Shein Deal to Re-Enter India Comes With Strict Licensing Rules

Chinese-founded online fast-fashion giant Shein won approvals to re-enter India only after agreeing to a stringent licensing deal with Mukesh Ambani’s Reliance Industries Ltd., according to people familiar with the matter.

The agreement, which comes three years after Shein was booted out of India, will require the retail arm of Reliance to fully own the domestic business, while Singapore-headquartered Shein will offer production support and training to over 25,000 small and mid-sized local suppliers so they can produce for Shein-branded products globally, the people said, asking not to be identified because the details are private.

Such a structure would allow Shein to tap into rising consumer demand in the world’s most populous country and take a cut from sales, the people said.

It would also allow Shein to increase the share of made-in-India goods sold on its platform, potentially adding some 500 billion rupees ($6.1 billion) of exports from the South Asian nation, should its manufacturers be able to handle one fourth of Shein’s global demand, the people added.

Representatives and spokespeople for Shein and Reliance declined to comment.

Banned Apps

Shein was among a slew of Chinese apps that India banned in 2020 following deadly clashes between the two countries’ soldiers along their disputed Himalayan border. Shein, which doesn’t sell any of its apparel in China, has since tried to distance itself from its home country, relocating its headquarters to Singapore in 2021.

All data generated by Shein’s app and from its operations in India will be stored in India and be inaccessible to the online retailer in compliance with strict requirements from the Indian government over data security concerns, the people said.

Since there is no equity involved, Shein will be paid a license fee from the Indian entity and payments will also only be made out of any profits that entity makes, they said.

The specific requirements show how New Delhi is intent upon keeping Shein at arm’s length while seeking to leverage its know-how to build up India’s own manufacturing prowess. Prime Minister Narendra Modi is bent on turning the South Asian nation into an alternative manufacturing hub amid growing global concern about over-reliance on China in supply chains. India has said it wants to more than double its annual exports to $2 trillion by the end of the decade.

Expanding its footprint in India is also part of an ongoing push by Shein to diversify its own manufacturing sources. The company has also moved to shore up local production in countries from Brazil to Turkey.

By Bloomberg News

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