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PESTLE Analysis of Shein – All 6 Factors Analyzed
A PESTLE analysis is a framework for evaluating the external factors that can affect a business. These factors can include political, economic, social, technological, legal, and environmental factors.
By conducting a PESTLE analysis, companies can gain a deeper understanding of the external forces that may impact their operations and can use this information to make more informed decisions.
In the case of Shein, a fast-fashion e-commerce retailer, there are several key factors that are likely to have an impact on the company’s performance.
For example, Shein operates in a highly competitive and rapidly changing retail market, where trends and consumer preferences can shift quickly.
As a result, the company must stay attuned to changes in the economic, social, and technological environment in order to stay ahead of the competition.
Shein faces a number of legal and regulatory challenges, particularly in relation to issues such as intellectual property and labor rights.
In order to succeed, the company will need to navigate these challenges carefully and take a strategic approach to managing risks.
In this post, we will conduct a PESTLE analysis of Shein and work out the hidden forces that drive its business operations.
Political Factors Affecting Shein
Following are some political factors that may be considered in a PESTLE analysis:
- Trade Agreements: Shein has a broad customer base, and the company relies heavily on importing and exporting goods to different countries to meet the demands of its customers. Given the current climate of trade agreements, Shein’s operations could be affected. Governments around the world are re-evaluating their trade policies, and this could lead to increased tariffs, restrictions, and taxes affecting Shein’s supply chain network. This could lead to higher costs for the consumer, which could eventually affect Shein’s profits.
- Labor Laws: Shein has also been criticized for their labor practices in various factories overseas. Allegations of forced labor, long working hours, low wages, and unsafe working conditions have become a major concern for many governments. Therefore, they have become more vigilant and have started monitoring Shein’s compliance with labor laws more closely. If Shein cannot meet the labor standards set by different countries, this could result in hefty fines and lawsuits.
- Environmental Policies: The fashion industry is often criticized for its contribution to environmental damage, such as water pollution, waste generation, and the emission of greenhouse gases. Many governments have become mindful of this and are implementing strict environmental regulations and policies. The fashion industry has been put on notice to ensure that they reduce their carbon footprint by implementing sustainable practices.
- Social Media Regulation: Shein’s marketing strategy heavily relies on influencer marketing as well as promoting its brand on social media platforms. However, in recent years, many governments are implementing stringent regulations regarding social media marketing, including influencer marketing, that may affect Shein’s ability to pitch products to their target audience. With the increased scrutiny of social media advertising, Shein will have to comply with different regulations to uphold ethical marketing practices.
- Political Stability: The last factor affecting Shein’s operations is political stability. Shein operates in some of the world’s most politically unstable regions, including Hong Kong, Russia, and Turkey. The political environment in these regions can be unpredictable, and this can cause supply chain disruptions, shipping delays, and safety concerns. Political instability can lead to increased expenses, reduced profits, and credibility loss if Shein is unable to address the concerns of customers in these regions.
Economic Factors Affecting Shein
In the case of Shein, some of the key economic factors to consider include:
- Exchange Rates: As a global fashion e-commerce company, SHEIN needs to deal with different currencies and exchange rates. Changes in exchange rates can significantly affect the company’s profits and revenues. For instance, if the US dollar strengthens against other currencies, including the Chinese yuan, where SHEIN sources its products, the company’s costs will rise, and this may impact product pricing and sales.
- Inflation: Inflation refers to the rate at which prices for goods and services rise. Inflation can influence consumer behavior, as well as the pricing of products. If the inflation rate is high, SHEIN may have to raise its prices to maintain profitability, which can potentially reduce consumer demand for its products.
- Manufacturing Costs: SHEIN relies heavily on contract manufacturing to produce its products and bring them to market. Labor costs and materials prices are major components of manufacturing costs. If there’s a significant change in these prices, SHEIN may have to pay more for its products, which would increase its cost of goods sold. In turn, this could reduce profit margins or lead to higher prices for consumers.
