Discount retailer Shein disclosed in IPO documents that elimination of trade law exemptions has materially impacted its business performance, particularly in its largest markets. The company attributed a decline in U.S. revenue to tariff-related price increases implemented beginning in May 2025, with U.S. sales falling more than 3% between 2024 and 2025 and dropping 14% in the first quarter compared to the prior year.
Europe, which contributed 35% of Shein’s 2025 revenue, faces similar headwinds following the European Union’s recent termination of its de minimis exemption. The EU now imposes a flat-rate duty of 3 euros on packages, replacing the previous duty-free threshold for items valued under 150 euros. Shein indicated in regulatory filings that price increases in Europe could produce outcomes comparable to or exceeding the negative sales impact experienced in the U.S. market.
Shein’s overall profitability deteriorated significantly, with companywide profits declining 39% between 2024 and 2025. The company posted a loss of $99 million in the first quarter, compared to profit of $395 million in the year-ago period. Tariff rates increased substantially, rising from a range of 0% to 62.5% previously to between 10% and 87.5% currently.
Facing these challenges, Shein is pursuing business model diversification through expanded marketplace operations and commercialization of its supply chain infrastructure. Services revenue grew approximately 40% in 2025, with the company’s “brand enablement services” emerging as a particularly promising segment. Though representing only about 1% of revenue, this offering enables brands and designers to leverage Shein’s supply chain and product infrastructure, with participants demonstrating accelerated sales growth and improved financial performance compared to other direct-to-consumer businesses.
Industry analysts indicated that the regulatory changes represent a fundamental threat to Shein’s competitive positioning, which historically relied on pricing advantages. The company’s ability to successfully transition to higher-margin service-oriented business models may determine its long-term viability amid the shifting regulatory landscape.
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