2024 JANUARY ISSUE
SHEIN
THE FAST FASHION
DISRUPTOR
Written by Andrew Sia
Share this article !
From the Desk of the Publisher
Shein was found in 2008 in Nanjing and very quickly it gained popularity in its trendy and affordable clothing and accessories. It is today’s one of the most downloaded mobile apps, right after Amazon and Nike.
It overtook H&M for the total sales revenue and is chasing closely after Zara, and in the meantime it is looking for its IPO in the New York Stock Exchange in the early 2024.
With its acquisition of Forever 21, it is also moving into bricks-and-mortar. It will also expand its platform for other products, such as products from kitchenware to other gadgets. It will put itself right in the competitors like Amazon, Temu and Pinduoduo.
It is known for its fast-to-market and offers direct shipment to customers. It is known for its 150 million customers in 150 countries. I can see that it will continue to win the market in a tremendous way.
This piece of write-up can be used as a case study for business.
China online fast fashion company, Shein, has shipped to 150 countries with its extreme-low-price clothing has filed for an initial public offering in the U.S. that could take place next year. Already Goldman Sachs, JPMorgan Chase and Morgan Stanley have been hired as lead underwriters for the offerings. Its backers have included Abu Dhabi sovereign wealth fund Mubadala and venture capital group Sequoia China.
Shein is now based in Singapore after moving its headquarters from China in 2021. It is looking for a valuation of higher than the $66 billion implied by a fundraiser earlier on in May of this year. If this is successful, its market value will be higher than H&M’s $27 billion, but below Inditex’s $127 billion.
Its sales of $23 billion last year is due to its very affordable price especially among the youngsters. It has already overtaken its rival, H&M, and closing in on fast-fashion leader Zara. Its $5 skirts and $9 jeans has disrupted the clothing industry. Shein is also known for clothing, home furnishings and pet accessories at less than $10 for instance.
The company continues to grow rapidly. Through its global app users, in the third quarter of 2023, Shein grew 31% from the year before.
Shein is known for its network of suppliers in China and its design team of 3,000 strong, who can turn designs and products according to the market demand. Its fast-to-market is its success formula. It allows the company to stay very lean with prices and inventory low.
It has chosen the right moment to enter into the stock market as fast-fashion stocks are performing very well with Inditex hit the high level of rising 49% this year. Also, the shares of H&M gained 55%. Its valuation of $66 billion, Shein would be valued at 2.9 times last year’s revenue. Inditex is 3.5 times.
Its price-to-earning is 83 times versus Inditex’s 28 times. Although its net margin was 3.5% compare with Inditex’s 13%. Like what we reported that its sales of $23 billion in revenues in 2022 and its $800 million in net profit and its recorded revenue and income for the three quarters of 2023, is what the market wants to hear.
Shein is announcing that its business activity will move beyond clothing, and it will open its platform to third-party sellers for all sorts of products from kitchenware to any gadgets. This will put Shein up against the competitors like Amazon, Temu and Pinduoduo.
On top of these, Shein has struck a partnership with Forever 21, and this not only allows the company to have a piece of business with the American brand, but also its bricks-and mortar stores in the U.S.
With so many frontiers to capture, Shein has to prove itself in the eyes of the investors.
Its business practice is not without critique, although the business requires modest requirements for warehouses and inventory in the U.S., which is also its largest market. It ships most of its products directly to the customers and this allows it to avoid import taxes. There is a provision in the U.S. tax tariff regulations that can waive tariffs if the package’s retail value is less than $800. This business practice has drawn the scrutiny from the trade department. Shein is known for its using of 600 manufacturers and these are third-party manufacturers. They don’t have to disclose employment practices that they alleged for force labor. But Shein denies all allegations.
So that you know, its manufacturing has been extended to Turkey, Brazil and a joint venture in India.
A U.S. stock listing could make Shein the biggest stock offering in recent year. We have seen the IPO of British chip designer Arm Holdings, which was valued at around $55 billion when it made its debut in September this year. In 2021, the offering of Rivian Automotive was valued at about $77 billion at its IPO. China’s ride-hailing, Didi Global in 2021 valued at $68.4 billion was delisted from its IPO from the New York Stock Exchanges 11 months later after it was caught in Beijing’s tech crackdown.
For Shein to relocate its headquarters in Singapore is the move to avoid any geopolitical tension arises.