Fast fashion’s new superpower: Shein

This is an audio transcript of the FT News Briefing podcast episode: Fast fashion’s new superpower: Shein

Marc Filippino
Good morning from the Financial Times. Today is Monday, December 13th, and this is your FT News Briefing.

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The cost of shipping things by air has soared to record levels. It’s bad timing; companies are dealing with a lot of holiday demand. And some gig workers have been mistakenly accused of fraud and even banned from the apps they work on. But it’s hard to fight back when your boss is an algorithm.

Madhumita Murgia
So this isn’t, you know, let’s look at gig work and solve this problem. This is the start of a sort of algorithm boss relationship. The employees are going to have across many, many different sectors.

Marc Filippino
Plus, there’s a brand ripping up the world of fast fashion. Our retail correspondent Jonathan Eley dives into the world of Shein. I’m Marc Filippino, and here’s the news you need to start your day.

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Flying cargo around the world now costs more than ever. Over the past three months, prices have nearly doubled on key air freight routes linking China to consumer markets in the US and Europe. And it’s not just the typical surge in demand that comes when Christmas approaches. Supply chains and shipping especially are still a mess because of the pandemic. There’s a shortage of containers and there are bottlenecks at ports, which means more companies need air freight. Companies are having a hard time finding enough aircraft. On top of Christmas shipments, there’s also a rush to transport coronavirus tests and protective gear in Europe to deal with the new Omicron variant.

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Over the past eight months, hundreds of UK gig workers have sought help after their gig companies like Amazon, Deliveroo and others suspended them for fraud allegations. The workers say they didn’t do anything wrong. They say it was a mistake by the company’s algorithms. The FT’s European technology correspondent Madhumita Murgia spoke to one worker in this predicament named Alexandru.

Madhumita Murgia
He was flagged twice for fraud, but he had absolutely no idea what he’d done wrong. And he was terrified because if he got a third flag, he would be kicked off the Uber platform, but he couldn’t risk that. So instead, he just stopped working for Uber. And there’s a really interesting recording in the report I talk about between Alexandru and Uber customer service person. You know, the person seems to have no idea what he did wrong either, and instead says, you know, you must have done something because the system doesn’t go wrong. So that’s the real danger because the companies and the employees at these companies, they trust the computer system. They says, you know, if the computer says you did something, you must have. But really, nobody seems to know what’s gone wrong, which puts the workers in a very vulnerable position. So companies are only really responding when these individual cases are taken either to court or brought by the union to them. And in Alexandru’s case, you know, they then went and queried it and they came back and apologised and kind of reinstated him more. And so, you know, it’s it’s really difficult because they don’t know really these workers, whether the responses, because they kind of complained or whether they would have happened anyway. So it’s a completely kind of a wild west space at the moment.

Marc Filippino
So Madhu, what do they do? You know, you mentioned that gig workers in the UK have a union they can turn to for help. But, you know, having an advocate doesn’t always guarantee that you’re going to solve the problem.

Madhumita Murgia
It’s really, really hard for them to push back. And I think this is kind of why the story is so fascinating. It’s the start of the automation and sort of the infusion of AI into the workplace, and we’re seeing it to begin with in in the gig work space. But this could soon be loads of different types of jobs ranging from factory work, you know, to office work. So it’s really hard for them to push back because there isn’t any real transparency in how the algorithms are being used or what decisions they’re making. So when you don’t even know what you’re being subject to, it’s really hard to to fight against it or to query it.

Marc Filippino
Madhumita Murgia is the FT’s European technology correspondent.

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Brands like Zara, H&M and Boohoo have long dominated the massive fast fashion industry and now another player has stormed in and just grabbed the number one spot in the US in terms of sales. But if you’re under 25, you probably haven’t heard of it. Our retail correspondent Jonathan Eley only recently stumbled on it.

Jonathan Eley
We’re preparing to move house at the moment. And I cleared out my daughter’s wardrobe, and I found a huge stack of Shein delivery bags in the back of it, which I didn’t even know were there, which which kind of explains where it sits in their brand recognition pantheon.

