sh-

initial sound-cluster, containing the exceptions to the general rule that sc- or sk- in Modern English indicates a word not from Old English (whose sc- regularly becomes sh-). Words often are found in pairs, especially in dialect and slang, one in scr-, one in shr- (or schr-); a prominent surviving example is shred and screed, the same Old English word surviving in two forms now much different in meaning.

OED also notes that "Many English words beginning with scr- agree more or less closely in meaning with other words differing from them in form only by the absence of the initial s" (such as crunch/scrunch, scringe, an alternative form of cringe, etc.)

It does not appear that these coincidences are due to any one general cause ..., but it is probable that the existence of many pairs of synonyms with scr- and cr- produced a tendency to change cr-, in words expressive of sounds or physical movements, into scr- so as to render the word echoic or phonetically symbolic. [OED]

1660s, of persons, "poorly dressed;" 1680s of clothes, furniture, etc., "of mean appearance, no longer new or fresh;" with -y (2) + shab "a low fellow" (1630s), extended from the original sense, "scabies." This is from Middle English shabbe "skin disease characterized by eruptions, itching, etc.," from Old English sceabb, the native form of Modern English scab (n.), which was influenced by Scandinavian (see sh-).

Shab (n.) survives in reference to a disease of sheep, but in Middle English shabbed meant "suffering from scabies, mange, etc." (from Old English sceabbed).

Shabby in the sense of "inferior in quality" is from 1805. The figurative meaning "contemptibly mean" is from 1670s. Similar formation in Middle Dutch schabbich, German schäbig "shabby." Related: Shabbily; shabbiness. Carlyle has shabbish "somewhat shabby."

Shabby-genteel "run-down but trying to keep up appearances, retaining in present shabbiness traces of former gentility," is attested by 1754. Shabaroon, shabberoon "disreputable person" is attested from c. 1700.