Shein enters bricks-and-mortar retail in France, sparking backlash

(Reuters) -Online fast-fashion retailer Shein plans to open its first bricks-and-mortar shops in France in November under an agreement with department store owner Société des Grands Magasins, a move that sparked criticism from French retailers.

The stores in the BHV department store in central Paris and Galeries Lafayette department stores in five other French cities mark a new step for Shein, which has up to now only hosted temporary marketing-driven pop-ups around the world.

SGM president Frédéric Merlin said the launch would attract a younger clientele, adding that a customer might buy a Shein item and a designer handbag on the same day.

Galeries Lafayette, which sold the stores operated by SGM under its name through a franchise agreement, said it opposed the move, which would violate the franchise agreement, and plans to stop it from happening.

“Galeries Lafayette profoundly disagrees with this decision with regards to the positioning and practices of this ultra fast fashion brand that is in contradiction with its offer and values,” the group said in a statement.

RETAILERS CRITICISE DEPARTMENT STORE DEAL WITH SHEIN

Shein, which sells 12-euro dresses and 20-euro jeans, faces pressure from other retailers, politicians and regulators in France, where lawmakers have backed a draft law regulating fast fashion that would, if implemented, ban Shein from advertising.

"In front of the Paris City Hall, they are creating the new Shein megastore, which – after destroying dozens of French brands – aims to flood our market even more massively with disposable products," Yann Rivoallan, head of fashion retail association Fédération Francaise du Pret-a-Porter, said in a statement.

French retailers were already struggling to compete with Zara and H&M when Shein launched, drawing cost-conscious consumers in with its discounts.

Several French fast-fashion retailers such as Jennyfer and NafNaf went into insolvency proceedings earlier this year.

SHEIN'S BRICKS-AND-MORTAR LAUNCH BRINGS CHALLENGES

Shein sells clothes and accessories at rock-bottom prices thanks to its business model of sending parcels direct from factories in China to shoppers around the world, benefiting from customs rules giving low-value e-commerce parcels an exemption from duties.

Shein executives have said its success is due to its online-only business model, meaning it has little unsold inventory, unlike bricks-and-mortar retailers.

Setting up physical stores is a big departure from that model, requiring the company to maintain inventory in stores, which will add to running costs.

It comes as Shein adapts to changes in its biggest market, the U.S., where its "de minimis" duty exemption for low-value parcels is ending. The European Union is planning to do the same.

Shein's first store, on the sixth floor of the BHV, will open in early November, with later openings planned in Galeries Lafayette department stores in Dijon, Grenoble, Reims, Limoges, and Angers.

Executive Chairman Donald Tang has said in interviews that Shein is especially popular in provincial and rural areas where he says customers have fewer options for fashionable clothes.

(Reporting by Inti Landauro, Helen Reid and Mimosa Spencer, Editing by Louise Heavens and Jane Merriman)