Shein’s U.S. charm offensive and IPO could hinge on NRF membership. So far, it’s been rejected

Shein, which filed to go public in the U.S. late last year, has tried to become a member of the retail industry’s largest and most powerful trade association but has been repeatedly rejected, people familiar with the matter told CNBC. The people spoke on the condition of anonymity because the talks are private. 

For most companies, becoming a member of the NRF wouldn’t have a major impact on their business. The organization is the retail industry’s primary lobbying machine in Washington, D.C., and provides access to NRF events and research on market trends, among other benefits.

But Shein is in the midst of a charm offensive. It has been working to convince lawmakers that it can be trusted as a public company listed on American exchanges despite concerns over its ties to China, its supply chain and its use of a trade law loophole.

Shein is also caught in the middle of a complex geopolitical rivalry between the U.S. and Beijing and has been targeted by lawmakers who are concerned the company shares data on American consumers with the Chinese government and produces goods made with forced labor. The intense scrutiny Shein has faced reportedly pushed the retailer to consider going public in London instead of the U.S.

Shein was recently valued at $66 billion, CNBC previously reported, and is poised to be one of the biggest listings of the year. It pulls in revenue well above $30 billion a year, according to a key retail partner. Its rise has eaten into the market share of a host of U.S.-based rivals including Gap Inc., TJX Companies and Macy’s, and has challenged mass-market players like Target, Walmart and Amazon.

If Shein can earn a stamp of approval from the de facto voice of the retail industry, which is led by the largest retailers and tech companies on the planet, it could help legitimize Shein in the eyes of federal lawmakers. It could also smooth over what’s been an otherwise bumpy path to a U.S. initial public offering. 

“That definitely would put a little bit more pressure on the politicians to accept the company, right? Simply because the peers recognize the company and they think that it is a worthy competitor. … That would definitely create a little bit more legitimacy,” said Wharton School professor John Zhang, founding director of the Penn Wharton China Center. “Most importantly, I think that [NRF membership] really creates the perception amongst the investors that this is just one of the normal retailers.” 

Steve Dennis, a retail consultant who previously held executive positions at Neiman Marcus and Sears, agreed that NRF’s acceptance of Shein could be a positive catalyst for the company. 

“I don’t think that would automatically mean the [New York Stock Exchange] or the federal government’s going to be OK with them, but I think it would be kind of a feather in their cap, a meaningful step in the right direction,” said Dennis. “You sort of look at the NRF as being the voice of the industry, so if it’s OK with them, maybe it should be OK for us.” 

The NRF hasn’t totally shut the door on Shein’s membership application and has been in talks with the retailer about its request, people familiar with the dynamic told CNBC, adding the trade group is open to welcoming Shein. 

A spokesperson for the NRF said the organization “does not comment on our membership process or on individual retailers.” It said it “disagrees with many of the characterizations” in CNBC’s report but declined to elaborate further.

Shein declined to comment.

It’s unclear why the NRF rejected Shein’s membership application, but according to one of the people familiar, someone with sway is strongly against the company’s admittance. The person declined to provide specifics surrounding who could be exerting that influence.

The NRF’s board has a leadership team and an executive committee. Those people have the closest counsel with the trade group’s CEO, Matthew Shay, who has been involved in membership discussions with Shein, according to two people familiar with the organization’s dealings.

The leadership team is comprised of Shay; Walmart U.S. CEO John Furner; BJ’s Wholesale Club CEO Bob Eddy; and Mike George, the former president and CEO of Qurate Retail, which owns QVC. The executive committee includes eight other top industry insiders, including Target CEO Brian Cornell and Macy’s CEO Tony Spring.

Like most trade associations, retailers looking to become a member of the NRF are typically granted access as long as they’re involved in retailing and pay the required dues, according to three NRF board members who spoke to CNBC on the condition of anonymity. 

The specific requirements for becoming a member of the NRF and the process for screening new members is unclear. The NRF declined to answer questions about those details.

An NRF membership application form that can be found online states: “Companies principally engaged in retailing are eligible for membership in the Federation.” The form includes questions about a retailer’s annual sales volume and total number of retail units and explains that NRF bylaws requires that members pay dues “based on total annual sales as reported in the most recent fiscal year.”

The NRF said the form is outdated by about a year but declined to say what, if any, material changes had been made to the membership form since the document was uploaded online. 

The board members who spoke to CNBC, who each have years of experience on the NRF’s board, said Shein’s membership application hadn’t come up in board meetings and that they aren’t involved in deciding which companies are granted access. This suggests top NRF brass would be the ultimate decision makers on prospective members.

“There are quiet conversations that will happen around topics like this. As part of our governance, we certainly look at membership, overall trends, we talk about membership proposals and new additions, but we don’t typically get into specifics around individual companies,” one of the board members said. 

Two of the board members said they weren’t aware of any instances where the NRF denied a retailer membership. One noted the trade group is actually trying to grow its ranks and has worked to expand into nontraditional markets, including the tech sector. 

“I don’t think they are in the business of turning anyone down,” one of the board members told CNBC. 

Every year, the NRF hosts a massive conference in New York City dubbed “Retail’s Big Show” that features the industry’s top companies. In recent years, Shein has been conspicuously absent from the event. 

