Ultra-fast-fashion giant Shein said it will invest €250 million ($271 million) in British and European designers and circularity initiatives over the next five years as it seeks to manage a regulatory crackdown targeting “fast fashion” and drum up support for a potential IPO in London.

The disruptive Singapore-based e-tailer said Tuesday that it plans to launch a €200 million circularity fund focused on textile-to-textile recycling and related innovations, inviting other businesses and financial institutions to co-invest. Shein said it will set aside another €50 million to help fashion businesses in the UK and EU join its marketplace and support its Shein X incubator programme, which connects emerging designers to the company’s supply chain, in the region.

The moves form part of the company’s efforts to address criticisms and controversies that have dogged its ambitions to go public and made it the focus of regulatory scrutiny that could stunt future growth prospects.

The company reportedly filed confidential papers with Britain’s market regulators for a London listing in June. It has declined to comment on its plans.

Founded in Nanjing, China, in 2012, Shein is now one of the world’s most popular clothing brands, a rise that has been fuelled by a pioneering and hyper-efficient test-and-learn manufacturing model that allows it to produce a dizzying assortment of new styles in small batches and sell them at rock bottom prices. Gross merchandise value, a measure of the value of sold goods on its website, reportedly reached around $45 billion in 2023. Its London IPO could be one of the largest stock offerings globally this year.

Escalating tensions between the United States and China, where most of the company’s manufacturing still takes place, disrupted previous plans to list in New York. And its fast-paced, low-cost business model has made it a regulatory lightning rod. The company has attracted a barrage of criticism over issues including its supply-chain labour practices, product safety, copyright infringement and environmental impact.

In Europe, which has been moving to protect local producers from the flow of cheaper Chinese goods and address criticism that new green rules disadvantage businesses operating in the trading bloc, the company is seen as a key target of proposed and incoming regulations that take aim at fast fashion. These include moves to address a loophole which allows foreign companies like Shein, that ship low-value parcels direct to consumers, to sidestep import duties and higher fees for fashion retailers that produce large volumes of clothes.

“Compliance and circularity are the priorities I wake up with,” Shein executive chairman Donald Tang said, adding that the company prefers to style its business as “on demand” fashion, rather than “fast fashion.”

Though the e-tailer produces many styles, each one is manufactured in small quantities that are only increased if there’s clear demand, avoiding the wasteful overproduction associated with many established mass market rivals, according to Tang. With its circularity fund, Shein said it is moving to take more responsibility for what happens to clothes at the end of their life — a trickier challenge for a company that has been blamed for fuelling overconsumption.

While the €200 million fund represents a tiny fraction of the profits in excess of $2 billion that the company reportedly generated last year, Shein said it can have a bigger impact by leveraging its size and scale to support innovators through things like offtake contracts or other commercial arrangements.

Tang said he has spent the last few weeks talking with the venture community and fund managers to “very, very enthusiastic feedback.” Still, establishing the mechanics of the fund, including putting someone in place to oversee it, is still in progress.

“The tradition and hallmark of Shein is waste reduction,” said Tang. “This is the beginning of the effort.”

🇨🇱 Chilean retail giant Parque Arauco acquires Colombia’s Parque Alegra. The Santiago-based firm, whose shopping malls in Chile, Peru and Colombia house retailers like Gucci and Guess, has completed its ownership of the Colombian mall through a local subsidiary, acquiring the remaining stake from Colvalor Propiedades Colombianas. “Taking full control of Parque Alegra [in the city of Barranquilla] reaffirms our commitment to growth in Colombia, after the significant steps taken in recent months including the increased ownership stakes in Titán Plaza [in Bogotá] and Parque Fabricato [in Medellín],” said Diego Bermúdez, CEO of Parque Arauco’s Colombia division. Home to brands like H&M and Pandora, Parque Alegra is now one of Parque Arauco’s seven malls across the country. [Business Wire]

