Shein faces growing European scrutiny despite rapid growth

Shein, the Chinese e-commerce giant, has seen its European customer base grow to an average of 156 million monthly users by the end of last year, positioning it as one of the continent's leading online platforms. Despite its meteoric growth and international expansion ambitions, Shein has become a focal point for European critics of "ultrafast fashion."

European officials are seeking to regulate its operations to address social and environmental concerns, resulting in a series of probes, financial penalties, and intense debates. These challenges have not entirely dampened Shein's popularity, however, as millions of clients continue to support the platform.

The company's entry into the European market began in 2012, with Shein launching online sales of its continuously refreshed inventory of clothing items. By the end of last year, the company had amassed a substantial European presence, trailing only AliExpress from China and Amazon among e-commerce giants. In November, Shein even opened its first physical store in Paris, a move that drew both enthusiastic crowds and protests from concerned citizens.

The store's opening was marred by a controversy involving the sale of childlike sex dolls on Shein's platform, prompting French authorities to open an inquiry under the Digital Services Act.

The regulatory scrutiny extended to other aspects of Shein's operations, including product traceability, environmental labeling, and delivery times. French authorities imposed fines totaling over €22 million (US$25 million) on the company, while Italy joined in by fining Shein for alleged misleading environmental claims. Shein has paid over €210 million in various French fines over the years, with Italy imposing fines as well.

The company has contested these penalties, labeling them "disproportionate and discriminatory" and arguing that they violate World Trade Organization rules.

European authorities have also imposed duties on small parcels of retail items entering the bloc, primarily from Chinese e-commerce sites, including Shein. Since July, a duty of €3 per item has been applied to packages valued at less than €150 in the EU, similar to a measure previously enacted by the US administration against Chinese products.

The EU expects the number of small parcels from abroad to increase significantly, with customs offices estimating a 4.4-fold increase since 2022. Despite these challenges, Shein's enthusiasm among European consumers persists, making it a key market for the company's international expansion.