Fast fashion giants Shein and Forever 21 join forces in groundbreaking deal

Two fast-fashion giants, Shein and Forever 21, have formed a strategic partnership.

On Thursday, these retailers announced an agreement that unites two brands renowned for their trendy clothing and accessories at affordable prices, attracting a loyal following of young shoppers.

Under this joint venture, Shein will acquire approximately one-third of Sparc Group, the operator of Forever 21. In return, Sparc will hold a minority stake in Shein. The financial terms of the deal were not disclosed.

This partnership comes as Shein aims to address recent criticism and prepares for a highly anticipated initial public offering (IPO) in the United States. Shein has faced allegations of various wrongdoings, including violating U.S. import tariff laws, contributing to waste accumulate in landfills with its inexpensive products, and relying on underpaid or coerced labor. These accusations have attracted scrutiny from lawmakers and sparked backlash on social media platforms.

Shein vehemently denies all of these allegations.

Furthermore, the company seeks to distance itself from its Chinese origins by relocating its headquarters to Singapore. The close ties with China have become a source of concern for Shein, as regulators and legislators in the United States closely examine companies with significant connections or headquarters in China, such as the popular social media platform TikTok.

While Shein and Forever 21 share a similar target market, they have catered to their customers in different ways. Shein predominantly operates as an online retailer, while Forever 21 is recognized for its mall-based stores in the United States.

This partnership will provide both Shein and Forever 21 with new avenues to reach their customers. Shein will incorporate a selection of Forever 21’s dresses, shoes, and other merchandise into its offerings. Shein boasts a user base of 150 million individuals.

For Shein, this agreement will allow the company to establish a stronger presence in U.S. malls, which are frequented by current and potential customers. The company intends to experiment with novel approaches such as shop-in-shops and in-store returns, as stated in a press release.

Shein has already dipped its toes into brick-and-mortar retail, organizing temporary pop-up shops in cities like Dallas and Los Angeles, which have garnered substantial attention from eager customers and formed long queues.

Sparc, the company acquiring a stake in Shein, is a joint venture involving Authentic Brands Group, a prominent brand management company with a diverse portfolio that includes well-known retail names like Brooks Brothers, Lucky Brand, and Nine West, as well as Simon Property Group, the largest shopping mall owner in the United States.

The Wall Street Journal originally reported this agreement.

— CNBC’s Gabrielle Fonrouge contributed to this report.