🇮🇳 Reliance is reportedly preparing to launch Shein in India. Reliance Retail Ventures, the retail arm of oil-to-telecoms conglomerate Reliance Industries, is planning to sell products from the ultra-fast fashion giant on its app and offline stores, according to “multiple executives aware of the developments,” speaking to the ET. An imminent launch would come a year after the partnership was reportedly struck between the two firms, and four years after India banned Shein and other apps originating in China from operating in the country over border disputes. A deal could also help Shein reduce dependence on China by scaling up sourcing from India. Reliance, a leading player in India’s fashion industry, recently struck a deal with Britain’s fashion e-tailer Asos. [Economic Times]

🇨🇳 Uighur group wins UK appeal over forced labour in Chinese cotton. A British court of appeal has ruled that the UK National Crime Agency’s decision not to launch an investigation into the importation of cotton products believed to be manufactured by Uighur and other Turkic Muslim people through forced labour in China’s Xinjiang province was unlawful. The appellants, the Global Legal Action Network and the World Uyghur Congress, said that their win could lead to UK retailers being prosecuted under the Proceeds of Crime Act if imported products are found to be made through forced labour. [Sourcing Journal]

🇦🇺 Australian regulators ban Honey Birdette’s “sexually suggestive” advert. The Ad Standards Community Panel has forced the upmarket Sydney-based lingerie brand co-founded in 2006 by Eloise Monaghan to remove an advert from a store window after a customer complained that it exposed too much of one of the model’s genital regions. This isn’t the first time the brand has faced opposition from the organisation over ads deemed too racy or explicit, with local media reporting in 2018 that its adverts had already been banned over a dozen times. [Ragtrader]

🇮🇳 India’s Baba Ramdev claims a cartel wants to “destroy” his firm. The popular and controversial Indian yoga guru and founder of Patanjali Ayurved, an ayuverda consumer goods company based on India’s ancient philosophy of holistic healing which sells skincare, personal care and food products, has said that a group of ‘anti-ayuverda’ companies, politicians and intellectuals seek to damage his company’s reputation. India’s Supreme Court has previously banned ads for the firm’s medicinal products claiming to cure cancer. In 2021, the government intervened over herbal tablets claiming to cure Covid-19 and in 2022 the Indian Medical Association took the firm to court over products claiming to cure diabetes. [Economic Times, BBC, BoF]

🇨🇳 EU may close off duty exemption that aids China’s Shein and Temu. The European Union is working on a proposal to impose import duties on cheap goods bought from online platforms outside the bloc, a move that would impact all non-EU e-commerce platforms but primarily targets China-founded firms Temu, AliExpress and Shein, according to people familiar with the matter. The EU currently has a €150 ($161) duty-free de minimis threshold for online purchases which has enabled a surge in small-value imports from those platforms. The move follows the EU’s recent toughening of tech compliance requirements for the platforms. [BoF]

🇿🇦 South Africa’s Rich Mnisi wins top award at Africa Fashion Up. The competition founded by Share Africa, a platform supported by Balenciaga and Galeries Lafayette, named Mnisi the “Best Designer Africa” for the latest edition at a ceremony in Paris last month. Founded in 2021 by Valérie Ka, the contest’s other 2024 prize winners included Niuku founder Kadiata Diallo from Senegal and Mauritania; Gugu Peteni, the South African founder of Gugu by Gugu; and Mohamed Youss, founder of Anouri, from Morocco and Kader Diaby, from Côte d’Ivoire, founder of Olooh. [Africa News Agency, Semafor]

🇮🇳 Indian watch and jewellery giant Titan reports 9 percent revenue growth. The Tata Group-owned firm, whose portfolio includes its namesake brand alongside Tanishq, Zoya, Mia and CaratLane, posted 9 percent growth in the first quarter ended June 2024. It added 61 stores during the period, bringing its combined retail network presence to 3,096, amid a domestic and international expansion drive across the US, Middle East and Southeast Asia. [Economic Times]

