Local production to ownership: Strict rules of Shein's India re-entry deal

The agreement will require Reliance's retail arm to fully own the domestic business, people familiar with the matter said

Chinese-founded online fast-fashion giant Shein received permission to re-enter India only after agreeing to a strict licencing agreement with Mukesh Ambani's Reliance Industries Ltd (RIL), The Economic Times (ET) reported.

The agreement, which comes three years after Shein was booted out of India, will require Reliance's retail arm to fully own the domestic business, people familiar with the matter told ET.

Shein, which has its headquarters in Singapore, will provide production support and training to more than 25,000 small- and mid-sized local suppliers so they can produce Shein-branded products globally, they said.

Such a structure would allow Shein to capitalise on rising consumer demand in the world's most populous country while taking a cut of sales, they further said.

It would also allow Shein to increase the proportion of made-in-India goods sold on its platform, potentially adding Rs 50,000 crore ($6.1 billion) of South Asian exports if its manufacturers could handle one-fourth of Shein's global demand, they added.

Shein was one of a number of Chinese apps that India banned in 2020 as a result of deadly clashes between the militaries of the two nations along their disputed Himalayan border.

Shein, which doesn't sell any of its apparel in China, has since made an effort to distance itself from its home country by moving its headquarters to Singapore in 2021.

All data generated by Shein's app and from its operations in India will be stored in India and will be inaccessible to the online retailer in accordance with strict requirements from the Indian government regarding data security concerns, people familiar with the matter said.

The company will receive a licence fee from the Indian entity as there is no equity involved, and payments will only come from any profits that the entity makes, they added.