Online fashion retailer Shein is reportedly considering building a factory in Mexico as part of its efforts to diversify its manufacturing hubs outside China. Sources familiar with the matter revealed that the factory will produce Shein items and aims to reduce shipping time and distribution costs for the company's customers in Latin America.
Shein's move follows its recent announcement of establishing a manufacturing network in Brazil to cater to its global customer base.
The China-founded company, now headquartered in Singapore, primarily manufactures its products in China but is now seeking to expand its production locations. Shein has gained market share from other affordable fashion retailers by offering $10 dresses and $5 tops. It competes with Temu, operated by PDD Holdings, which sells low-priced items from China in the U.S.
Although a specific location for the Mexico site has not been determined yet, Shein plans to utilize funds from its recent $2 billion capital raise, which included investments from Mubadala and Sequoia China, to support its expansion. The company is also considering an initial public offering in the United States. Despite a valuation cut to $66 billion in its latest funding round, Shein continues to experience 40% annual revenue growth, according to one of the sources.
Shein has recently launched an online marketplace platform in Brazil, allowing third-party merchants to sell their products on the Shein app and website. A similar marketplace is expected to be launched in the U.S. before expanding globally. However, the upcoming Mexico factory will not accommodate items from third-party vendors.
Shein has faced criticism in various markets, including India, Brazil, and the U.S., due to its supply chain links to China. In May, a bipartisan group of U.S. representatives called on the Securities and Exchange Commission to suspend Shein's initial public offering until the company can verify that it does not use forced labor. Shein has previously stated its "zero tolerance" policy for forced labor and its requirement for suppliers to adhere to the International Labour Organization's core conventions.
Amid accusations of forced labor and internment in China's Xinjiang region, Shein has denied shipping from the area, emphasizing its commitment to responsible sourcing practices.