Polyester Giant Reliance Sets Stage for Shein's Backdoor Return to India

Shein had left India almost three years ago in a huff. In June 2020, the Indian government had banned 59 Chinese apps in a retaliatory move over the border skirmish between Indian and Chinese troops in the Ladakh region. At that time, Shein was immensely popular among both working women and college-going young women for the chic designs and the attractive price points.

As it returns to India, a lot has changed. On the Shein front, it is no longer perceived as a Chinese company, now headquartered in Singapore as it happens. The growth of Reliance Retail in the meantime has been phenomenal, and the company is one of the focus areas of RIL. At RIL’s annual general meeting in the last week of August last year, Chairman and Managing Director Mukesh Ambani had put daughter Isha Ambani at the helm of affairs at RRVL. In the preceding year, Reliance Retail had added over 2,500 stores and generated employment for more than 150,000.

The numbers, as they stand, are staggering. The company's revenues for FY2021 were $26.3 billion. Today, it owns 15,196 retail stores spread over an area of 41.6 million sq ft. Reliance Retail is present in over 7,000 cities and towns, and serves over 5 million customers every week. It runs over 500 distribution centres, and owns about 12 million sq ft of warehousing space.

It is on this tailor-made turf that Shein will be operating on. As part of the agreement, Shein would be using Reliance Retail's sourcing capabilities, and warehousing and logistics infrastructure along with the latter's huge portfolio of online and offline stores. Shein, for its part, is expected to bring its brand appeal and technology to the table. It’s what they love to call a win-win partnership.

When the COVID-19 pandemic hit India, Shein was on a roll at over 20,000 order shipments a day, and the sky seemed to be the limit. Then—Ladakh happened.

India took its ire out on Chinese apps, calling them a "threat to sovereignty and integrity.”  The government contended that these apps posed potential risks in terms of data collection, storage, and potential misuse. PUBG, Tiktok, Shen and others were shown the exit. Since then, India has banned over 270 Chinese apps for being "prejudicial" to India's sovereignty, integrity and national security.

For a brief period, Shein apparel could be accessed over amazon.in, but even that stopped soon. What reports indicated was that only Shein’s app had been banned, and the company was free to sell its products otherwise in the country. But a Shein on an Amazon made no sense. Shein disappeared from the Indian landscape, leaving a huge fanbase yearning for more. Or at least, some. 

But, the 2020 crackdown was not the first occasion when Shein had found itself at the receiving end of the Indian government’s stick. Exactly a year earlier, Shein had gone temporarily offline after Customs officials seized about 500 parcels from the premises of Sino India Etail, Shein’s Indian seller, and sealed a company warehouse. The allegation was that the Indian wing was undervaluing and wrongly declaring goods. Another Chinese brand Club Factory was also targetted.

Given this backdrop, India’s retail and ecomm sectors are abuzz with what’s going to be the impact of the Reliance-Shein combine on the overall landscape, and also how it is eventually going to play out.

The Mint newspaper, quoting government officials, reported that Shein would not require foreign direct investment (FDI) approval since it will not hold equity in the new operations, which would be controlled by a wholly-owned subsidiary of Reliance Retail.

“Ownership and control of the platform will remain with the RRVL subsidiary, a 100% Indian firm. The agreement says that an Indian app which will be built by RRVL will have a wall between the domestic and global app. If in the future, investment comes from Shein India, Press Note 3 would be applicable," the official told the newspaper. “RRVL has only bought the licence and the platform. The agreement between the companies says that the profits will be shared when this subsidiary makes profit," he added. [Press Note 3 is an amendment to the FDI policy brought about in 2020 to prevent hostile takeovers of domestic firm by Chinese entities.]

Many conjectures are floating around. One is that Shein—which sources over 90% of its wares from China—could ramp up its India intake to as much as 25%. Were that to happen, both small-time apparel manufacturers as well as independent designers in India could see an attractive channel opening up for them. This assumes significance in the face of dwindling apparel exports.

It is not clear where this initiative would be hosted, but speculation is rife that it could well be on the Ajio platform, the digital commerce subsidiary of Reliance Retail. Ajio already markets a bunch of international labels, and is a cousin of Reliance Jio—India’s biggest telecom player by a yard. Last August, Meta introduced WhatsApp grocery shopping to India through Reliance Retail and Jio.

In short, the stage is set. All that Shein now needs to do is re-launch.