Chinese online retailer Shein is selling to more shoppers in SA than H&M and teen fashion store LEGiT, but the government has contradicted claims it is investigating tax loopholes believed to favour the online giant.
A figure of almost 250,000 Shein shoppers is, according to data from the Marketing All Product Survey (MAPS), the figure which Mr Price referenced at a media results interview.
It is long been suspected that Shein, which is thought to have overtaken the value of fast-fashion retailers H&M and Zara globally, is growing in SA. It has high website traffic numbers and app downloads.
MAPS data now gives a clear indication that the retailer is a sizeable operation locally.
Between June 2022 and July 2023, MAPS fieldworkers asked 20,000 individuals, who make up a representative sample of SA consumers, if they had shopped recently and where they had bought clothing.
The survey indicated Mr Price is the clear fashion leader in SA, selling to almost 4.4-million shoppers, while Shein sells to 247,774.
Shein does not come close to having as many customers as Ackermans, Pep, Sportscene, Truworths, Jet and Woolworths, however. But it sells to almost the same number of shoppers as discounter Power Fashion and 30,000 fewer than ladies-wear retailer Foschini.
Shein posts goods directly to SA consumers and sells shoes, accessories, clothing and make-up at extremely low prices with as many as 2,500 styles on sale at a time.
TFG CEO Anthony Thunström said earlier this month in a results interview that Shein “has a become a global phenomenon. And it’s already probably bigger than most people think in SA.”
There are concerns it is not competing fairly because consumers may be paying lower taxes on small parcels of Shein goods than retailers who import larger quantities of Chinese clothing and pay as much as 60% in taxes and duties.
Apparel retailers, through the National Clothing Retail Federation, an industry body, laid a complaint at the department of trade, industry & competition (DTIC) earlier this year about Shein.
However, the government on Friday contradicted itself on whether there was an investigation into Shein.
DTIC minister Ebrahim Patel said in a July media briefing that consumers and Shein were benefiting unfairly from a loophole.
“In SA, on the understanding that clothing production is very labour-intensive, [and is] one way of creating jobs, we have a trade policy that supports local production.”
The policy enforces import duties on foreign clothing to protect local manufacturing jobs, he said on July 3.
He said consumers who had travelled abroad or imported “modest quantities of clothing”, such as a wedding dress, paid lower tariffs than retailers importing large quantities. But these lower tariffs were now being used by Shein in “ways that were not intended”.
“Shein is an industrial-scale operation, bringing in huge quantities of clothing, but packaged in small amounts.”
Patel said that “the DTIC was looking at the impact of these practices on competition in SA and would make recommendations”.
However, department spokesperson Bongani Lukhele on Friday said there was no such investigation by the department. Instead, the SA Revenue Service (Sars) was looking at whether customs duties on all imported parcels were correctly applied.
Sars declined to answer questions about whether it was conducting an investigation and told Business Day that all imported goods and parcels already pay duties.
It said in response to a question about an investigation that “all importers of goods are bound to comply with the provisions of the Customs and Excise Act and pay the applicable duties on imported goods”.
“Duties levied on imported goods are usually calculated as a percentage of the value of the goods set in the schedules in the act,” Sars said.
Investment analysts said Shein posed a risk to local retailers who employ many staff in stores and factories.
Sasfin analyst Alec Abraham said “any ‘new’ competitor looking for a slice of the consumer pie is a problem considering that SA consumer wealth has been dwindling for some time”.
All Weather Capital analyst Chris Reddy said: “Shein is a clear threat to SA value apparel retailers”. However, he said the weaker rand and delays at ports may negatively affect Shein’s local competitiveness.
While Shein’s worth is not known, it is thought the e-commerce giant may list on a stock exchange in the US, which would allow investors to give it a value. It is believed to be valued at more than $60bn, according to website Quartz.
The company’s investors include large US venture capitalist funders Sequoia Capital and Tiger Global.
Shein has faced accusations of unfair working conditions, forced labour and copying other firms’ brands and designs.
In the US, it uses a loophole that allows individuals buying small parcels worth less than $800 to pay lower tax than companies.
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