PYMNTS MonitorEdge May 2024

Shein’s Technology Plans Face Concerns About Supply Chain Security

Shein

Fast fashion retailer Shein plans to expand its offerings by selling supply chain technology worldwide, but reportedly faces concerns about potential cybersecurity risks and Chinese government involvement.

With its close ties to China, Shein faces scrutiny from cybersecurity firms and national security experts who fear that sensitive logistics and customer information could be compromised, CNBC reported Monday (July 8).

Shein’s logistics software is currently in beta testing with select supply chain customers, according to the report.

“We try to limit our data collection to the minimum amount of information necessary to process commercial transactions,” Shein said in the report. “We have built systems in accordance with leading data protection frameworks such as the International Standards Organization’s standard 27001 and 27701.”

The U.S. supply chain has millions of connection points, and the integration of application programming interfaces (APIs) without proper cybersecurity measures poses a significant risk, per the report. Cybersecurity experts warn that compromised integrations can expose customer data and compromise connected systems.

The complexity of Shein’s supply chain, with thousands of suppliers and partners, further amplifies the potential vulnerabilities, according to the report. Shein’s extensive supply chain network includes more than 10,000 companies one tier away from the retailer and more than 50,000 entities when drilling down deeper.

This interconnectedness raises concerns about data access and potential espionage, the report said. Experts argue that Shein’s software could provide the Chinese government with unprecedented access to sensitive supply chain data, endangering U.S. supply chain integrity and exposing it to exploitation and manipulation.

To distance itself from Chinese affiliations, Shein moved its corporate headquarters from China to Singapore in 2022. However, critics view this as a practice known as “Singapore washing” and question the effectiveness of such a move in reducing regulatory scrutiny, per the report. Chinese law requires companies’ cooperation in providing sensitive information related to U.S. citizens to the Chinese government.

Political pressure and other challenges in the U.S. reportedly led Shein to consider London as an alternative site for it to go public, even though the company confidentially filed for an initial public offering (IPO) in the U.S. in November 2023.

The retailer has also reportedly been rebuffed in its repeated attempts to become a member of the National Retail Federation (NRF), a move that would aid in its “charm offensive” as it tries to convince lawmakers it could become a public company in the U.S.

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