MARKET INTELLIGENCE
SHORT READ
PART 3
2023 JANUARY ISSUE
Written by : Andrew Sia
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Contents:
H&M to Layoff 1,500 Jobs
Hong Kong Losses Its Title as the Priciest Retail Rent to New York
Shoppers at This Time of the Year
Wakeup Call for Transforming Fashion
Gucci’s Challenge in Find a New Creative Director
Claire’s a Teenage Retailer
Retail Sales Were Still Fickle in November
Luxury Brands Latest Status
Fashion Giants Pledged for More Recycled Fibers
Lanvin Group’s Endeavor in their Merge with Fosun Group
H&M’s Performance for the Recent Twelve Months
Zara Reported Both Rises in Sales and Earning
Outlook of Cotton Prices for 2023
Shein’s Latest News
Prada’s Succession Plan
Appetites for the Luxury Brands
Shein is Setting Trends Now
H&M to Layoff 1,500 Jobs – WSJ, December 1, 2022
It has announced that it would cut around 1,500 jobs globally because of the high inflation and weakening consumer demands. It is part of its efficiency program to reduce administrative and overhead cost. Its profit margin is coming under pressure because of the higher merchandise cost and freight costs.
The layoff is almost 1% of its global headcount of 155,000 as at the end of last year. It is only affecting the office staff while the front-line store employees are unaffected.
Like the other retailers, the uncertain consumer demand has put the profit margin under pressure. Also H&M was slower to bounce back from the Covid pandemic than the other brands.
Hong Kong Loses Its Title as the Priciest Retail Rent to New York – FT, November 23, 2022
Gone were its days because of the city’s restriction of visitors due to the strict Covid measures. Manhattan’s upper Fifth Avenue is now the most expensive street for luxury shopping. The Hong Kong’s Tsim Sha Tsui becomes number two. The orders go like that: Milan’s Via Monte Napoleone ranks the third and London’s New Bond Street ranks number four. Paris’s Avenue des Champs-Élysées ranked the world’s fifth priciest shopping district.
The average annual rents for upper Fifth Avenue shops stay within $2,000 per square foot. It is a 14% surge compared with pre-pandemic levels. The average rents of Tsim Sha Tsui is at $1,436 per square foot, which is a fall of 41% over the same period.
Hong Kong still requires masks and several Covid tests for visitors upon arrival. It has also lost its tourists from China as upon their return they would need to put up with the five-day quarantine.
Via Monte Napoleone recorded a 9% rise, with New Bond Street at 11% and Avenue des Champs-Élysées at 18% respectively.
In mainland China, Shanghai’s West Nanjing Road is ranked at top 10 most expensive district globally.
Across all global prime retail locations, retail rents fell on average 6% compared with pre-pandemic figures. The Asian-Pacific region was the most affected with an average drop of 12%.
Shoppers at This Time of the Year – New York Times, November 28, 2022
With the arrival of the all-time important holiday shopping season, retailers are competing with one another to attract customers. In the U.S., the customers are spending although the prices are climbing at the fastest pace in decades while the Federation Reserve is trying to rein them in by raising interest rates. Their efforts have made borrowing more expensive, and trying to tell the customers that a recession is still possible in the horizon. But forecasters believe that the consumer’s spending is accounted about 70% of the total economic growth. It will still remain in the fourth quarter because of the $1.7 trillion extra household savings accumulated during the pandemic. This is also due to the government aid earlier on.
But the September numbers showed that Americans saving was only 3.1% compared with a year earlier. The poorer Americans have seen their saving dwindling. Credit card balances in the third quarter grew by 15% compared with a year before. It was the largest increase in more than two decades. It showed that consumers were relying on credit card spending.
Retail sales grew by 1.3% in October. Consumers spent on earlier-than-usual holiday deals and major retailers like Walmart and Home Depot reported stronger third-quarter earnings.
Several retailers are saying that the demand for their products would slower down and the consumers would be motivated by sales. Already we had seen shoppers were price conscious on Black Friday that lasted through weekend. The in-store sales on Friday increased by 12% from last year, and online sales increased by 14%.
Wakeup Call for Transforming Fashion – New York Times, November 14, 2022
It was in the spring of 2020, during the earliest and also the darkest months of the coronavirus, a group of fashionista began talking about upending some of the global fashion industry’s hidebound practices.
Talking about the ripping up the fashion calendar—presenting fall designs in the spring and vice versa. Delay the traditional discounting periods and cutting down on those midseason sales. Both of them eroded profits.