- Tax Policies: Tax policies can significantly impact SHEIN’s profit margins. A change in the tax code could increase the company’s tax burden, leading to lower profits. Furthermore, different tax systems across countries and regions where SHEIN operates could impact the company’s decision-making process and potential market expansions.
- Trade Policies: SHEIN is an international company that relies on global trade to source raw materials and sell its products worldwide. Changes in global trade policies can significantly impact the company’s growth and profitability. For example, if the US imposes tariffs on imports from China, where SHEIN sources many of its products, the company may face higher costs and reduced profits.
Economic factors have a direct impact on the sales and profitability of the company and can affect the overall growth and expansion of Shein’s business.
Social Factors Affecting Shein
The social factors of a PESTLE analysis for Shein would examine the impact of consumer behavior and cultural norms on the company’s operations.
- Diversity: As an online retailer catering to a wide range of fashion tastes, Shein has made a conscious effort to be inclusive and represent diverse communities. This includes providing sizes, styles, and colors for everyone, no matter their shape or size.
- Digitalization: In the age of digital shopping, Shein has been able to capitalize on this trend and use technology as its main platform for reaching out to customers. This has allowed it to reach a larger audience than ever before, as well as create a seamless online shopping experience.
- Fast Fashion: Shein’s “fast fashion” approach allows customers to purchase items quickly and easily, as they don’t need to wait for the traditional fashion cycle or follow seasonal trends. This means that consumers can keep up with the latest looks in much shorter timeframes.
- Sustainability: In recent years, Shein has made an effort to be more sustainable by using recycled materials and investing in eco-friendly manufacturing processes. This helps reduce their environmental impact while still providing customers with fashionable items at an affordable price
- Collaboration: Shein has worked with numerous high-profile influencers in the fashion industry, from celebrities to models and bloggers. This helps spread the brand’s message and reach a wider audience, while also helping to create unique styles that customers love.
Technology Factors Affecting Shein
Following are some technological factors that may be considered in a PESTLE analysis:
- Mobile Optimization: Mobile optimization is essential for any online store, SHEIN included. With almost all shoppers now using mobile devices to shop online, mobile-optimized websites are no longer a choice but a necessity. SHEIN gets this, which is why they have optimized their mobile site for an excellent user experience. This optimization is one of the significant factors that impact SHEIN’s tone of voice.
- Artificial Intelligence: AI is having a significant impact on the way we shop online, and SHEIN is no exception. From chatbots to personalized shopping experiences, AI is revolutionizing online shopping. SHEIN has integrated AI into its system, enabling the brand to personalize shopping experiences for shoppers by considering their search history and past purchases.
- Social Media: Social media is a crucial part of any brand’s marketing and communication strategy, and SHEIN has been leveraging social media platforms very effectively. Their presence on platforms like Facebook, Instagram, and Twitter is strategic and tailored to appeal to their target audience. Through social media, SHEIN has been cultivating a unique tone of voice that resonates with its followers and customers.
- Virtual Reality: Virtual Reality is transforming the online shopping experience by enabling shoppers to have a more immersive and interactive experience. SHEIN has been leveraging this technology by integrating it into its online shopping platform.
- Data Analytics: Data Analytics is critical to understanding consumer behavior and preferences. SHEIN has been leveraging this technology to collect data about its shoppers, enabling them to make better decisions about its product offerings and marketing efforts. This helps SHEIN make it more effective in communicating with its target audience.
Legal Factors Affecting Shein
Legal factors in a PESTLE analysis refer to the laws and regulations that can impact a company’s operations.
- Intellectual Property Rights: SHEIN has been accused of violating intellectual property rights by copying the designs of famous brands. In 2019, Dolce & Gabbana filed a lawsuit against SHEIN for copyright infringement, forcing SHEIN to remove the alleged infringing products. More recently, a vegan leather bag company filed a lawsuit against SHEIN for selling products that were similar to their brands. Therefore, before selling any product, SHEIN should ensure that it is not violating any intellectual property rights.
