Shein Founder Defends Business Model Amid Regulatory Scrutiny
Xu Yangtian, the typically reclusive founder and chairman of the rapid-fashion giant Shein, recently made a rare public appearance to defend the company’s business practices. This comes as Shein faces increasing regulatory pressure, particularly in Europe, over concerns ranging from product safety to its digital platform’s potential for addictive behavior. Xu’s remarks, delivered at the High-Quality Development Conference in Guangdong province, China, highlighted Shein’s sustained growth and its significant contribution to the region’s export economy.
Speaking as a representative of the business community, Xu emphasized that Shein’s export value through its platform exceeded 100 billion yuan (approximately $13.8 billion USD) in 2025, according to reporting by Yicai. He stated that the company now operates in over 160 countries and regions and has become one of the world’s three largest fashion retailers. This rapid expansion, Xu argued, is fueled by a “digital and flexible” supply chain model – often referred to as “small orders and quick replenishment” – allowing the company to adjust production to meet demand in cycles of just two to three weeks. This agility is a key differentiator in the competitive fashion industry.
The success of Shein, valued at an estimated 365 billion yuan ($53 billion USD) by the Hurun Research Institute in its 2025 ranking of emerging companies, is rooted in the integration of manufacturing and services, coupled with the strategic use of data to translate fragmented demand into efficient production orders. Xu believes this combination is the “key to competitiveness” for Shein. The company’s ability to quickly identify trends and deliver affordable clothing has resonated with a global consumer base, particularly younger shoppers. However, this very model is now under intense scrutiny.
European Regulatory Challenges
Xu’s public defense of Shein’s practices arrives at a critical juncture, as the company navigates a series of investigations in Europe. In France, authorities initiated a probe after discovering the sale of sexually suggestive dolls resembling children on the platform. This investigation raises serious concerns about the protection of minors and the responsibility of online marketplaces to prevent the sale of illegal or harmful products. The French investigation underscores a growing trend of increased regulatory oversight of online retailers and their content.
More broadly, the European Commission launched a formal proceeding against Shein in February 2026 under the Digital Services Act (DSA). The Commission’s concerns center on the potential “addictive design” of the Shein platform, a lack of transparency in its recommendation systems and the sale of illegal products. The DSA, which came into effect in February 2024, aims to create a safer digital space for users by imposing stricter obligations on large online platforms. Shein has responded by stating its full cooperation with the Commission, emphasizing its commitment to protecting younger users and implementing age verification mechanisms.
The DSA requires very large online platforms (VLOPs) and very large online search engines (VLOSEs) to take a number of measures to mitigate systemic risks, such as the spread of illegal content and disinformation. Shein, with its massive user base, falls under this category and is therefore subject to heightened scrutiny. The Commission’s investigation will assess whether Shein is adequately fulfilling its obligations under the DSA.
Potential IPO and Future Outlook
Despite the regulatory headwinds, Shein continues to explore options for an initial public offering (IPO). The company has reportedly been considering listings in both London and Hong Kong, although no firm timeline has been established. An IPO would provide Shein with significant capital to further expand its operations and invest in areas such as sustainability and supply chain transparency. However, the ongoing regulatory investigations could potentially complicate the IPO process and impact the company’s valuation.
The company’s rapid growth has similarly raised questions about its labor practices and environmental impact. Reports have surfaced alleging poor working conditions in some of Shein’s supplier factories, and concerns have been raised about the company’s contribution to textile waste. Shein has stated that it is committed to improving its sustainability practices and ensuring fair labor standards throughout its supply chain, but critics argue that more needs to be done.
Shein’s supply chain is largely based in Guangzhou, China, a major manufacturing hub. The company leverages a network of thousands of small factories to produce its vast range of clothing and accessories. This decentralized model allows Shein to quickly respond to changing fashion trends and offer incredibly low prices. However, it also makes it challenging to monitor and enforce labor and environmental standards across the entire supply chain.
The Rise of Ultra-Fast Fashion
Shein’s success has popularized the concept of “ultra-fast fashion,” a business model characterized by extremely rapid product turnover, incredibly low prices, and a relentless focus on trend replication. This model differs from traditional fast fashion retailers like Zara and H&M, which typically have longer design and production cycles. Shein’s ability to bring new styles to market in a matter of days, rather than weeks or months, has disrupted the fashion industry and forced competitors to adapt.
The ultra-fast fashion model relies heavily on data analytics and social media marketing. Shein uses algorithms to identify emerging trends and predict consumer demand. The company also leverages influencer marketing and targeted advertising to reach its target audience. This data-driven approach allows Shein to minimize waste and maximize sales. However, it also raises concerns about the potential for overconsumption and the environmental consequences of disposable fashion.
The debate surrounding Shein’s business practices highlights the broader challenges facing the fashion industry. Consumers are increasingly demanding affordable and trendy clothing, but they are also becoming more aware of the social and environmental costs of fast fashion. Companies like Shein will need to address these concerns in order to maintain their long-term success. The company’s response to the European Commission’s investigation and its commitment to sustainability will be closely watched by regulators, consumers, and competitors alike.
Looking ahead, Shein’s ability to navigate the evolving regulatory landscape and address concerns about its business practices will be crucial to its future success. The company’s next steps, including its response to the European Commission’s findings and any potential IPO plans, will be closely monitored by the industry. The ongoing investigations and public scrutiny underscore the growing pressure on fast-fashion companies to prioritize sustainability, transparency, and ethical labor practices.
Key Takeaways:
- Shein’s founder, Xu Yangtian, publicly defended the company’s business model amid increasing regulatory scrutiny in Europe.
- The European Commission is investigating Shein for potential violations of the Digital Services Act, including concerns about addictive design and the sale of illegal products.
- Shein is exploring options for an IPO in London or Hong Kong, but the timing and valuation remain uncertain.
- The company faces ongoing challenges related to labor practices, environmental impact, and the sustainability of its ultra-fast fashion model.
The situation with Shein is developing, and further updates are expected as the European Commission’s investigation progresses. Readers are encouraged to share their thoughts and perspectives on this important issue in the comments below.