Their aim was to come together to improve the efficiency of the industry to prevent the largely unsold inventory that lead to fashion’s environmental toll on the planet.
By May 2020, they came up with a proposal in an open letter called the Forum Letter which followed very quickly by a second initiative called Rewriting Fashion. As the result, the ambitious statements never led to the changes envisioned. It drawn the comments from designers, retailers, customers that the industry system would become less and less conductive to genuine creativity and was rejected by designers like Dries Van Noten, Erdem Maralioglu, Joseph Altuzarra, and Missoni, and retailers like Selfridges in Britain and Mytheresa in Germany.
Although the ambitious statements never led to the changes but they set off alarm bells in Brussels.
In May this year, European Union antitrust regulators conducted raids on several unnamed fashion houses and in a statement they wrote that there is the suspected anti-competition practices that may violate rules of price-fixing and potentially created a cartel. It was reported that those designers and executives who signed the 2020 declarations on transforming fashion industry who shared many common complaints in the open letter about fast fashion who undercutting their business model while third-party retailers who would discount their designs at all time during the year, They ended up producing more and sell even at low price and in the end found that the business model being sustainable and competitive doesn’t go hand-in-hand.
Environmental, Social and Governance (E.S.G.) become a tension. In the U.S. these conflicting objectives have become increasingly political. Its Congress will continue to scrutinize the antitrust violations being committed in the name of E.S.G.
Fashion industry has been criticizing for the practice of burning or destroying unsold inventory and send them for landfills.
The Forum Letter and Rewriting Fashion proposed changes in producing less to deal with the unsold stock at the end of the seasons. Only by doing so, they can achieve the goal for selling at full price. This would lead to the reducing of fabrics and inventory. The using of the digital showroom can increase the promotion to the business with the retailers and also avoid the business traveling. But these ideas may violate antitrust by the European Union where the rules for price fixing, limiting and controlling production. The line between the good intention in running a business and an antitrust line is being blurred.
There is another organization, Sustainable Apparel Coalition, met in Singapore in November. They promoted the fashion’s sustainability challenges would only be addressed by collaboration and partnership. But again some of the collaborations may have some pitfalls around the anti-collusion laws. And it is already warned that some of the topics discussed would have legal pitfalls.
Take for instance, the world’s most powerful luxury conglomerates like LVMH and Kering, both with the multi-brand portfolio, have not sign the papers. They choose to distance them from this conversation.
Gucci’s Challenge in Find a New Creative Director – WSJ, November 26, 2022
Gucci’s creative director, Alessandro Michele, who is considered as one of the luxury brand’s most successful makeovers, is stepping down. From his first runway show in 2015, he more than doubled Gucci’s sales and tripled its operating profit. But the brand has lost its luster since 2020.
As a result, Kering’s Paris-listed stock has been one of the luxury sector’s worst performances over the past two years. It is now trading at 25% discount to rivals.
Kering has becoming heavily dependent on Gucci, which generated 74% of the group profit last year.
In the meantime, Kering has been successfully revamping some of its brands, such as Bottega Veneta and Balenciaga.
Luxury brands are very careful when they have to change their creative directors. Especially those brands that are generating most of the profits.
Kering is not spending money on mergers and acquisitions. Lately it lost out to Estée Lauder in the $2.8 billion on Tom Ford.
Claire’s a Teenage Retailer – WSJ, November 30, 2022
For four decades, Clare’s jewelry chain had been a fixture at malls and shopping centers, piercing the ears of millions of American teenagers. It is said to have pieced more than 100 million ears worldwide.
Claire’s filed Chapter 11 in the U.S. in 2018 due to a debt of $2 billion, and it exited with roughly $500 million in debt in 2019. Its presence in traditional malls have been moved to lifestyle and strip centers. It has been ramping up its partnerships with more than 30 retailers including Walmart and CVS Health Corp.
Claire’s is a fashion-and-accessories store, and this time Macy’s is saying that it will bring 21 of its stores inside Macy’s to strengthen the store-in-store concept. Claire’s has been long popular with girls in their tween and teenage years, and at this time Macy’s hope to bring more business from this demographic during the holiday season.
This partnership with Claire’s is part of Macy’s strategy for broadening its customer base. This is the follow up of a rollout of Toys “R” Us stores in all of its 400 locations. This helps to drive foot traffic, bring in new customers and increase other product categories.
