Chinese online fast fashion retailer Shein is spending RMB 3.5 billion (USD 490 million) to build a logistics hub in Guangdong, seeking to improve operational efficiency as Europe and the US move to reign in the influx of cheap imports by the company.
Work on the distribution center was already underway last month at an industrial park in the city of Zhaoqing. Scheduled to begin operating in the first half this year, the facility will house 14 two-story buildings with a total construction area of 600,000 square meters.
The new hub will sort and package goods from contracted manufacturers to be shipped around the world. In a rare move, Shein decided to develop the facility in-house instead of leasing from a warehouse operator in order to achieve maximum efficiency.
Shein is also moving forward with plans to invest over RMB 10 billion (USD 1.4 billion) elsewhere in the province, provincial government-backed newspaper Nanfang Daily reported late last year.
Guangzhou, the provincial capital, is home to “Shein village,” which hosts thousands of contract manufacturers that supply the company, making it one of China’s leading apparel clusters. Shein is likely aiming to have its distribution centers close to that area.
While Shein is headquartered in Singapore, it operates mostly out of Guangzhou. It was once based in Nanjing, Jiangsu, where the company was founded in 2008 by CEO Xu Yangtian, also known as Chris Xu, as an e-commerce outlet that exported wedding dresses.
Some Chinese media have reported that Shein plans to set up an R&D base in Nanjing.
Looking to go public, Shein has confidentially filed for listing on Hong Kong’s exchange. While it had once hoped to go public in the US, the plan seems to have faltered over allegations that its suppliers use forced labor in the Xinjiang Uyghur autonomous region.
There also were plans to list in the UK, but the company has not revealed details.
Companies that have business bases in China need approval from the China Securities Regulatory Commission to list outside the mainland. Being listed in Hong Kong would only add to the online retailer’s presence in China.
Shein has grown rapidly as a specialist in cross-border e-commerce. Its business model of working closely with subcontractors to produce a large number of items in small quantities by using artificial intelligence trend analysis has been key to its success.
While the minimum lot size for items for major apparel player Zara is 500 pieces, the minimum at Shein is just 100 pieces, according to China’s Sealand Securities. Shein also has a seven-day new product cycle, in contrast to Zara’s 14 days. Its inventory turnover period is also half that of Zara’s operator. Shein has systems in place that minimize inventory risk and allow it to keep prices low.
Shein has also made use of de minimis rules, which exempt small orders of imports from tariffs in some countries, to sell its low-priced, China-made products.
Nearly all the company’s sales come from outside China. In 2024, Shein’s Singapore-registered operating company Roadget Business saw sales rise 20% on the year to reach USD 37 billion.
Yet Western markets are growing alarmed by the influx of discount products from Chinese sellers.
The US ended its de minimis rule on goods from China in May. The European Unit will also begin charging duties on small parcels in July. Japan is working to revise its tariff rules on purchases from cross-border e-commerce sites.
France called for the suspension of Shein’s site in the country following the discovery of illegal products on the company’s website, such as sex dolls.
The end of tariff exemptions will raise the prices of Shein’s products, potentially alienating customers. Shein plans to use the new logistics hub to improve efficiency and retain its price-competitiveness.
“With more factories closing lately, the empty lots are starting to be more noticeable,” said a person familiar with the Shein village.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.