🇯🇵 Japanese beauty giant Shiseido wins Max Mara fragrance license. The Tokyo-based conglomerate will develop, produce and manufacture fragrances for Max Mara, which has not sold perfume since it discontinued a line of scents launched in the mid-2000s. Shiseido has several fragrance licensing deals with fashion houses, including Narciso Rodriguez, Issey Miyake and Tory Burch. [BoF]

🇮🇳 India’s Malabar Gold & Diamonds accelerates UK expansion. The jeweller has opened a store in the city of Leicester, following its debut in London’s Upton Park district. The Kozhikode-based company, which operates 350 stores across 13 countries, said it plans to strengthen its footprint in existing markets in Europe, the Middle East and North America, and enter new countries in Africa, Asia and Oceania. In the UK, “we have…immediate openings planned in Southall and Wembley in London, as well as Birmingham and Manchester,” said Shamlal Ahamed, MD of international operations. [Economic Times]

🇹🇭 Thai textile leader calls for companies to innovate to aid recovery. “It is time for us to take … a new direction, with a different focus … towards more creativity and technology,” said Setthapong Srisuphonvanij, president of the Thai Textile Merchant Association, at last month’s GFT Expo trade show in Bangkok, referring to the need for more Thai sourcing partners of global fashion companies to provide “specialty textiles to meet consumer needs.” Thailand’s apparel and textile exports decreased from $6.85 billion to $6.03 billion between 2022 and 2023. [Sourcing Journal]

🇮🇳 India’s Kalyan Jewellers plans US debut by Diwali. The Thrissur-based company whose portfolio includes its namesake brand and digital-first brand Candere has said that part of its plan to launch over 130 new stores during the current financial year will include its first in the US by Diwali, which falls on 1 November. The firm currently operates more than 270 stores across India, the UAE, Qatar, Kuwait and Oman. [Economic Times]

🇨🇳 Chanel chooses Hangzhou for its next Métiers d’Art show location. The French luxury brand will showcase its collection featuring the house’s special artisanal skills, on December 3 in the Chinese city, an historic centre of the global silk trade. Hangzhou’s Métiers d’Art show will follow those in Manchester, UK and Dakar, Senegal. Chanel presented a repeat cruise show in Shenzhen, China last year. [Jing Daily]

🇰🇷 LVMH-owned jeweller Fred names Jin from BTS as brand ambassador. The brand has tapped the South Korean singer and member of K-pop boyband BTS, which has been on hiatus while the band members complete mandatory military service. Jin, who has over 48 million followers on Instagram, was the first to be discharged last month. [Billboard Philippines]

🇨🇳 Gucci taps Chinese actor Zhang Linghe as brand ambassador. The Italian luxury brand has partnered with the star of TV series including “Story of Kunning Palace” and “Sparkle Love,” who has nearly 10 million followers on Weibo, to endorse its products. [Dscene]

At a recent Singapore retail convention, an Australian financier recounted how his wife spent her time on a trip to Tokyo. Speaking privately on the sidelines of the event, he revealed that she didn’t spend a single minute sightseeing in the city because she was laser-focused on buying a haul of luxury goods. By taking advantage of highly favourable exchange rates, she found that it was cheaper to purchase a plane ticket from Melbourne to Tokyo and buy the items from major French houses in Japan than it was to shop at the brands’ Australian boutiques.

With the Japanese yen continuing to plummet against major currencies — last week it dropped to its lowest level since 1986 against the US dollar — shopping sprees like this have become increasingly common. Wealthy and aspirational consumers from around the world have been flocking to the Japanese capital as the yen hit multi-year lows against the euro, the Australian dollar and the Chinese yuan.

“Top luxury brands, especially in the Ginza district [of Tokyo] and department store shop-in-shops, are performing exceptionally well,” said Maiko Shibata, head buyer and creative director at Japanese multi-brand boutique Restir, which sells an edit of products from both big brands like Balenciaga, Valentino and Burberry and niche names including Marine Serre, Sacai and Maison Mihara Yasuhiro.