In the old days, Toys “R” Us, which often carried Claire’s products, liquidated and sold all of its stores in the U.S. followed by Claire’s filing for Chapter 11.
On the other hand, Pandora A/S has a similar store-in-store arrangement with Macy’s and has grown from five locations to 28 over the past year.
In 2020, Macy’s announced that it planned to close 125 stores over the three years and would exit those troubled malls. Since then the retailer has been operating smaller locations in shopping centers, invest on its digital platform and adding dozens of new off-price stores called Backstage, largely inside its department stores. In January 2023, it would announce another closure of 10 stores.
Kohl’s is another department store entering into the store-in-store model, as it has spent hundreds of millions in building and stocking more than 600 Sephora locations.
Department stores have been losing market share for years as shoppers are buying more online. Taking partnership is like entering into a franchising agreement. Taking the right partners and build them into the business will become the trend.
Retail Sales Were Still Fickle in November – WSJ, November 18, 2022
This year, although the supply-chain bottlenecks have eased, retailers are stocked with everything from toys to kitchen gadgets, and big offers started in October but they weren’t enough to tempt the shoppers. Both Macy’s and Kohl’s said that sales slowed in October compared with August and September.
Starting November, colder weather drove demands for heavy coats, boots and other winter gears.
Shares of Macy’s and Kohl’s showed us that Macy’s shares gained 15% while Kohl’s gained about 5%. But so far for the year, Macy’s is down by 13% and Kohl’s down by 36%.
But Walmart and Target reported stronger-than-expected sales driven by demand for groceries.
Gap mentioned about its third-quarter sales rose 2% to $4.04 billion driven by a recovery at Old Navy and Banana Republic chains. The company took a $53 million charge to end its Yeezy Gap partnership with Kanye West. Promotions to clear the inventory would help to hit margins.
Luxury Brands Latest Status – FT, November 4, 2022
In the U.S., the demand for expensive handbags and fashionable clothes bounced back quickly from the pandemic and has since proved to be surprisingly resilient. Luxury sales in the U.S. grew almost twice as fast as the global average in 2021 and one-and-a-half times faster in the first half of 2022.
LVMH reported recently a 19% growth year-on-year for the U.S. market. Another luxury brand, Hermès reported a 24% growth. The two key players in the U.S. expressed their expansion, LVMH and Cartier, are seeking for more presence in the market. Cartier said that they want to expand their number of stores from 30 to 40 eventually.
Take Cartier for instance, this watches and jewelry brand owned by Swiss luxury group Richemont, had doubled its size of its U.S. business in five years.
LVMH with its main brands, LV and Tiffany, have a large retail presence with 110 and 93 stores respectively. Its smaller brands, Dior has 42 stores, Fendi with 36 stores and Givenchy with 8 stores.
Its beauty chain Sephora, an LVMH brand that is more for mass market, has 500 U.S. stores.
Kerling which owns Gucci and Saint Laurent wants to open more than 30 stores in the coming years.
With sales in the U.S. for €78 billion in 2021, it is the biggest market for the luxury brands. It has the potential of evolving into a younger market, more diversified and also spread out geographically outside its traditional hubs of New York and California.
All of them have expanded into Fort Worth and Austin, Texas, Naples in Florida, and this sort of geographical expansion in the U.S. is relatively new for luxury brands as we used to find them in department stores like Saks and Neiman Marcus. If we look back before the pandemic, they were at one time depending on almost half of their sales in New York City. Now the sales are more spread out as wealthy people have relocated with the increase of remote working.
The U.S. specific marketing has been picked up by LVMH for Tiffany’s advertising campaign with Jay-Z and Beyoncé, and its cognac brand, Hennessey, in a partnership with the National Basketball Association.
Luxury brands were driven by the China market in the past decade, are becoming more uncertain in these days. The country has been under lockdown with its zero-Covid policy, although it has been lifted in December, is still uncertain.
With the Russian’s attack of Ukraine and the country is under sanctions from the Western world. It sends the message to China if they would openly attack Taiwan and the consequence that they would have to face.
Although most of the luxury brands said that they have not experienced any slowdown. The S&P Global Luxury Index is down by 30% in this year.
Fashion Giants Pledged for More Recycled Fibers – WSJ. November 15, 2022
During the United Nations climate conference in Egypt, business leaders with the fashion companies were moving forward to look for ways to collaborate and partnering to help to solve their shares in environmental issues to fulfil the net-zero commitments at the time when customers, regulators and investors have shown their rising scrutiny.
