Shein is looking to lobbying, as the ultra-fast fashion company increasingly expands its footprint in the U.S., including by way of three domestic distribution centers aimed at catering to its growing consumer base of Western millennials and Gen-Zs. In addition to boosting its physical footprint in America, the Wall Street Journal reported last month that the privately-held Chinese entity is also planning to hire “at least several hundred employees at its U.S. corporate headquarters in Los Angeles, its Washington, D.C., office and potentially in other American cities,” currently boasting more than 400 staffers in the U.S., up from a little over a dozen in 2019.
Taken together, such efforts raise the stakes for the company, hence Shein’s move to retain counsel at Akin Gump Strauss Hauer & Feld, as well as Hobart Hallaway & Quayle Ventures, to lobby on “legislative and regulatory issues impacting the apparel industry and e-retailers, including trade and tax related matters,” according to a lobbying registration form filed by Shein on September 1. The firms will also engage in “general [government-focused] education regarding SHEIN’s presence, operating footprint, and economic impact in the United States.”
The bigger picture here is that the disclosures from Shein come as lobbying (i.e., efforts to influence government action) and political spending continues to be big business for corporations. “In the 2020 election cycle, alone, private interests spent $486 million on campaign contributions to U.S. federal election candidates and over $7 billion to lobby Congress and federal agencies,” according to DePaul University management professor Richard Devine and Florida State University professor of strategic management R. Michael Holmes, who claim that “the 2022 cycle could be a record period if recent trends are any indication.”
Data from campaign finance monitor the Center for Responsive Politics shows that companies that are most affected by government regulation spend more when it comes to campaign contributions and lobbying, per Devine and Holmes. They point to the operations of Facebook owner Meta, for example, which “could be heavily affected by government legislation, whether from laws concerning net neutrality, data privacy, or censorship.” This is why Meta spent “nearly $7.8 million in contributions and $36.4 million in lobbying during the 2020 cycle.”
While fashion is a sector with relatively low-levels of regulation (something that may be in the process of changing), that has not stopped big players from spending on lobbying efforts, either directly or by way of the trade organizations to which they belong. The National Retail Federation, for instance, spent more than $7 million on lobbying activity in 2021. At the same time, the American Apparel and Footwear Association, whose members range from Levi’s and Lululemon and to Supreme-owner VF Corp. and Versace, boasted almost $600,000 in lobbying expenditures.
At the core, companies spend on lobbying and political contributions when they “have vested interests and operations in a state” – or on a federal level – “that are subject to regulation,” Devine and Holmes state. “Regulation creates uncertainty for [companies’] management – which they do not like. Spending helps alleviate the uncertainty by influencing what regulation may be imposed.”
Studying corporate political strategy and involvement in U.S. state politics, which saw them examine political contributions by publicly traded companies in elections for governor and the legislature across the 50 U.S. states., Devine and Holmes say that the following four major insights stood out. While not specifically focused on fashion/retail, such insights are, nonetheless, telling for – and about – industry entities across the board …
1. Corporations spend when they are worried about negative media coverage prompting what they perceive to be potentially harmful regulations. Media coverage can drive public perceptions of corporations and influence politicians’ views. In particular, media coverage can amplify misdeeds of companies across states, which worries managers who do not want to see new regulations. In line with this, we found that the companies spent 70 percent more in states they operated in when national media coverage was more negative rather than less negative. We found that this effect was exclusive to national media coverage as opposed to local media coverage. Specifically, when local media coverage was more negative, it did not appear to affect political spending.
2. Corporations spend when there are powerful social movement organizations – for example, environmental protection groups – within a state. “Public relations firms are routinely engaged to monitor activists and the media, because if you don’t watch them, they can create regulatory change. You have to get ahead of it,” an executive said. Social movement organizations (e.g., Sierra Club and the Rainforest Action Network) help shape public opinion on important issues, pursue institutional change and can prompt legal reform as well, which is a concern to corporations. Our research indicated that in states where they had operations, companies spent 102 percent more when facing greater opposition from social movement organizations than they would have on average.
3. Corporations spend to gain a seat at the legislative table to communicate their interests. Our interviewees shared with us that companies spread their contributions around to those politicians who they believe will listen to their causes and concerns – regardless of party. They described themselves as wanting their voices heard on particular issues and as important players in the states in which they operate due to the employment and tax base they bring to states. Boeing, for example, was the largest private employer in Washington state for decades and has been able to secure tax breaks as a result. This is despite documented environmental problems that Boeing’s operations have had in the state.
4. Corporations spend because they see it as consistent with their responsibility to stakeholders. “Companies mostly want certainty, they want to know the bottom line, and engagement can create opportunities,” said one political affairs consultant. Corporations have a legal and ethical responsibility to their stakeholders. Company leaders often believe they are upholding their responsibilities to shareholders, employees, communities, customers, and suppliers by participating in the political process.
Reflecting on the stakes, Devine and Holmes state that “there can be huge repercussions for companies in state regulation.” The passage of regulations in large states like California, for example, “can have nearly as much impact as a national regulation, making their passage far more significant for companies working nationally.”
Going forward, in light of “the changed business landscape – and increased operating costs – caused by the coronavirus pandemic,” they say that they expect that businesses across the country will continue to be interested in influencing policies, and that “this interest will likely translate into significant spending in the upcoming election, to both major parties and their candidates.”