Marc Filippino
Jonathan joined me to talk more about Shein. The Chinese company has been around since 2008 and doesn’t even sell its products in China. Jonathan says one of the factors behind its global success is that it goes where the young people are.

Jonathan Eley
The brand that they’re all using right now is TikTok, and Shein piggybacks on the rise of TikTok very, very effectively. The other thing that it’s got is that it’s really, really cheap. If you are a young person, you know, with no earnings, perhaps if you’re still living at home or a student or relatively low earnings and huge chunks of your outgoings going on rent and bills, cheap is good.

Marc Filippino
So is social media the main reason that Shein is so far ahead of Zara and Boohoo or are there other reasons too?

Jonathan Eley
Well, the other thing is quite on trend. So one of the one of the sort of defining characteristics, if you like, of fast fashion is that it copies catwalk styles and things being worn by celebrities and influencers and puts them in front of consumers at modest prices very, very quickly. And the company that started that process is arguably Zara, the Spanish headquartered fashion retailer. And typically, their their probably the quickest products in their stable gets to market in about three weeks. And then along comes someone like Boohoo in the UK, and they’ve got that by having manufacturing very close to their market. They’ve got that down to about two weeks for certain styles, only a small proportion of their overall offering. Shein has managed to get it down to about a week in some cases, and it creates many thousands of styles every day, every week, new styles land on its website. So it is very, very quick and very responsive. And basically it gets sort of catwalk styles in front of young consumers noses quicker than anybody else.

Marc Filippino
So Jonathan, the big concerns about fast fashion in general are that it creates a throwaway culture of mass buying and mass tossing, and it just adds to landfills and it’s, this emissions producing environmental nightmare. But Shein has come under some specific criticisms as well, one being copyright violation, basically clothes that are inspired by other fashion that crosses into the line of copying.

Jonathan Eley
Yeah. So this if you automate this sort of process of scanning for new styles and new trends and putting those styles and trends into production, the sort of charitable explanation, I suppose, is that things will slip through the net and you will end up copying something that is not yours to copy. And there have been multiple, lots and lots of complaints about that. And the other thing is, I suppose, labour issues. There have been reports in China and elsewhere about subcontractors, particularly being paid very, very low wages and working in very difficult conditions. And lots of other brands like H&M have taken a stand against cotton from Xinjiang, it’s the biggest producing area in China of cotton, and they’ve said they won’t use it if they can avoid it. I don’t think Shein has made any such commitments. I think it’s probably quite relaxed about using cotton from that source.

Marc Filippino
But, you know, despite all the criticisms, Morgan Stanley is betting on Shein to undercut its competitors. Are competitors doing anything to stay competitive, maybe taking a page out of Shein’s book?

Jonathan Eley
It’s difficult to know how much disquiet this company is really causing. There is a school of thought that says it is a bit of a passing fad and it will crash and burn, and it enjoys some peculiar fiscal advantages through various loopholes that may well eventually be closed. I think most established fashion retailers will be watching it very carefully. A lot of them have tried to see how it can do its manufacturing so cheaply in a part of the world where manufacturing wages have risen quite rapidly in recent years. And I think they’ll be looking again at their own production and how they can optimise their supply chains better. But of course, all of that will require investment and investment costs money in an industry where margins are already quite thin.

Marc Filippino
Jonathan Eley is the FT’s retail correspondent. Thanks, Jonathan.

Jonathan Eley
No problem, thank you.

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Marc Filippino
Before we go, executive pay has been on the rise all over the world, but the US is in a league of its own. American CEOs earned about twice as much as their European counterparts, according to one analysis, and almost eight times that of Japanese CEOs. During the pandemic, the gap between US CEOs and their workers grew even bigger. Take the head of movie chain AMC, Adam Aron made nearly $21m last year, more than double the previous year. As for his employees, who are furloughed nearly half the year, the median pay was about five and a half thousand dollars.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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