Shein opening physical store in South Africa – with a big catch

Shein will open a pop-up store in South Africa, but products cannot be purchased in-store.

The Chinese-founded and Singapore-headquartered e-commerce giant will open its first South African pop-up store at the Mall of Africa in Johannesburg, the country’s busiest mall.

The store will be open from 14h00 to 20h00 on Friday, 2 August and from 09h00 to 21h00 from Saturday, 3 August, to Sunday, 11 August.

However, the pop-up store is only an exhibition space that showcases the latest fashion and lifestyle products, the group said.

This means that products cannot be purchased at the pop-up. Customers will be able to try on products and order them online with a discount at the store.

A blend of physical and online retail is a similar strategy to what Yuppiechef adopted when it launched its first brick-and-mortar outlets in 2018.

Tax fight

Shein, along with fellow online retailer Temu, has caused chaos in the South African retail space, with local retailers struggling to compete with their lower prices.

In the Bureau for Economic Research’s (BER’s) latest Retail Survey for 2024Q2, confidence amongst semi-durable goods retailers, which includes textiles, clothing, footwear and leather goods, declined massively from 68% in the prior quarter to 38%.

The drop in confidence followed weak sales in 2024Q1, which came off a high base period due to, in part, the 2023 Rugby World Cup.

The BER said that online competitors like Temu and Shein were also straining the sales of domestic clothing retailers.

Many retailers have also criticized the online sellers for allegedly violating tax laws to drive down prices and undercut South African competitors.

They are accused of abusing the de minimis rule to get clothing parcels of under R500 through customs with a 20% import duty and 0% VAT.

Local retailers claim that Temu and Shein break up larger orders into smaller quantities and packages to ensure they are under R500.

After benefitting from the lower 20% tax, they then must combine the orders before shipping them to clients.

Local retailers said that Shein and Temu must pay the 45% plus value-added tax (VAT) for imported clothes.

“These companies are not paying duties on their imports and are avoiding paying VAT where it should be applied,” the National Clothing Retail Federation’s Michael Lawrence said.

Lawrence said these eCommerce giants’ local couriers and service providers are also not reporting their duties and taxes correctly to the South African Revenue Service (SARS).

“There have not been any invoices that show the correct revenue collection from authorities about VAT and tariffs at this point,” he said.

SARS Commissioner Edward Kieswetter said that the taxman would continue to target Temu, Shein, and other online retailers.

The service committed to levying the same duties and taxes on clothing items under R500 as on bigger orders.

Kieswetter said that the state lost out on over R3 billion in unpaid taxes and is actively looking to address the problem.

However, Temu and Shein deny any wrongdoing.

Temu said that it complies with local tax legislation, and the products on its website do not include import duties and taxes.

Shein said it keeps prices affordable through its technology-based on-demand business model and flexible supply chain, not by dodging local taxes.

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