The information that Shein will start manufacturing its clothes in Brazil, given by the chairman of the company in Latin America in an interview with the Brazil Journal, brought a mix of surprise and relief among investors, businessmen and entrepreneurs.
Surprise, because the announcement that in three years Shein will have 80% of the products sold coming from local manufacturing (while today 70% comes from China) shows an unexpected change of course, at a time when part of the Brazilian Government has been demonstrating against “unfair competition” from foreign companies in digital sales, accusing them of practices that circumvent product import rules.
Relief, because there seems to be a unanimous view that if Shein actually operates in the Brazilian economic environment in 80% of its business, it will hardly be able to maintain the advantages it has today, operating from China.
This seems obvious.
Will Shein be able to remain efficient buying items “made in Brazil”, proving that its local competitors are really no match for it? Or will the reality of the “Brazil cost” also impose itself on her, something that any local entrepreneur already knows the hard way, and which made many foreigners leave (see Walmart, Forever 21 and Fnac)?
Shein, get ready to deal with possible assessments and labor and tax litigation (state and federal), which generate costs and uncertainties for years without the Judiciary resolving them – and be aware, because sometimes it “resolves” by reversing decisions that have already had taken.
Shein, talk in advance with the Public Ministry and other official bodies and understand how to protect yourself from hiring local suppliers that do not practice labor laws, and learn how to structure your own audit team to assure the authorities that your entire supply chain is in compliance. compliance.
Shein, understand that the prices charged by your local competitors seem high compared to what you charge today operating from China, but that does not mean that their profits are too. And that the fact that you have grown so much in this country in recent years does not mean that the people here are weak, but that the environment for those who produce and live here is inhospitable. Find out about the logistical cost, cargo thefts, militias and informality, before putting down roots in the beloved homeland, gentle mother.
Shein, think carefully before deciding to come to Brazil. Perhaps it is better and more cost effective to simply produce in China and pay import duties here.
But if the decision has already been made, welcome. We all want to learn how you manage to succeed in the same environment where many good people fail to compete and thrive.
Wagner Salaverry is a founding partner of Quantitas Asset Management.
Wagner Salaverry