Shein's production shift cuts orders for Chinese suppliers

Suppliers in Guangzhou, China, are reporting a sharp decline in orders from Shein.

Factory owners attribute this to Shein’s strategy of shifting production to Vietnam to navigate US tariff challenges and the removal of the de minimis exemption for Chinese imports.

Some factory owners in Guangzhou’s Panyu District said their orders from Shein have dropped by as much as 50%.

Shein has denied moving supply chain capacity out of China, but it has encouraged larger suppliers to set up facilities in Vietnam with incentives like minimum orders and extended lead times.

Experts believe sourcing from Vietnam may help Shein reduce tariff costs for US-bound goods, but warn it could disrupt Shein’s efficient business model. The shift may lead to higher costs, longer turnaround times, and reduced consumer demand.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ The end of a de minimis era reshapes e-commerce economics

The elimination of the de minimis exemption marks a fundamental shift in cross-border e-commerce that extends far beyond Shein.

This loophole previously allowed packages valued under $800 to enter the U.S. duty-free, serving as a cornerstone of ultra-fast fashion’s business model and enabling direct-to-consumer shipping at rock-bottom prices 1.

With new tariffs as high as 145% on Chinese goods and the closure of this exemption, the economics of the entire fast fashion sector are fundamentally challenged, potentially raising apparel prices by 64% in the short term 2.

This change represents a significant trade policy shift for fashion and will disproportionately impact the 97% of U.S. clothing and shoes that are imported 2.

The disruption extends beyond price increases to threaten the entire just-in-time manufacturing approach that allowed Shein to introduce thousands of new styles with minimal inventory risk.

2️⃣ Vietnam shift reveals the complex economics of supply chain diversification

The reported incentives for Shein suppliers to establish factories in Vietnam highlight the challenging economics of supply chain diversification that many retailers now face.

Factory owner Li’s assessment that productivity drops dramatically—”Here we can finish 1,000 pieces of clothing in one day, there it takes a month”—reflects the reality that China’s manufacturing efficiency cannot be easily replicated elsewhere, despite lower tariff rates 3.