Online fashion giant Shein is exploring plans to build a factory in Mexico as one of its manufacturing hubs outside China, sources familiar with the matter told Reuters, as the company faces increased scrutiny from U.S. lawmakers and looks to expand its Latin America footprint.
The factory, which will make Shein products and is part of the retailer's push to localize production, could shorten shipping time and cut distribution costs for customers in Latin America. In April, Shein said it would build a manufacturing network in Brazil to serve as a global customer base.
Shein was founded in China and manufactures most of its products there, but is seeking to diversify. The company sells $10 dresses and $5 tops and has taken market share from other affordable fashion retailers. Now based in Singapore, Shein competes with PDD Holdings' (PDD.O) Temu, which sells low-priced items ranging from clothing to electronics from China in the U.S.
A final location for the Mexico site has not been decided, said the sources, who requested anonymity as the discussions are private.
Shein will use funds from its recent capital raise of $2 billion from investors including Mubadala (MUDEV.UL) and Sequoia China for the expansion, as it eyes a U.S. initial public offering. Despite a valuation cut to $66 billion in its latest funding round, the retailer still posts annual revenue growth of 40%, one of the sources added.
Shein declined to comment on the expansion, but said it is committed to localization as it adds new markets.
"SHEIN's localization strategy allows us to shorten delivery times to customers while expanding product variety and supporting local economies," Marcelo Claure, chairman of SHEIN Latin America, said in an emailed statement.
Shein is "continuing to explore nearshoring options," he added, referring to manufacturing closer to the point of sale.
The upcoming Mexico factory will not house items from third-party vendors, sources said. Claure confirmed that Shein is considering bringing its "marketplace model to other markets across Latin America."