“There’s a trend among wealthy shoppers, [both tourists and locals], to spend money on very rare, hard-to-get products, or limited-edition items such as Hermès and The Row Margaux [bags]. We even have a word [in Japanese to describe them] called ‘her-pat,’ [a codename for those who shop enthusiastically as if they’re on ‘Hermès patrol’ and] post their trophy items on social media,” she added.

The boom is motivating luxury brands like Hermès, Tiffany & Co and Balenciaga to boost their operations in the country, expand their retail footprint or accelerate existing expansion plans. Hermès, which posted a 25 percent sales jump in Japan for the first quarter, opened its second location in Ginza last month at the Mitsukoshi department store, following its Azabudai Hills store launch in February. In April, Balenciaga opened a three-level flagship store in Ginza, bringing its Japanese store count to 37.

There has also been an influx of emerging jewellery and accessible luxury brands into the country, with Gemmyo, Ganni, Studio Nicholson and Polene entering or opening their first stores in the last year.

“[Other] luxury brands are investing more in their presence in Japan by modernising stores and enhancing their digital infrastructure,” said Federica Levato, senior partner and a regional leader of fashion and luxury at consultancy Bain & Company. “[In addition to] personalised customer experiences and exclusive events to engage wealthy local clients, [they] are also revamping interest in exclusive partnerships with local craftsmanship and creativity to increase cultural relevance.”

Some of the industry’s biggest players have been duly rewarded. French luxury conglomerate LVMH reported a 32 percent sales surge in Japan in the first quarter, the highest growth rate among regions. Kering posted revenue Q1 growth of 16 percent and Prada Group’s retail sales in the country were up 46 percent, which the company said was “sustained by local consumption and increasingly by tourists”. Meanwhile, Richemont saw sales surge 20 percent at constant exchange rates in Japan in the year ended March.

Factors driving the sales boom

In stark contrast to the slowdown in the Chinese market, Japan’s luxury sector has been experiencing a substantial and sustained increase in sales since last year driven in part by international tourists — including Chinese and many other nationalities.

“Luxury retailers in Japan have undergone a period of strong acceleration in 2023 and [have remained] on a positive trajectory over the first months of 2024,” said Levato. “The market has seen robust growth, driven by solid demand on behalf of locals and an increase of tourist inflows, partially attracted by the weak local currency.”

The Bain analyst said the value of the Japanese luxury market was at 29 billion euros ($31 billion) last year, up 27 percent year-on-year at constant exchange rates.

According to the Japan Department Stores Association, duty-free sales by visiting foreign nationals marked a record high for the third consecutive month in May, more than tripling year on year to 71.8 billion yen ($450.7 million), driven by the surge in international tourists purchasing luxury goods. It marked the 27th consecutive month of overall sales growth across department stores.

Department store giant Takashimaya confirmed in its 2024 financial statement that “inbound net sales were favourable on luxury brands and other high-ticket items as sales were propelled by an increase in per-customer sales due to yen depreciation.”

The luxury department store chain, which has branches offering tax refund counters in Greater Tokyo and Osaka and in at least one branch in Kyoto, Nagoya, Okayama, Gifu and other cities around the country, is popular among international tourists, many of whom travel to Japan for a combination of sightseeing and shopping.

“Once lagging in innovation, [Japanese] department stores have now become better at capturing new trends and consumer desires, although this remains an area needing further improvement to attract younger customers,” said Levato.

An example of this is Seibu & Sogo Co which is reconfiguring its Seibu Ikebukuro main store in Tokyo under a theme it dubbed “inclusion” which will move away from the traditional segregation of men’s and women’s sections and welcome all customers in “unifying spaces where friends, couples, and families can shop and enjoy time together.”

How reliant is Japan on Chinese shoppers?

Japan recorded more than 3 million visitors for a third straight month in May, according to the Japan National Tourism Organisation (JNTO). Arrivals during the month were up 60 percent year on year and 9.6 percent compared to 2019.

The JNTO noted that Chinese travellers accounted for 16 percent of tourists and 20 percent of overall tourism spending in the first quarter of the year, which is still about 30 percent lower than pre-pandemic levels.