- Consumer Protection Laws: SHEIN’s customers are primarily teenagers and young adults who are not aware of their rights. Thus, SHEIN has faced accusations of violating consumer protection laws. In 2018, the Norwegian Consumer Council took legal action against SHEIN for misrepresenting the quality of its products. The council claimed that SHEIN used false product descriptions to lure customers, which is a violation of consumer protection laws. Therefore, SHEIN should ensure that its products are of the same quality as advertised.
- Advertising Laws: Advertising laws are in place to protect consumers from false advertising. SHEIN has also been accused of violating advertising laws by misleading its customers. In 2018, the Advertising Standards Authority (ASA) ordered SHEIN to remove an advertisement after they claimed that the product was on sale for a limited time, while in reality, it had not been priced higher before the sale. Thus, it is essential for SHEIN to ensure that their advertisements comply with the advertising laws of the relevant country.
- Shipping Regulations: SHEIN operates globally, and each country has its shipping regulations that SHEIN must follow. In 2019, Indian customs seized over 5000 products from SHEIN because they did not follow the country’s shipping regulations. This incident shows that SHEIN needs to be aware of the shipping regulations of any country where they want to sell their products.
- Labor Laws: SHEIN has also been criticized for violating labor laws. In 2018, an investigation revealed that some of SHEIN’s products were made in sweatshops in Los Angeles where workers were paid less than minimum wage and were subjected to terrible working conditions. SHEIN claimed that they have a strict supplier code of conduct. However, this incident highlights that SHEIN should improve its ethical and social practices, including ensuring that its suppliers comply with labor laws.
These are just a few examples of legal factors that Shein may need to consider, depending on the country or countries in which they operate.
Environmental Factors Affecting Shein
Following are some Environmental factors that may be considered in a PESTLE analysis:
- Water Pollution: The dyeing process used for fabrics requires a large amount of water and often results in polluted water being released into rivers and oceans. SHEIN can take steps to reduce this by adopting eco-friendly options such as organic cotton, recycled fabrics, and natural dyes. Additionally, making use of closed-loop systems in their manufacturing process can reduce the amount of water wasted.
- Chemical Pollution: Many of the chemicals used in the production of synthetic fabrics are toxic and harmful to the environment. SHEIN can cut down on chemical pollution by using organic cotton instead of synthetic fabrics, or by adopting options like biodegradable or recycled polyester.
- Waste Management: The fashion industry is responsible for a tremendous amount of waste. SHEIN can take a proactive approach to this problem by reusing and recycling materials whenever possible, or by eliminating unnecessary packaging materials. They could also establish a take-back or buy-back program to encourage customers to dispose of their unwanted items responsibly.
- Carbon Emissions: The supply chain of the fashion industry, from production to delivery, generates CO2 emissions at every stage. SHEIN can reduce their carbon footprint by making use of green energy sources, using sustainable transport modes, or by opting for local production. They could also offset their carbon emissions by investing in reforestation.
- Exploitation of Workers: In addition to environmental concerns, SHEIN has also been criticized for unethical labor practices. They can address this issue by ensuring that their factories provide fair wages and working conditions to their employees. They could also adopt certifications such as Fair Trade or GOTS as a proof of their commitment towards transparency and ethical practices.
⇒ Also, read the SWOT analysis of Shein for a better understanding of external & internal factors.
In conclusion, Shein has succeeded in an incredibly competitive market, thanks to its brilliant business strategies, low-cost operations, and appeal to fast fashion enthusiasts.
But, as we have seen, it is not without its share of challenges and controversies.
Therefore, in a dynamic business environment, conducting a PESTLE analysis is important to stay on top of the game and remain in tune with the external factors that influence a business. By understanding these factors, companies can adapt their operations and navigate the challenges proactively.
Hope you find our well-researched PESTLE Analysis of Shein very helpful.