Another global coalition of 65 businesses known as the First Movers Coalition was founded at the GOP26 in Glasgow last year, promised to foster innovative lower-carbon suppliers in hard-to-decarbonized areas like cement, steel and aviation.
Our fashion industry is under the increasing scrutiny from consumers and regulators about where the fabrics are coming from and what is happening to its waste.
In the U.S. the textile waste going to the landfills has been rising since 1960 and reached 11.3 million tons in 2018 according to the latest figures from the U.S. Environmental Protection Agency.
The European Union published a plan in March 2022 calling for clothing to be long-lived and recyclable, and also to a greater extent that it should be made of recycled fibers by 2030.
Fashion houses like H&M, Zara, Gucci, and Stella McCartney were among the companies who mentioned at the COP27 in Sharm-El-Sheikh that they would collectively purchase 550,000 metric tons of alternative fibers to make textiles and packaging, such as those made from agricultural residuals or recycled materials. They weren’t able to set the deadline as currently the materials are scarce to come by.
There is a lot of pressure on the fashion industry to reduce its environmental footprint and the awareness is experiencing a rapid uptake within those mainstream brands. This has been very encouraging.
Lanvin Group’s Endeavor in Their Merge with Fosun Group – WSJ, December 16, 2022
Lanvin Group and Primavera, founded by former Goldman Sachs Group Inc., and its Greater China chairman Fred Hu, announced the merger in March. The deal has faced multiple hurdles including a stock-market rout, currency-market volatility and investors’ disinterest in SPACS.
Lanvin Group owns multiple Western brands, is controlled by China’s Fosun International Ltd. and has raised $150 million in fresh capital at a valuation of $1 billion, which it lowered its valuation from $1.25 billion to $1 billion in October.
And because of the turn in fortunes for special-purpose acquisition companies (SPAC) with the general slowdown in the market for new listings, the shares traded at above $14 in mid-morning but at the end of the day it was only at $7.63 per share.
Fosun, a Shanghai-based company conglomerate co-founded by the Chinese billionaire Guo Guangchang and was once known as one of the most progressive deal-makers who made a lot of outbound acquisitions. Lately, it was reined in by Beijing’s policy to stop the outflow of the capital.
Lanvin was founded in 1889 and it has under the group Wolford, a high-end Austrian hosiery brand, Sergio Rossi, an Italian shoemaker, St. John, the American luxury house and Caruso, a tailoring label.
Most of the fresh capital raised by the group was outside institute investors, and we are referring to the Japanese conglomerate Itochu Corp. But around 97% of the original SPAC shareholders redeemed their shares upon the merger and took back the money they invested in the shell company.
The average redemption rate for the de-SPAC transactions went up to 84% this year from last year’s 45%. This means the investors have redeemed $84 of every $100 they invested. This is because of the change of the market environment as SPECS have always been easier in a bull market and investors are interested on actual yields right now.
H&M’s Performance for the Recent Twelve Months – WSJ, December 16, 2022
H&M reported a rise of 12% in the annual sales but the rate of the growth in the fourth quarter struggled with economic uncertainty. The revenue for the 12 months to November 30 came to $21.84 billion. In 2019 it was doing $22.71 billion which was before the pandemic.
But we have to understand that it has been hampered by the closing of its stores in Russia and Belarus at this time when Russia is still invading Ukraine. The lockdowns in China led to its temporary closing of 50 stores in the most recent quarter.
And like all the other retailers, with the economic uncertainty and high inflation rate have turned the customers away.
H&M’s performance lagged behind Zara, who announced its sales for the nine months increased by 19% compared with last year. But in its fourth quarter, it has also shown a slowdown.
We wait to hear H&M’s earning in January 2023.
Zara Reported Both Rises in Sales and Earnings – WSJ, December 15, 2022
Inditex reported a rise both in sales and profit as shoppers are still visiting their stores despite the economic uncertainty.
Its net profit for nine months to October 31 rose 24% from a year earlier to €3.1 billion. Its sales increased by 19% to €23.1 billion from €19.8 billion before the pandemic in 2019.
Despite a record-low consumer confidence in Europe with all the unfavorable factors, its autumn and winter collections had been well received by the customers. Its sales are said to have increased around the world and both physical and digital sales are doing well.
Inditex reported they have increased the selling prices to counteract with rising material and logistical costs. They said that their operating costs have increased by 17% for the nine months of this year. But they have invested their inventory to avoid from any shortage of merchandise.
