Chinese fast-fashion platform Shein to open pop-up store in South Africa

Singapore-headquartered Chinese online discount retailer Shein is set to open its first physical pop-up store in South Africa. The outlet, located in the Mall of Africa in Johannesburg, will showcase over 1,000 garments from the brand's summer and winter collections, as well as the Shein X range from local designer Ishaarah Abrahams.

Customers will have the opportunity to interact with and try on the displayed items in designated changing rooms. However, purchases must be made through the Shein app by scanning the QR codes on the garments, as no direct sales will occur in the store.

Shein, which has been available in South Africa since 2020, and rival Chinese discount platform Temu, which entered the market in January, have achieved significant success in the country. According to the Marketing Research Foundation, Shein holds a 35% market share in online women’s clothing purchases, making it the country's top retailer in this category, with another survey estimating 250,000 Shein users. Temu, meanwhile, is the most downloaded app among Android users in South Africa.

The rise of Shein and Temu has, however, hurt the bottom line of traditional retailers in South Africa who struggle to compete with these platforms on prices. They have been accused of exploiting tax loopholes by shipping China-made products in small quantities to evade higher duties. Previously, e-commerce platforms enjoyed a flat 20% duty and no value-added tax (VAT) for items under ZAR500 (US$27) - a policy initially designed for the courier industry. In contrast, local clothing retailers, which order in bulk, faced a 45% tariff and a 15% VAT rate. However, recent tax reforms are likely to provide some relief. South Africa has now decided to impose a 45% tariff and a 15% VAT on imported clothing orders under ZAR500, aligning the tax burden with that of local retailers.

While online retail remains relatively small in South Africa, the industry is experiencing rapid growth. In 2023, online retail grew by 29% from the previous year, accounting for 6.15% of total retail sales with a turnover of ZAR 71bn (US$3.9bn). By 2026, the industry is expected to surpass the ZAR100bn (US$5.5bn) mark. Despite this growth, physical retail still dominates in South Africa. H&M's South Africa country manager, Caroline Nelson, says the group, which operates 28 stores across the country, is heavily investing in upgrading its existing brick-and-mortar stores while gradually expanding its footprint. She emphasised that malls provide a safe environment for shoppers to bring their families, making them as important as online retail. This prevalence of brick-and-mortar retail likely contributed to Shein’s decision to open a pop-up store.

 

References

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‘SA e-tailers furious as rivals Shein, Temu ‘eat their lunch’’, ITWeb, 26 April 2024

‘SA’s online shopping catapults to R71bn turnover’, ITWeb, 08 May 2024

‘Chinese e-commerce companies popular in South Africa’, VOA, 16 July 2024  

‘Shein, Temu and others: SA has now lost R3.5 billion in tax, says Kieswetter’, News24, 17 July 2024

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