Major fast-fashion retailer Shein plans a factory in Mexico

Shein, the online clothing retailer giant, is considering building a factory in Mexico as a manufacturing hub outside of China.

The factory will produce Shein products and is part of the retailer's initiative to localize production. For Shein customers in Latin America, this could result in faster shipping and lower distribution costs. It comes after the company declared that a manufacturing hub would be established in Brazil to serve a global customer base.

Shein was established in China, where it continues to produce the majority of its products, though it is currently looking to grow. With its $10 dresses and $5 tops, the company has driven out other low-cost fashion retailers from the market.

Shein, which has its current headquarters in Singapore, competes with PDD Holdings' Temu, which offers low-cost goods from China, including clothing and electronics, for sale in the United States.

According to the sources, who asked for anonymity because the discussions are private, a final location for the Mexico site has not yet been chosen.

Shein will use the $2 billion it recently raised in capital from investors such as Mubadala and Sequoia China to fund the expansion as it prepares for an IPO in the United States. One of the sources added that the retailer still reports annual revenue growth of 40% despite a valuation reduction to $66 billion in its most recent funding round.

Recently, Shein provided a platform for an online market place in Brazil, enabling independent vendors to sell their own products on the Shein app and website. Then, before going global, a similar marketplace would be introduced in the United States.

Items from independent vendors won't be kept in the upcoming Mexico factory, according to sources. Shein is considering expanding its marketplace model to other markets across Latin America.