Shein Turns to Western Executives to Become Even More Global

The China-founded retailer, which has become increasingly entangled in Beijing-Washington friction, has started making some of its products outside China and forged partnerships with Western brands. Now it is globalizing its leadership ranks as it looks to establish itself in its biggest markets, especially the U.S.

Recently, Shein tapped Frances Townsend, a former Activision Blizzard executive who also worked in former President George W. Bush’s White House and the Justice Department, for a six-month consulting contract as a senior adviser. If she comes on board when that ends, as is being discussed, Townsend would be one of the most senior additions to Shein’s leadership lineup and the rare executive with experience in the political corridors of Washington.

Since its 2012 founding, Shein has become one of the world’s biggest fashion brands with its $2 T-shirts and $7 pants. This year, the company has also started operating marketplaces in the U.S., Mexico, Brazil and Europe that allow third-party merchants to sell a variety of merchandise.

Through that process, Shein’s Chinese co-founders have kept a low profile, rarely engaging with the press. But starting in 2022, Shein embarked on a campaign to improve its public and government relations. Since then it has often had recently onboarded Western executives address public and regulatory concerns in the international media.

It has appointed Marcelo Claure, a former SoftBank executive, to oversee global growth initiatives. Other new hires have expertise in areas where China-bred executives may lag, such as U.S. legal and cybersecurity matters, as well as Western standards of social responsibility and corporate governance.

Townsend, a former White House adviser on terrorism and homeland security to Bush in the 2000s, held several top positions at Activision Blizzard, including chief compliance officer. Before Activision, she was an executive for the New York-based investment firm MacAndrews & Forbes for 10 years.

Beyond adding global expertise that could help Shein tackle compliance and image challenges, the effort to bring on board more diverse leadership could also help boost investors’ confidence ahead of a potential U.S. stock listing.

In its latest fundraising round in May, Shein raised $2 billion but also trimmed its valuation by about a third compared with a year earlier, to $66 billion. In a letter sent to investors this week, Shein said the company delivered record revenue and income for the first three quarters of 2023.

Shein’s small-batch, on-demand manufacturing model has contributed to its explosive growth, but has also raised eyebrows of U.S. lawmakers and attorneys general, who have pressed Shein to be more transparent about its supply chain. Critics have also slammed Shein for its environmental footprint and accused it of copyright infringement.

Reports have alleged that some of Shein’s products contain cotton from China’s Xinjiang region, which would make them subject to a U.S. import ban. Shein has said it has a “zero-tolerance policy” for forced labor and has installed a “robust system” to comply with U.S. law. The company told The Wall Street Journal in August it doesn’t source any cotton from China and has no manufacturers in Xinjiang. Since 2022, Shein has spent more than $1 million on lobbying as it undergoes probes into its supply chain.

Townsend is well aware of the regulatory and compliance issues Shein faces in the U.S. and says she is confident she can help the company with corporate governance, environmental compliance, data security and legal issues as it matures.

“They are very focused on ensuring that they comply with U.S. laws and they want to comply with U.S. expectations,” Townsend said. “They don’t want to fall short, and they don’t want to be perceived as trying or attempting to not meet U.S. standards.”

Shein hired experienced sustainability executive Adam Whinston as its first head of environmental, social and corporate governance in 2021. The same year, it tapped Peter Pernot-Day, who has extensive background in legal and data-privacy matters in the U.S. He is now head of strategic communications for the U.S. and U.K. Shein also recruited Leon Li, a former senior executive at Comcast’s cybersecurity division who now heads Shein’s global security and risk management.

Also in 2021, Shein completed a move of its headquarters to Singapore from Nanjing. Since then, the company has taken steps to be more forthcoming about its business practices and corporate responsibilities.

Pernot-Day said in a recent interview with the Journal that Shein uses algorithms to not only predict consumer demand but also spot potential copyright infringement.

The company on Monday announced its acquisition of the British women’s fashion brand Missguided from Frasers Group. In August, Shein acquired about one-third of Forever 21’s operator, Sparc Group, which will allow the online-only retailer to sell in Forever 21’s bricks-and-mortar stores.

Shein, which ships most of its products to customers in more than 150 countries from China, is diversifying its supply chain outside China. It has started manufacturing in Turkey and Brazil and formed a partnership with a major Indian retailer.

This summer, Townsend flew to Shein’s manufacturing base in Guangzhou to meet the top executives and “walk the supply chain” herself. She said she was impressed by Shein’s technological capabilities, though she said “there’s lots of work to be done.” She said she also shared the energy and enthusiasm of Shein’s senior leadership.

A senior Shein executive said Townsend is being considered for a global leadership role.

After coming back from China, Townsend decided to consult with Shein before coming on board full-time, wanting to make sure that she could get things done.

“For me, it’s all about ‘Can I be effective in this environment and are we a good fit on both sides?’ ” she said. “I give them credit. They want to hear other perspectives.”

Write to Shen Lu at shen.lu@wsj.com

This post was originally published on this site