 |
| Close-up of an industrial sewing machine stitching bright red fabric, highlighted under a spotlight. |
Shein Scales Back Vietnam Operations as China Supply Base Strengthens
HANOI/GUANGZHOU — August 10, 2026
Shein is sharply reducing its operations in Vietnam after an effort to build the country into a major export base failed to deliver the expected benefits. The online fashion retailer has cut the space it uses at a large logistics facility near Ho Chi Minh City, while strengthening its supply-chain operations in southern China.
Shein began leasing about 15 hectares of warehouse space in Vietnam more than a year ago. The facility, which was designed to support exports and was large enough to employ thousands of workers, now covers about 6 hectares, according to people familiar with the company's operations.
Large-scale layoffs began in April, and further job cuts are expected, workers said. During a visit to the facility in late July, only a small number of employees and trucks were visible, while warehouses operated by other companies nearby remained busy.
The change follows major shifts in US trade policy that weakened the original reasons for expanding Shein's manufacturing and logistics operations in Vietnam. The company had encouraged some of its largest Chinese suppliers to establish production facilities there as a way to reduce exposure to tariffs and other trade risks.
One major setback came when the United States ended a duty exemption for low-value shipments worth less than $800. The policy had been important to Shein's business model because it allowed small packages to enter the US without certain import duties.
The exemption for Chinese shipments ended first, followed by the broader removal of the benefit for shipments from other countries. Although Vietnamese clothing can still face lower US duties than some Chinese products, the difference has become smaller.
New US tariffs on goods from both China and Vietnam have also reduced some of the incentive for Shein suppliers to move production. A 12.5% US tariff introduced last month on goods linked to concerns over forced labour further weakened Vietnam's appeal compared with some other Southeast Asian manufacturing locations.
Trade policy is not the only reason Shein's Vietnam strategy has struggled. People familiar with the company's suppliers said some manufacturers found it difficult to recruit Vietnamese workers willing to work the long hours required by Shein's fast production model.
Shein relies on a large network of Chinese factories that can produce very small batches of clothing quickly and repeat orders within days when particular products sell well. Some suppliers say this combination of speed, flexibility and low production costs remains difficult to reproduce elsewhere.
A number of manufacturers that moved some operations to Vietnam have since returned to China. One Guangzhou factory manager said lower Vietnamese tariffs were not enough to offset what he described as lower production efficiency.
The Guangzhou area, where thousands of small garment factories form a major part of Shein's supply network, also remains important to the company. Local authorities had expressed concern about production moving away from the region and warned against a major shift in orders, according to a person familiar with the matter.
Shein is now putting more money into its Chinese supply chain. Chief Executive Sky Xu pledged more than 10 billion yuan, or about $1.5 billion, for a technology-focused supply-chain system in Guangdong, reinforcing the company's commitment to its manufacturing base in southern China.
The stronger focus on China comes as Shein prepares for a potential listing in Hong Kong. The company previously considered listings in New York and London and moved its headquarters to Singapore as it expanded internationally.
But Shein's renewed focus on Chinese production does not mean all of its suppliers are equally confident about its future. Some factories say orders have remained flat or grown only slightly as demand weakens in key markets.
Shein's draft prospectus showed that US revenue fell 14% in the first quarter, following the end of the low-value shipment exemption. The European Union has also introduced a €3 charge on low-value e-commerce imports, adding another potential cost for online retailers.
Some smaller Shein suppliers are responding by seeking other customers and selling through platforms such as Temu and Amazon. Others are moving toward larger orders from traditional customers, which can provide longer production schedules and more predictable demand.
The developments show the limits of Shein's attempt to diversify its manufacturing base away from China. For now, the company's speed-focused business model continues to rely heavily on the dense network of factories and suppliers that has helped it build a global fast-fashion business.
