve product iteration in "days". There has been a ** report citing official data that a piece of clothing from SHEIN only takes 20 days from proofing to delivery to consumers; During peak periods, SHEIN will launch 5,000-6,000 new SKUs every day, and the inventory turnover days are 30 days.
SHEIN can sell well overseas at a low price, and it is inseparable from the support of China's ** chain. It is reported that SHEIN's clothing chain is mostly distributed in Guangzhou, China, relying on the low-cost and high-efficiency upstream chain in Guangzhou, when the price of ZARA is 30-40 US dollars, SHEIN can do less than 20 US dollars. "Almost 1 3 of China's clothing chain companies are supplying SHEIN. An industry insider once told **.
But Shein was tripped by "fast".
In the face of the increasing demand for products, designers need to desperately dig for inspiration in order to continue to provide new designs. ButUnder the huge number of SKUs and the ultimate turnover rhythm,SHEIN's original design"Innovation" cannot keep up with the speed of "new".can only rely on "copying" big-name "homework".So much so that they frequently fall into plagiarismLawsuit.
According to Lei Feng, an insider in the cross-border e-commerce industry said that SHEIN can control the process, but it cannot verify the designer's inspiration. For fashion design, the line between "plagiarism" and "borrowing" is usually blurred, leading to SHEIN repeatedly involved in infringement disputes.
A buyer of SHEIN once vaguely told ** that he often observed the current popular elements in the offline stores of major fashion brands, and was "kicked out" by the clerk for taking pictures.
In fact, the risk of infringement is a common problem for many fast fashion brands.
Not only SHEIN, but also brands such as Forever 21, Urban Revivo, and Zara have also been exposedFor example, Zara was sued by Diesel's parent company, OTB, and Diesel said that Zara copied the design of its company's jeans and sandals, and finally the court required Zara to recall the infringing goods and stop selling, and pay compensation for each product.
The protection of intellectual property rights in the apparel industry is also not an easy task. Some analysts pointed out that China's garment enterprises generally attach importance to brand promotion, but the operation ability of intangible assets is weak, the means of protection are not perfect, and the construction of intellectual property protection strategy is still in a state of enlightenment; Especially in the new environment of e-commerce, trademark infringement against clothing brands is more frequent.
ButSHEIN's problem is not only infringement litigation, but also faces social "torture" in terms of ESG.
According to Jiemian News, the labor watch organization Public Eye pointed out in an investigation report that some of the factories used by SHEIN do not meet ESG standards; There are also workers who say they need to work 75 hours a week and only have one day off per month. The Telegraph has also reported that SHEIN's products use a lot of chemical fiber and nylon fabrics.
The waste of resources, consumerism and labor problems associated with the fast fashion model are the "original sin" that fast fashion companies cannot get rid of, and it is even more out of place in the ESG era. In fact, many fast-fashion giants have already tried to make changes, such as Uniqlo and other brands to start using biodegradable fabrics, energy-saving and emission reduction manufacturing processes, and more environmentally friendly paper packaging.
The SHEIN team has publicly responded to environmental issues.
According to the 21st Century Business Review, Tang Wei, executive vice chairman of SHEIN, said: ".It's not an area where the company excelsBut we still did some things, such as second-hand exchanges, providing customers with fabric options, etc. In addition, Tang Wei explained that SHEIN has established a partnership with Queen of Raw to reproduce surplus fabrics from the industry.
But it is undeniable that from copyright disputes to environmental public opinion, SHEIN's brand image has been damaged, and its brand upgrade has encountered a lot of resistance.
Shein has been repeatedly sued for infringement, and the road to listing may be affected.
According to China Business Daily,U.S. regulators will consider intellectual property rights when reviewing a company's listing application, especially for companies that rely on innovation and unique design, such as technology companies, fashion companies, etc., and SHEIN happens to fall into the category of fashion companies.
It is worth mentioning that in the lawsuit filed by Uniqlo and For Love &Lemons against SHEIN, SHEIN's Singapore headquarters company, a company called Roadget Business Pte., coincidentally listed SHEIN's Singapore headquartersltd.) took the company to court. Tianyancha information shows that this company is the current holding entity of SHEIN.
When did SHEIN become a Singaporean company?