Outlook of Cotton Prices for 2023 – WSJ, December 9, 2022
Cotton prices surged through 2021 and reached the 11-year high in May of this year. But since then, it has been on a steady decline and are now 47% below that peak. The unfavorable weather—severe flooding in Pakistan and drought in the U.S.—affect cotton-harvest and help to push the cotton prices up again. A worsening consumption pulled the prices down and in the nine months of this year, up until September, China’s cotton yarn imports have fallen by nearly half from the same period a year ago. Meanwhile, ocean shipping rates from East Asia to the West Coast of the U.S. were down by 87% compared with a year ago.
Apparel companies managed to increase their prices as costs have been on the way up, partly due to the inefficiency of the supply chain, the factory shutdowns in Vietnam, and all these created a lower inventory across the industry. For the moment, the consumers have the appetite for dressier clothes and made it easier for the clothing brands to increase their prices. But going forward, if inflation will continue then it will shift the consumer’s spending from discretionary purchases.
Cotton comprises roughly 10% to 20% of the cost of goods sold for Levi Strauss, North Face, Gap, American Eagle Outfitters, Abercrombie & Fitch, Ralph Laurent, Children’s Place and Hanesbrands. They all can see the benefits of lower cotton prices for the next year and they tend to make purchase of cotton in advance.
China acts both the key manufacturer of clothes and consumers, has eased from its lockdown policy, will play a key factor for the cotton prices knowing that it has been viewed as the bellwether for global cotton consumption. It may push the cotton prices up. But if the consumer demand fall next year, the cotton prices can be softened as well.
Shein’s Latest News – WSJ, October 29, 2022
Shein is on track to reach revenue of $24 billion this year. This is three quarters of sales from Zara and it took Shein ten years to reach this point. Originally it was started in China but now its headquarters is in Singapore.
The business model of Shein is its ability to sell a large assortment of apparel at an incredibly low price. Its quick response to adjust in according to the market need is also one of its keys of success.
Its gross merchandise value (GMV) is projected to reach $30 billion in 2023 which will be on par with Zara. And the company has been profitable since 2019.
The company is privately held and it is currently shipping and selling to more than 150 countries.
Shein was founded by four young people in their mid-to-late 30s all with different experiences. Xu Yangtian acts as the CEO, Molly Miao as the chief operating officer, Maggie Gu works as the merchandising development and Tony Ren is in charge of the supply-chain management.
They began with the online retail business selling products made in China and using their skills in online marketing and search-engine optimization to target customers outside China. They were selling wedding gowns, spectacles, clay teapots which were unrelated to fashion.
After two years of trial-and-error, they decided to focus on fashion retailing and it was something missing in the e-commerce at that time. They set up Shein.com in 2012 and established its supply chain in Guangzhou, which is also the major manufacturing hub in China. They have now a supplier network of more than 3,000 manufacturers. Its key success is its low price that they can use for products that they can sell directly to the consumers.
Prada’s Succession Plan – WSJ, December 7, 2022
The former LVMH executive, Andrea Guerra, has been planned to be Prada’s next chief executive. This is also the plan to set the long-awaited succession for Miuccia Prada and her husband, Patrizio Bertelli, who are now 73 and 76 respectively.
It is expected that Patrizio Bertelli will become the chairman of the board and Muiccia Prada will continue as its creative director for the Prada and the Miu Miu brand.
Andrea Guerra started his career in hotel management and in January 2020 he was named as the CEO of a newly created LVMH Hospitality Excellence division, but he stepped down as a senior advisor this year.
Prada was founded in Milan in 1913 by Miuccia’s grandfather and his brother, and since then the business has grown into a company with a value of $15 billion and 13,000 employees as at the end of 2021.
Patrizio Bertelli started selling leather belts and owned a modest leather-goods business in the mid-1970s and met Miuccia at a trade fair. Later the two got married. The two combined their talents, one with her cutting-edge aesthetic and the other with his sharp commercial trained vision, transformed a company of $40 million in sales in 1990 to $1.6 billion ten years later.
Today, the two of them owned almost 80% of the company and Prada has been listed in Hong Kong since 2011. They are now exploring if it is possible to also list the company in Milan.
Their successor of the family business, Lorenzo Bertelli, is a 34 years old, once a race-car driver who retired in 2017 and has joined the company since then as the group’s digital-communication strategist. He joined the board last year and he is serving the roles as marketing director and head of the corporate social responsibility.