However, overall spending on products that tourists typically claim tax refunds — such as luxury goods — are up on pre-pandemic levels, according to data from a report by Global Blue. Despite fewer trips in 2023 compared to 2019, the average amount of tax-free spending by Chinese visitors in Japan was more than double that of 2019, marking a 117 percent increase.

“Mainland Chinese tourists and currency depreciation are key levers. However, there is also strong inbound tourism from South Korea, the US and Hong Kong SAR,” Daniel Zipser, McKinsey & Company’s senior partner and leader of the consultancy’s consumer and retail work in Asia. “Japan has taken the lead as the top destination for South Korean travellers due to the favourable exchange rate.”

According to JNTO, South Korea had the highest number of foreign visitors to Japan in April at 661,200, followed by China at 533,600, and Taiwan at 459,700. Both Hong Kong- and Taiwan-based consumers have been travelling and spending abroad enthusiastically as markets such as Japan and Europe offer retail prices on luxury goods that are significantly cheaper after currency exchanges and tax rebates, according to the latest annual report by Dickson Concepts.

“The local market is also growing,” said Zipser, citing research by NRI showing that “the total number of wealthy and ultra-wealthy [Japanese] households in 2021 increased by 158,000 households from 1.327 million households in 2019, the highest number since the estimate began in 2005.”

EY’s Asia-Pacific strategy execution leader Nobuko Kobayashi said that “while [foreign] visitors account for one-third of sales in major luxury brands [in Japan] according to the FT, Japanese locals show resilience in supporting the post-Covid luxury market in the country, particularly since [outbound] overseas travel appetite wanes in the face of yen depreciation,” citing figures from Morgan Stanley’s luxury analyst Edouard Aubin in the Financial Times.

Levato echoes that sentiment. “Domestic spending on luxury goods in Japan remains sound, particularly among wealthier Gen X consumers less impacted by general macroeconomic pressures,” she said. “Yet, aspirational customers started to resent inflationary pressures more recently, and brands are still facing harder times in capturing a younger customer base.”

Shibata suggests that recent price hikes by European luxury brands have disproportionately impacted the Japan market in the current economic cycle of a weak yen, leading to an increase in sales revenue for some retailers, despite a slight decrease in the number of units sold.

“Prior to Covid-19, or when exchange rates were more favourable [to Japanese customers], they readily spent money on new and emerging brands. Now, with the weak yen, [locals] think carefully before shopping and only buy if they believe they won’t regret it,” said Shibata.

Another reason for caution among some locals is that they “may be tired of the rapid fashion cycle and obvious marketing,” she conceded. “They [hesitate to purchase because they] simply want to make the right decision.”

How long will the boom last?

Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Banking, recently told The Japan Times that if there are no major changes in monetary policy, the yen will continue to weaken. But the near-term course the Japanese government will take with fiscal policy remains shrouded in conjecture at the time of writing.

Finance minister Shunichi Suzuki commented on July 2 that currency moves were being watched vigilantly, but analysts speaking to Reuters observed an absence of any usual reference to the government being “ready to act” to support the yen’s recovery.

Levato said that while the recent boom driven by the weak yen and tourism may normalise, positive signals from the local customer base suggest that the market is well-positioned for future growth.

“The key for brands to continue growing will be increasing relevance toward local consumers, capturing younger generations and innovating to respond to changing consumer trends and market dynamics [such as]... weakening macroeconomics...impacting confidence in recent months, with consequences hitting the aspirational segment.”

British consumers reined in spending on clothing in June during a cold spell, another indication that poor weather has contributed to lacklustre economic growth.

Barclays Plc said that weaker retail sales drove a 0.6 percent year-on-year drop in card spending last month, the first decline since the depths of the Covid-19 lockdown in early 2021. Separate figures from the British Retail Consortium and and KPMG showed total retail sales fell 0.2 percent in June — a reversal of fortunes from an annual gain of 4.9 percent a year ago.

