Investing.com-- Fast fashion giant Shein is urging some of its top Chinese suppliers to establish new production facilities in Vietnam, offering incentives such as higher procurement prices, Bloomberg reported on Monday, citing people familiar with the matter.
The move is part of Shein’s efforts to mitigate the impact of new U.S. tariffs on Chinese goods, including the removal of a longstanding duty-free exemption for low-value packages, the report stated.
This change threatens the core business model of companies like Shein and Temu, which rely on the so-called "de minimis" rule to ship goods directly from China to American consumers, Bloomberg reported.
Temu is an online marketplace operated by the Chinese e-commerce company PDD Holdings (NASDAQ:PDD). Shein is a fast fashion company that buys clothes from factories to sell.
To encourage suppliers to shift production, Shein is offering temporary financial sweeteners, including higher procurement prices of up to 30%, guaranteed orders, as well as logistical support such as transporting fabric from China to Vietnam, according to the report.
However, these incentives will only last for the initial months of the transition, Bloomberg reported.
A Shein spokesperson denied any plans to expand production capacity in Vietnam, the report stated.