Shein, Simon Property Group Form Strategic Partnership

Fast-fashion online retail giant Shein is teaming with mall giant Simon Property Group to expand a foothold in bricks-and-mortar retail.

Singapore-based Shein has formed a strategic partnership with Sparc Group Holdings, a joint venture including Simon and Authentic Brands Group, a brand management company with a portfolio of fashion retailers including Forever 21, Aeropostale, Nine West and Brooks Brothers, Chain Store Age reported.

Financial terms of the agreement were not disclosed. Sparc Group will become a minority shareholder in Shein, which had annual revenue of $23B in 2022, the report said.

Shein, which reaches a global online market estimated at 150M customers, has been experimenting with physical retail at “pop-up” stores within stores in Dallas, Los Angeles and Las Vegas.

The new strategic partnership will give Shein the opportunity to test customer-focused experiences in Forever 21 locations across the US, including shop-in-shops that will provide return to store services, CSA said. Forever 21 has 400 outlets in the US.

Forever 21 is partnering with an artificial intelligence provider to create personalized customer experiences based on omnichannel data, the report said.

“The powerful combination of Simon’s leadership in physical retail, Authentic’s brand development expertise, and Shein’s on-demand model will help us drive scalable growth and together make fashion more accessible to all,” said Donald Tang, Shein’s executive chairman, in a statement.

Shein is in the process of opening three US distribution centers, including a 1.8M SF distribution facility that will soon be delivered in Cherry Valley in SoCal. The campus, developed by a joint venture of Shopoff Realty Investments and Artemis Real Estate Partners, includes two buildings, a 1M SF warehouse and an 811K SF industrial building.

In addition to the SoCal facility, the company is planning to expand an existing facility in Whitestown, IN and to occupy a warehouse in a location in the Northeast.

Digital native brands that flourished in the surge of e-commerce during the pandemic have been racing to buttress their growth strategies by securing bricks-and-mortar outlets. The migration of direct-to-consumer digital native brands to bricks-and-mortar outlets is now one of the hottest growth sectors in retail.

“Digital native brands have to go to bricks and mortar to grow,” Barrie Scardina, Head of Americas Retail for Cushman & Wakefield told GlobeSt. at ISCS 2022. “It’s very expensive to grow online. The cost of customer acquisition is very high, the cost of shipping is high. Having a [physical] store gives you a broader opportunity to grow faster.”

“Almost every digital native fashion brand we work with is demanding bricks and mortar retail,” she said. “We’re spending a lot of time on digital native brands.”

According to Scardina, the expansion of digital native brands to bricks and mortar is on a par with the expansion of medical outlets—an estimated 20% of new retail leases involve medical outlets like walk-in care, she said—as a major growth sector that will see positive growth even as economic headwinds increase, along with luxury goods.