Shein, the ultra-fast fashion behemoth, that rose to prominence thanks to scores of exuberant influencers flaunting their “hauls” on social media, is having a trickier time getting likes amongst the financial community. And this, despite its ballooning revenues and healthy profit margins.
Shein’s listing on the New York stock exchange stalled due to repeated red flags around the sustainability of its supply chain and its alarming human rights record. London – hungrier for IPOs, after a slowdown over the last few years – is looking more welcoming, but a listing in the City is not yet a done deal.
The whole episode shines a light on an interesting contradiction: it’s Shein’s huge popularity with Gen Z females that has seen its revenues soar from $10bn in 2020 to an eye-watering $100bn in 2022 (Bloomberg).
And yet, this is the very demographic that fund managers are convinced will spearhead calls for cancellation, if a brand falls foul of progressive environmental, rights or social policies.
In a world of glaring scrutiny and increasingly violent social media blowouts, can a brand ever really outrun its business operations? The answer is: it depends.
Scandals around supply chain, ethics and corporate culture can blow up and become big issues for leadership and shareholders. But as the saying goes, today’s news is often tomorrow’s fish and chip paper.
When the Sunday Times broke a story in 2020 that led to accusations of modern slavery against UK online fashion retailer Boohoo, the company’s stock price fell dramatically. But following an independent review by Alison Levitt QC and a £10m commitment to rectify the issues, the stock had regained much of the lost ground by the end of that year.
Similarly, following Russia’s invasion of Ukraine, scores of Western businesses exited Russia under immense pressure from shareholders, politicians and the general public. The prevailing wisdom in those heady days at the beginning of the conflict was that any brand continuing to do business in Putin’s Russia was committing reputational harakiki. But, of course, not everyone left. Several large Western conglomerates, from France’s Auchan to Austria’s Raffeissen Bank, still operate in Russia to this day. Their presence has not escaped the glare of the world’s business press but has largely been greeted by indifference by the general public. A survey of European and US consumers showed that only a small minority knew which global companies had remained in Russia. Those that have left barely got a reputational boost.
The irony, of course, is that the biggest barrier to building a strong brand – getting people’s attention in today’s everything-everywhere-all-at-once media landscape – is what works in favour of brands facing operational and organisational scandals. Excessive noise dampens the scale and length of outrage. We ran a brand health tracker, which suggests the Shein brand continues to grow in strength and stature with consumers, despite these scandals.
No surprise though. We live in a moment of cognitive overload. Our exponentially volatile socio-cultural, geopolitical and macro-economic environment means that it’s hard for people to keep track of everything that they would ideally like to get outraged about. And it’s harder still to follow through on that outrage –when simultaneously trying to juggle the needs to sate our our ‘id’ through affordable, accessible pleasure. Especially when affordable, accessible pleasure is often made possible through less-than-sustainable, less-than-ethical business practices.
Fund managers and business audiences, however, are a slightly different breed: they are attentive to these signals, because they are socially and financially compensated for staying on top of them (and often heavily penalised if they’re not). As a result, reputational scandals disproportionately impact the success of IPOs, because the associations that fund managers and investors make between brand and business practices intersect more with their own reputations and careers.
So, while these scandals may get some fleeting attention from their customer base by, they matter more to the narrow and specific (often accountable) audience that determines a brand’s fate ahead of IPO – a non-negligible factor that needs to be artfully managed.
Only time will tell whether Shein’s $7.6 million partnership with the nonprofit, Apparel Impact Institute, will do the job. They may scrape through, having done ‘just enough’ to soften the sharpest edges of the criticism, while the forces of the 24-hour news cycle surface a new scandal or sensation that diverts attention from this one.
Matt Kissane is Global Executive Director at Landor
