Shein, the discount retailer, has reported a slowdown in its U.S. and European sales, attributing this decline to the need to raise prices in response to new tariffs. Since May 2025, the company has increased prices to offset additional tariff costs, resulting in a more than 3% revenue decline in the U.S. and a 14% drop in sales during the first quarter compared to the previous year.
In Europe, where new flat-rate fees have been implemented, Shein anticipates a similar negative impact on sales volume. Angela Lee, a professor at Columbia Business School, emphasized that the removal of regulatory advantages poses a fundamental risk to Shein's business model, which has relied heavily on low prices.
The company's profitability has also suffered, with a 39% decline reported between 2024 and 2025, and a loss of $99 million in the first quarter of 2026. Despite these challenges, Shein is attempting to pivot its business model by expanding its third-party marketplace and brand enablement services, which have shown promising growth.
Deborah Weinswig, CEO of Coresight Research, noted that if Shein can successfully grow this segment, it may find new opportunities for profitability. However, the overall outlook remains uncertain as the company's competitive advantage in pricing diminishes