Shein remains under the microscope of the European Commission, but the company has managed to gain some breathing room. The Chinese enterprise was supposed to provide evidence that it’s taking measures against the sale of illegal products in the European Union, but it requested a deadline. Brussels accepted the petition due to Shein’s “very constructive” attitude in the investigation, according to Thomas Regnier, the Commission’s Digital Technology spokesperson.
The underlying issue is serious: illegal products entering the EU, many of which are potentially hazardous, have increased significantly. A recent European Commission report revealed that in 2024, 4.6 billion illicit products were purchased in the region, with a staggering 91% coming from China. This growth has led European authorities to tighten regulations and propose the elimination of tariff exemptions for shipments under 150 euros, which would directly impact platforms like Shein and Temu.
Financial Woes and Competitive Pressure
Shein is facing not only regulatory challenges but also financial struggles. According to the Financial Times, the company experienced a 40% decline in net profit in 2024, down to $1 billion. Although its annual sales increased by 19%, reaching $38 billion, these numbers are below expectations. The British media outlet attributes much of this decline to a difficult quarter and the rise of competitor Temu, whose popularity has grown significantly in key markets, including Spain.
Meanwhile, Shein has reduced its estimated valuation to $50 billion, a 25% decrease from the $66 billion it reached in its last funding round in 2023. This decline reflects the uncertainty surrounding its business model and the impact of new trade barriers.
The End of Tariff Exemptions Could Change the Game
Another significant blow comes from the US, where the Trump administration has announced the end of tariff exemptions for low-value products. Until now, Shein and Temu had benefited from this rule, which allowed them to import items worth less than $800 without paying taxes. However, with the new regulations, analysts predict that both platforms will have to raise prices, which could affect their competitiveness.
In this context, Shein’s CEO, Donald Tang, has tried to reassure investors that the company remains committed to offering affordable fashion. However, the anticipated initial public offering in the UK, which many consider crucial for its expansion, might be delayed until the second half of 2025.
Between stricter regulations, changes in the rules of the game, and competitive pressure, Shein is facing one of the greatest challenges in its history. The question is: can it maintain its dominance in ultra-fast fashion without losing its essence of low prices?