According to public information, in recent years, SHEIN has staged a major shift in the holding entity in an orderly manner
In 2008, SHEIN, a cross-border B2C Internet company, was founded in Nanjing, and Nanjing Lingtian Information Technology was the main operating company of SHEIN.
In 2015, Xu Yangtian, the founder of SHEIN, moved SHEIN from Nanjing to Guangzhou, and relied on the Guangzhou garment industry belt to build his own ** chain, and established Guangzhou Shein International Import and Export in 2017
Subsequently, SHEIN changed the holding entity to Zhuotian Business Co., Ltd. in Hong Kong,limited）；
In 2022, SHEIN relocated its headquarters to Singapore and established a Singapore-based company, Roadget Business Pteltd.）。
WhileXu Yangtian himself, according to **, has also officially become a permanent resident of Singapore。As early as early 2022, Lianhe Zaobao published an article revealing that Xu Yangtian was considering changing his citizenship status to bypass the stricter rules proposed for China's offshore IPOs.
It is generally believed in the industry thatSHEIN wants to circumvent domestic regulation and list in the United States as a Singapore company.
A senior investment banker said in an interview with Top News: "At present, Southeast Asian companies are more active in IPOs and transactions in the United States, and it is more suitable for the development of international business of enterprises. ”
But according to the latest regulations of the China Securities Regulatory Commission, it is not so simple for SHEIN to want to go public.
The Trial Measures for the Administration of Overseas Issuance** and Listing of Domestic Enterprises (hereinafter referred to as the "Measures") issued by the China Securities Regulatory Commission (CSRC) in early 2023 strengthened the reporting mechanism for overseas listings of Chinese concept enterprises, which clearly requires that "domestic enterprises issued and listed overseas shall file with the CSRC in accordance with these Measures, submit filing reports, legal opinions and other relevant materials, and explain the information of shareholders truthfully, accurately and completely." ”
The Measures also point out that if a domestic enterprise meets the following two conditions, it shall be deemed to be an indirect issuance and listing of a domestic enterprise, and shall file with the China Securities Regulatory Commission. One is the operating income, total profit, total assets or net assets of the domestic enterprise in the most recent fiscal year, and any indicator accounts for more than 50% of the relevant data of the issuer's audited consolidated financial statements for the same period; The second type is that the main part of the business activities is carried out in China or the main place is located in China, or most of the senior managers in charge of operation and management are Chinese citizens or their habitual residence is located in China.
SHEIN's operation is deeply dependent on China's ** chain, which belongs to the second situation listed in the "Measures". Therefore, even if SHEIN "changes its vest" in the shareholding structure and seeks to go public as an overseas company, it must obtain the permission of the Chinese regulatory authorities.
Up to now, there is no SHEIN in the official website of the China Securities Regulatory Commission. According to Wall Street, Chinese authorities are conducting a review of SHEIN's chain in China, focusing on how it handles the information of its employees, partners and merchants in China to determine whether SHEIN can ensure that this information does not flow abroad.
In fact, Shein has repeatedly denied rumors related to listing.
However, in May 2023, a letter from U.S. congressmen jointly inquiring about SHEIN's listing was revealed by *** that SHEIN is actively raising funds and plans to conduct an initial public offering by the end of the year. The industry generally believes that this has confirmed the fact that SHEIN went public in the United States.
The letter of inquiry mentions that SHEIN's low prices may be "the use of algorithms to collect data, as well as forced labor to work overtime and low-wage labor problems." The inquiry letter also criticized SHEIN's business model, arguing that it collects and uses a large amount of consumer data to meet unreasonable market demand by manipulating a huge ** chain.
Or due to the great uncertainty of listing matters, coupled with the continuous outbreak of lawsuits from global brands, the capital market's pursuit of SHEIN has begun to heat up.
On January 25 this year, Bloomberg broke the news that some investors in SHEIN are trying to discount about 30% in private market transactions** According to people familiar with the matter told Bloomberg,Shein's investors have valued the company at as low as $45 billion, well below the roughly $66 billion in a funding round in May last year.
*The report also pointed out that even at such a low price, SHEIN has struggled to find a buyer, which increases the possibility of further valuation **. Author: Yiou.
References:
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