Is Labour bringing back the shine to Shein with a possible London IPO?

Anyone who walked into the lobby of the Peninsula, one of London’s most elegant hotels, last week might have seen a dapper 42-year-old man in a blue designer jumpsuit and a flowery shirt eating a bowl of Indonesian noodles.

The unassuming figure, with his Silicon Valley-style talk, is believed to be a big fan of the UK capital.

So much so that he prefers the City to New York and his company’s headquarters in Singapore for the initial public offering of the huge global online fashion brand Shein.

Donald Tang, Shein’s charismatic chief executive, took the precaution of enlisting senior Labour Party representatives for a takeover bid (which could value his company at more than £50bn) when the party was in opposition.

It seems no coincidence that he was back in London last week, even though members of the new Labour administration, busy enjoying their first surge of power, were busy with other things.

Since it was first revealed in these pages that the fashion group could be heading to London, in a public offering organised by Goldman Sachs, there has been intense scrutiny of its operations.

The London Stock Exchange, and one suspects the new Labour government too, are desperate to show that they are friends of the Square Mile and that the City can prosper under their stewardship.

That’s why the Financial Conduct Authority finally gave its approval to a “Big Bank 2.0” this week, easing the conditions for London listings, with the blessing of Chancellor Rachel Reeves.

She sees easing regulation and disclosure as a key element of her growth agenda.

But the government is the least of Shein’s problems. After the initial excitement at the prospect of a blockbuster UK IPO, attention has turned to Shein’s suppliers and the frequent accusations that its low prices are only achieved by using Chinese manufacturers who employ child and slave labour.

Meanwhile, brick-and-mortar retailers across Europe argue that Shein is a tax dodger, like other foreign online companies, as the small packages it sells directly to consumers are largely below the £135 threshold on which VAT is payable.

The mountain of publicity is believed to have had repercussions in Beijing (around 90 per cent of production is now made in China), which takes a dim view of attention being paid to human rights failings.

Shein remains adamant that if malicious actors have infiltrated its supply chain (and it works with thousands of factories), it will terminate them. In 2022, it eliminated 58 suppliers and recently cut another 15.

As part of the cleanup, it is focusing on forced labor, child labor and suppliers who refuse to be audited or try to bribe auditors.

Tang’s broader goal is to diversify its supply chain beyond the People’s Republic to be closer to its home market. One-third of sales are in the United States, one-third in Britain and the mainland, and one-third in South America and the Middle East.

The goal is to find suppliers in Mexico for the US market, probably in Turkey for Europe, etc. It makes no sense to be totally dependent on China now.

Shein sells everything from children’s clothing to pet supplies and household items. It claims to have no direct rivals on the high street. Its model is based on sophisticated technology and artificial intelligence.

It is seen as a streaming service where buyers decide what they want and suppliers connect online. The model is that of Uber and Netflix, rather than Primark or Walmart.

The company is therefore valued as a technological innovator. British and global funds and retail investors will soon have the opportunity to form an opinion on the matter.