Shein strikes deal with Forever 21 in fast fashion business

A Shein App is shown in the iOS App Store in Bargteheide, Germany, May 3, 2021.

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Fast-fashion competitors Shein and Forever 21 have joined forces.

On Thursday, the retailers announced a deal that will bring together two brands that have a strong following of young shoppers and a reputation for trendy clothing and accessories at a low price.

As part of the joint venture, Shein will acquire about a third of Forever 21’s operator, Sparc Group. Sparc will also take a minority stake in Shein.

Financial details were not disclosed.

Shein’s deal with Forever 21 comes as it tries to distance itself from sharp criticism and gear up for a widely rumored U.S. initial public offering. Among the backlash, the online retailer has faced allegations of violating U.S. import tariff law, filling up landfills with its super cheap items and relying on underpaid or forced labor. Those charges have prompted scrutiny by lawmakers and blowback on social media.

Shein has denied those allegations.

The company has also tried to distance itself from China, the country where it was founded. Its headquarters are now in Singapore. The ties with China have become a risk for the company, as U.S. regulators and lawmakers scrutinize companies with close connections or headquarters in China, such as social media app TikTok.

While Shein and Forever 21 have similar shoppers, they have catered to those customers in different ways. Shein sells its merchandise online. U.S.-based Forever 21 is mostly known for its mall stores.

By teaming up, Shein and Forever 21 will have new ways to reach customers. Some of Forever 21’s dresses, shoes and other merchandise will be available through Shein. The online retailer has 150 million users, Shein said.

For Shein, the deal will give the company a larger presence in U.S. malls, where its current customers and potential new customers shop. The company plans to test new approaches, such as shop-in-shops and allowing customers to make returns in stores, according to a news release.

Shein has already dipped its toe into brick-and-mortar retail. The company has had limited-time pop-up shops in cities like Dallas and Los Angeles, which have drawn eager customers and long lines.

Sparc, the company taking a stake in Shein, is a joint venture that includes Authentic Brands Group, a brand management company with a portfolio of well-known retail names like Brooks Brothers, Lucky Brand and Nine West; and Simon Property Group, the biggest shopping mall owner in the country.

The agreement was first reported by The Wall Street Journal.

— CNBC’s Gabrielle Fonrouge contributed to this report.

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