Shein x Forever 21: ‘If You Can’t Beat Them, Join Them’

Jasmin Malik Chua
·5 min read

Shein is making an extended play for bricks-and-mortar retail with a new stake that could soon see the e-tail juggernaut operating within Forever 21 outlets at malls across the United States.

On Thursday the Chinese-founded phenom, which previously kept its physical presence to short-lived pop-up activations, announced that it would be acquiring a one-third interest in Forever 21 parent Sparc Group, a joint venture that includes Authentic Brands Group and mall operator Simon Property Group. In return, Sparc, whose other brands include Aeropostale, Brooks Brothers and Eddie Bauer, will become a minority shareholder in Shein, though the exact terms are unknown.

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Shein, which is headquartered in Singapore, said that the partnership will give it the opportunity to explore “customer-focused experiences” in Forever 21 locations, including shops-in-shops and store-based order returns. Forever 21, which shares a young, trend-driven and typically cash-strapped demographic, will also get a boost through the arrangement. The Los Angeles-based fast fashion chain will get to hawk its wares on its former rival’s globe-spanning platform, extending its reach and distribution.

“We look forward to finding new ways to delight our customers through the potential of this partnership,” Donald Tang, Shein’s executive chairman, said in a statement. “The powerful combination of Simon’s leadership in physical retail, Authentic’s brand development expertise and Shein’s on-demand model will help us drive scalable growth and together make fashion more accessible to all.”

The new partnership between the two giants is one that makes sense for both parties, said Neil Saunders, managing director of GlobalData Retail, a market analytics firm. Although it has found a “firmer financial footing” under its post-bankruptcy ownership, Forever 21 continues to face headwinds because of a more subdued consumer, tougher competition and a “rather nondescript brand position,” he said.

“Selling products via the Shein platform is one way of quickly super-charging growth,” Saunders said. “Shein will allow Forever 21 to expose its products to a significant number of consumers both in the U.S. and globally. This will ultimately improve volumes and economies of scale.”

Ditto for Shein, he said. Roping in Forever 21 contributes to the company’s goal of “rounding out its proposition” so it’s less dependent on ultra-cheap apparel, he said. Plus, it could take some of the heat off Shein’s production model, which has been criticized for fueling sweatshops, promoting environmental degradation and harming the livelihoods of independent designers. Like its nemesis, the online marketplace known as Temu, the Romwe owner has also faced congressional questioning over its ability to avoid forced-labor products from China’s Xinjiang Uyghur Autonomous Region and its use of the de minimis trade provision to evade paying duties, taxes or fees to the American government.

“While Forever 21 isn’t premium, it is a credible brand that adds more fashion heft to Shein’s offer and may help attract some new consumers,” Saunders said. “Shein will also hope that the addition of a well-known American name will help to lessen [the] focus on its manufacturing practices, which have come under scrutiny.”

Dr. Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware, said that the partnership signals Shein’s “eagerness” to find new business growth opportunities and create a “favorable” environment that can eventually lead to a successful IPO. Earlier this year, the Christian Siriano collaborator also rolled out a new “full category” marketplace in the United States that allows third-party sellers to utilize its platform to tout a slew of products beyond its niche, including higher-end fashion from Paul Smith and Stuart Weitzman, and non-clothing items such as electronics, kitchen appliances and home improvement wares.

Lu noted that Shein’s own ESG report acknowledged that only roughly 18 percent of its audited factories achieved a B or better grade for safety and social compliance. Nearly half (47 percent) of the facilities were found to have “one to three major risks”; there weren’t enough emergency exits, some had signs of structural damage, several didn’t pay minimum wage and factories were found using underage or involuntary labor. Another 24 percent had “more than three major risks.”

“As Shein ambitiously expands into new territories, including areas without prior experience and resources like beauty products, significant questions arise about the company’s ability and commitment to effectively address public concerns regarding its sustainability and social responsibility practices,” he said.

Because Shein is operating from a position of strength and is already winnowing market share from Forever 21, the deal is “something of an admission” by the latter that it isn’t able to engineer growth the way that it would like, Saunders said. “There is an element of ‘if you can’t beat them, join them’ in Forever 21’s thinking,” he added.

Whether that will pan out is another matter.

“While it will make medium-term gains, the longer-term danger for Forever 21 is that it becomes overly reliant on Shein, especially if some [business] is pulled away from its stores,” Saunders added. “As Shein further develops and likely introduces other brands to its platform, Forever 21 may find itself crowded out. However, as Shein has taken a stake in the parent of Forever 21, the eventual gameplan might be for the eventual takeover of the brand.”

For Chapin Fay, executive director of Shut Down Shein, a mostly anonymous coalition of individuals and businesses that want the company to clean up its act, however, the move “changes nothing for us.”

“Shein must fully renounce and stop using cotton from forced labor for its products and pay its full share of tariffs due to U.S. taxpayers,” he added.

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