The figures point to another weak month for retail sales in official data that’s due out next week after the cold period in the first half of June. Retailers have sapped the economy’s momentum in the second quarter with the sector also holding back growth during a wetter-than-usual April.

More extreme weather due to climate change is creating larger swings in shopping figures, as Britons go from splurging to restraint in colder months.

“Despite pressure on household finances easing, with petrol and energy costs and shop price inflation all continuing to fall, consumers remain incredibly reluctant to take the brakes off of their spending,” said Linda Ellett, KPMG’s UK head of consumer, retail and leisure. “The stimulus of good weather, Wimbledon and Euro 24, which was hoped would drive consumer spending, has so far failed to materialise and financial concerns remain with many households.”

Data from Barclays showed that retail spending fell by 2.6 percent, driven by a near 8 percent plunge in clothing sales. The bank said colder weather in early June had weighed on the figures.

Non-food sales slumping 2.9 percent in the three months to June versus a year ago, according to the BRC. High street sales were particularly badly hit by consumers staying away, with most of the fall coming from a 3.7 percent decline in in-store non-food sales on a strong comparable the year before.

“The sluggish demand at the start of June even caused some fashion brands to adjust their sales schedules, although I was pleased to see that the situation has since improved with the arrival of sunnier days,” said Karen Johnson, head of retail at Barclays.

She said that sunnier weather and the Euro football tournament are a potential boost to spending in July with England making it to the semi-finals.

“Retailers remain hopeful that as the summer social season gets into full swing and the weather improves, sales will follow suit,” said Helen Dickinson, chief executive of the BRC.

By Jennifer Creery, Irina Anghel and Tom Rees

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What the UK Election Means for Fashion

The opposition Labour party’s landslide victory is most remarkable for the lack of drama it is expected to bring in an increasingly politically tumultuous world.

A sequel to hit 2006 comedy “The Devil Wears Prada” is under way at Disney, with key cast and crew widely expected to return, including director David Frankel.

Aline Brosh McKenna, who adapted the original film from the novel by Lauren Weisberger is in talks to write the follow-up, whose storyline reportedly follows Miranda Priestly, the withering fashion mag editor played by Meryl Streep, as she navigates the decline of traditional print publication in the digital space.

Her new key adversary is sometime assistant Emily Charlton (played by Emily Blunt in the original), who is now a high-powered executive for a luxury consortium, and who makes the decisions over where to place lucrative advertising contracts.

Weisberger worked as an assistant to US Vogue editor Anna Wintour before turning to fiction; Priestly is assumed to have been inspired by her former boss – still in position at Vogue. The film won Streep a Golden Globe and an Oscar nomination, as well as making $327 million worldwide from a $41 million budget.

The nominal leading character in the first film, Andy Sachs (played by Anne Hathaway) is so far absent from the new film’s logline. All three leads have frequently reunited, most recently at the SAG awards in February. Earlier this year, Blunt and Hathaway revisited their experiences making the film as part of Variety’s Actors on Actors series.

“We just had a joy bomb of a time on that movie,” Blunt told Hathaway during the conversation. “I don’t know if any of us knew it was going to become what it did. It’s quoted to me every week. It will be the movie that changed my life.”

Other cast members, most notably Stanley Tucci, who played Priestly’s long-suffering deputy, have also helped keep conversation about the film alive. Significant reassessment of the film’s romantic subplot has also taken place, with many viewers believing that Andy’s boyfriend, Nate, was the “real villain” of the story for his efforts to get his girlfriend to take her career less seriously.

Blunt will next be seen in “Jungle Cruise 2,” following her leading role in “The Fall Guy” and Oscar nomination for “Oppenheimer.” Age-gap romance “The Idea of You” reinvigorated Hathaway’s career last month; Streep is winning further acclaim for her role in comedy series “Only Murders in the Building.”

A musical version of the original film, with an original score by Elton John, opens in the West End in October, with Vanessa Williams as Priestly.

By Catherine Shoard

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Magazines Bet on Memberships

Elle UK launched its first reader membership programme on Thursday, part of a broader initiative at Hearst UK to monetise its brands.