Shein has emerged as one of the great phenomena of fashion retail in Brazil — reaching in a short time a GMV of BRL 8 billion, with a market share 5% of fashion retail and 27% of online sales in the sector.
Now, however, one of the main competitive advantages of Chinese e-commerce is under attack.
Responding to pressure from the sector, the Government has been talking about increasing the taxation of imports of small values, and, according to Itaú BBA, the inspection of these remittances already seems to have increased in recent months.
According to a report published today by the bank, imports of these products are slowing down sharply. In January and February, the high is still 14% and 11%, respectively – but much less than the 91% and 103% highs in January and February 2022.
Last year, imports of these products rose 131%; in 2021, more than 60%.
“This could mean that regulators are already moving towards stricter oversight of activity. cross-border in Brazil,” wrote analyst Thiago Macruz. “We do not rule out the possibility of implementing even stricter tax collection measures in the short term, which could affect the operations of these players.”
The analyst notes reports from Shein consumers on the internet, who say they have recently started to be charged an additional import fee when their products arrive in Brazil.
“On purchases of up to US$500, the import tax rate is approximately 60%, so any additional government taxation would take away Shein’s advantage in offering low prices.”
For Itaú, given that the Government has not yet announced any formal proposal to increase taxes on international players, “we believe that regulators have already adopted stricter supervision of international activity in Brazil.”
According to the bank, Brazilian fashion retailers should benefit from this scenario, especially Lojas Renner.
“For those with a 12-month investment horizon, we see a very attractive risk-return at Renner, with the company trading at 11.5x the estimated profit for this year.”
Renner shares are trading at R$15.15, their lowest price since December 2016, with the company worth R$14.6 billion.