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Fast-fashion giant Shein plans Mexico factory in diversification away from China, where it was founded, amid tensions

  • Shein is exploring plans for a factory in Mexico, sources told Reuters, following plans to build a manufacturing network in Brazil
  • The company is weighing ‘nearshoring options’ as it diversifies away from Chinese production amid heightened political tensions and accusations of forced labour

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A Shein distribution centre in Whitestown, Indiana in the US seen in October 2022. Shein is looking at building a factory in Mexico as an option to diversify production away from China. Photo: Shutterstock
Reuters

Online fashion giant Shein is exploring plans to build a factory in Mexico, as one of its manufacturing hubs outside China, sources familiar with the matter told Reuters.

The factory, which will produce Shein items and is part of the retailer’s push to localise production, could shorten shipping time and cut distribution costs for Shein customers in Latin America. It follows its announcement that it will build a manufacturing network in Brazil to serve as a global customer base.

Shein was founded in China and manufactures most of its products there, but is now seeking to diversify. The company sells US$10 dresses and US$5 tops and has taken market share from other affordable fashion retailers.

Now headquartered in Singapore, Shein competes with PDD Holdings’ Temu, which sells low-priced items ranging from clothing to electronics from China in the US.

A final location for the Mexico site has not been decided yet, said the sources, who requested anonymity as the discussions are private.

Shein will use funds from its recent capital raise of US$2 billion from investors including Mubadala and Sequoia China to fund the expansion, as it eyes an initial public offering in the US. Despite a valuation cut to US$66 billion in its latest funding round, the retailer still posts annual revenue growth of 40 per cent, one of the sources added.

Shein, in an emailed statement, declined to comment on the plan, but said it is committed to localisation as it expands to new markets.

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