That’s not to say that Shein isn’t relevant to NRF’s attendees — the impact the company has had on the fashion industry was widely discussed by conference goers and during official sessions — but the retailer wasn’t invited to talk about the strategies that drove its meteoric rise. 

At the NRF’s Big Show in January, there was a panel about Shein and Chinese retailer Temu titled “Coming to America: What Can We Learn from Chinese Brands in the U.S.” that was led by retail experts from Publicis Groupe and Coresight Research. 

During the panel, the two experts reflected on the strategies that have fueled Shein’s growth and outlined the “10 essential actions” retailers need to do “to rival Shein and Temu.” Throughout the event, attendees eagerly raised their phones in the air to snap photos of the slides. 

Meanwhile, at retail conferences elsewhere in the world, Shein has been a constant. Over the last year, the company had a presence at a number of high-profile industry conferences, including the OMR Festival in Hamburg, Germany, the Global E-commerce Leaders Forum in Los Angeles, the World Retail Congress in Paris and even the World Economic Forum‘s Annual Meeting in Davos, Switzerland, according to LinkedIn posts and conference agendas. 

In March, Shein presented at the annual Shoptalk conference in Las Vegas for the second year in a row and a company executive appeared on stage alongside counterparts from sustainable fashion brand Reformation and home goods retailer Wayfair. 

While Shein has been widely welcomed on stage at these events, which rely heavily on sponsors to drive revenue, the reception was a bit cooler behind closed doors. 

At a cocktail party on the sidelines of Shoptalk, a young founder of a fashion sustainability startup quietly referred to Shein as their “mortal enemy” when they saw two of its staffers join the event. 

The founder was referring to some of the sustainability concerns that Shein has faced, including accusations that its cheap clothing fuels overconsumption and that its clothes are made with materials sourced from regions that are hot spots for forced labor. 

Dennis, the retail consultant, posited the NRF’s concerns about Shein, at least on their face, could be related to some of the ethical questions surrounding the company but said what angers the retail community the most is how Shein is competing — and taking market share. 

“Their growth is extraordinary, right? … They’ve gone from zero to an enormous amount of market share in just a couple of years, so from that standpoint, if you’re a company that competes with them, you’re losing market share,” said Dennis. “Nobody likes that.” 

Plus, he added, there is the perception that Shein is competing unfairly because of its use of a specific U.S. tariff law loophole called the de minimis provision. Under the provision, packages valued under $800 are not charged import duties and aren’t subject to the same level of screening as other packages. Shein’s success is routinely attributed to the claim that it benefits from not paying tariffs, a charge the retailer denies. 

For example, in 2022, Gap, H&M and David’s Bridal paid $700 million, $205 million and $19.5 million in import duties, respectively, while Shein and Temu paid nothing at all, according to the House Select Committee on the Chinese Communist Party. 

The committee is investigating Shein over its use of the de minimis provision and concerns that the goods the company ships to the U.S. are made with forced labor. Shein has said that it’s committed to adhering to the laws and regulations of the respective markets that it operates in and is working to eradicate its supply chain of raw materials sourced from banned regions.

Considering the ire the retail community has for Shein, the NRF is stuck between a rock and a hard place. If the trade group accepts Shein as a member, it could upset its influential member base, but it also needs a valid reason to deny the company access. 

The NRF could lean on the serious ethical concerns surrounding Shein, but they’re not unique to the company. Last year when the committee on the CCP opened a probe into Shein about its use of forced labor, it sent similar letters to Adidas and Nike, whose vice president of global retail operations was on the board of the NRF’s foundation in 2022. 

Plus, using raw materials from regions that are hot spots for forced labor or other human rights issues is a problem for the entire fashion industry. It’s also an issue that has mired other global corporate powers that are on the NRF board. 

Rejecting Shein on the grounds that it unfairly uses the de minimis provision would also be a tough sell. While many NRF members are strongly against de minimis, or at least a competitor’s use of it, the NRF has yet to take a firm position on the matter, contrary to some other trade associations.

When asked for the NRF’s official position on de minimis, a spokesperson said it didn’t have one. 

“We encourage the collection of more detailed information by U.S. Customs and Border Protection to improve enforcement and ensure that only legitimate products are entered under the program,” the spokesperson said. 

Of course, Shein’s ties to China could be enough to exclude it from NRF membership, but the trade group is considering expanding internationally, according to one of the organization’s board members. If those plans come to fruition, the trade group will have to determine where to draw the line. 

Absent a clear reason for excluding Shein from membership, the NRF’s decision could raise antitrust concerns, legal experts said. 

While joining the NRF is unlikely to make or break a retailer’s business, it is seen as having a plus side. The benefits of NRF membership — advocacy, legislative lobbying and access to industry research, connections and events — could be seen as a competitive edge for its members.

Considering that argument, if Shein were to be excluded from an organization made up of its competitors, it could have an antitrust argument. 

“If they are a unique competitor and the powerful people in the industry are controlling the NRF to keep them out, that could raise concerns,” said Steven Salop, professor emeritus of economics and law at Georgetown University’s Law Center. “The question is whether it’s enough to have a significant impact on competition.”