Reliance seeks retail dominance in India with return deal for Shein

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India’s largest company, Reliance Industries, is looking to dominate the $10 billion online home fashion market by striking a deal with Shein that will allow the fast-growing Chinese retailer to return to the world’s most populous nation.

The retail unit of billionaire oil and telecom conglomerate Mukesh Ambani will join Shein three years after India banned the online retailer’s app in a bid to lock Chinese companies out of the local market in retaliation for border clashes tHat had left at least 20 Indian soldiers dead.

“We can confirm Shein’s partnership with Reliance Retail and have no further comments at this time,” Shein said, declining to answer questions about the structure of the deal. Reliance did not respond to questions about the partnership, which was first reported by The Wall Street Journal.

The addition of a low-priced offering gives India’s largest listed company by market capitalization a major boost in its battle to dominate the country’s growing online fashion retail market, which was worth $10 billion in 2022, according to analysts’ estimates.

As part of the licensing deal, which was recently approved by the government, Shein will receive a percentage of the profits it generates from its fast fashion sales in India, people familiar with the deal said, while Reliance will help Shein build a chain of supply with the Indian garment industry for global exports.

The shift to Indian sourcing comes as Shein diversifies its supply chain out of southern China’s coastal Guangdong province, where it has 8,000 suppliers, mostly located in the Panyu garment hub. Pandemic-era supply chain bottlenecks, rising labor costs in China and geopolitical tensions between Beijing and Washington have pushed multinationals including Apple and the apparel retailer Mangoto migrate parts of their supply chains out of the country.

Shein, who doesn’t sell to China, has tried to distance himself from his home country. Last year, it did its Singapore arm the de facto holding company, rapidly expanding its workforce there and moving some of its operations from its Chinese headquarters to Nanjing.

Shein will try to minimize lead times by having multiple manufacturing centers around the world. India, meanwhile, hopes to benefit from the multinationals’ “China plus one” movement, a strategy that seeks to avoid investing only in China and aims to diversify supply chains to other countries.

Reliance has signed deals with international luxury brands ranging from Balenciaga to Burberry, which caters to India’s small but growing demographic of super wealthy consumers. Additionally, it has nearly 13,000 physical stores across the country that sell affordable clothing.

“Reliance’s other international partnerships are more prestigious, being luxury or design brands,” said Devangshu Dutta, managing director of consultant Third Eyesight. “India is still an economy with a relatively low per capita income. The biggest opportunity is in brands that are euphemistically called value brands, and that’s where Shein is positioned.”

For Shein, access to the Indian market will allow the company to boost sales as the pace of its expansion into Europe and the United States begins to lose momentum, according to people briefed on its growth data.

financial time reported that in a recent presentation to investors, Shein predicted that gross commodity value — the total value of merchandise sold on its platform — will nearly triple by 2025 to $80.6 billion from last year’s figure.

The high revenue projections anticipate a highly anticipated initial public offering, which promises to be one of the largest public offerings from a China-founded company in years.

In fashion e-commerce, Reliance lags behind Myntra, one of the oldest e-commerce players in India, which merged with Walmart-backed Flipkart in 2014. Myntra accounts for about half of the online fashion market in India, according to Satish Meena, a Gurgon-based independent e-commerce analyst.

“Myntra is the nucleus” for online fashion, said Ankur Bisen, a senior partner at retail consultancy Technopak Advisors, adding that his “cohort” of shoppers is primarily young and urban. “With the Reliance and Shein partnership, they would like to join this cohort and break the monopoly of Myntra,” Bisen said.

Meena estimates that Reliance’s e-commerce fashion business Ajio holds about 4% of the market share, while Bisen has placed Ajio in the “long tail” of e-commerce fashion initiatives behind Myntra. Reliance’s JioMart online store also sells clothing, as well as groceries and electronics.

“If you look at Reliance as a company, it’s about domain and it’s about the long term,” Dutta said.