Succession has always been very challenging as for the fashion houses the namesake designers are often very closely linked. That is also the reason why we have seen many of the fashion houses have been snatched by the giant luxury conglomerates like LVMH and Kering who would appoint the new executives to lead the companies.
Andrea Guerra’s nomination as its chief executive will be voted in its next board meeting on January 26, 2023.
Appetites for the Luxury Brands – WSJ, November 15, 2022
The U.S. tourists have been spending heavily in designer fashion stores in European cities. Luxury spending by American tourists in the region was up more than 80% in the third quarter of this year compared with the same period in 2019, which was also before the pandemic.
Normally to buy the European designer goods in the market where they are actually produced would be a bit cheaper because of the savings in areas such as freight costs and import duties. But lately this difference has reached its extreme as the American shoppers have to pay 38% more at home than they would for the same product in Europe and historically the difference was about 20%.
This is due to the strong dollar and this is the important factor as all the other currencies have been weak compared to the U.S. dollar for the exchange.
In Europe, luxury brands can raise prices to rebalance things that have happened around them. Before the pandemic this probably wouldn’t have to hesitate. Back in 2019, half of all luxury sales in the region were to overseas tourists, particularly to the Chinese visitors. But today few Asian travelers can be found in Europe and the luxury brands have to rely on their locals.
Any dramatic price increase would annoy the European customers although prices have been raised by 8% this year, going forward it is hard to estimate as this can be a difficult winter for them.
Their pricing in the U.S. dollars help them to improve their margins and they don’t need to address the price gaps like before.
For the Chinese tourists, the luxury goods were almost 50% cheaper to buy in Europe than in the China cities and this was several years ago. It was due to the fluctuation of the currency’s exchange.
This created a business for the “resellers” as they could go to Europe on shopping trips and resell the goods at home. The premium can be as wide as 35% but in these days they can’t travel to Europe like before due to the pandemic.
At this moment, the U.S. tourists are still enjoying their shopping in Europe and this can last for a little while more.
Shein is Setting Trends Now – FT, November 3, 2022
Shein is soon to become the world’s largest fast-fashion retailer because of its marketing strategy focusing on Gen Z’s growing appetite for cheap clothing. It has also attracted new competitors to follow suit. We have found the Chinese e-commerce group, Pinduoduo who launched Temu and ByteDance, owner of TikTok, have launched If Yooou, respectively.
In April, it was valued at $100 billion at its last fundraising round, making it the world’s third-most valuable private company at the time. It was behind Elon Musk’s SpaceX and ByteDance.
Here is the report about the new startups that you can refer as the following:
Temu – an online marketplace owned by Pinduoduo’s supply chain expertise was only launched in September.
Pinduoduo is Shanghai based, was launched in 2015 as an e-commerce platform and specialized in its bargain group-purchase offerings. It expanded its market by focusing on consumers in less affluent cities ignored by those dominating performers like Alibaba and JD.com.
Temu has made the promising launch with influencers boosting the platform on social media.
Temu is targeting garment manufacturers in Panyu, where Shein is also using, but offer subsidies and waiving commissions and marketing fees to help the merchants to promote their products. But the price is so low that some manufacturers are complaining.
Pinduoduo has pledged $1.4 billion to help Temu to grow their business overseas.
If Yooou – It has been launched in the first quarter of this year by ByteDance. It is aiming shoppers in Europe. It adjusts its order through live feedback from shoppers on its website, just following Shein’s practice.
ByteDance’s TikTok has been the key of success to Shein, but with If Yooou, it has a lackluster record with its own fast-fashion venture.
For summarize, we use Shein as the example for the purpose of benchmarking:
Shein – It was founded in 2008 and had spent a decade in building its supply chain and improving its prediction algorithms. The company has also been using artificial intelligence to predict fashion trends. It is using digital marketing, engaging influencers and pushing adverts on social media. For new followers like Temu and If Yooou their marketing cost will be many times over at this time.
For Shein, it already sold $16 billion worth of merchandise in the first half of this year, a 50% increase from 2021. In 2022, it will be doing $30 billion sales and this will make them the world’s largest specialty apparel retailer. While the Spanish fashion group Inditex, who owns Zara was the world’s largest apparel retailer for 2021 was doing $27.4 billion.
Shein is also backed by Sequoia and General Atlantic, the investors who have invested from the private markets. Its net profit margin in 2021 was 6% but its number will deteriorate this time slightly by the increased procurement costs.
Despite of the mounting concerns from environmental activists about the impact of the fast fashion analysts predict the market will still grow and the Chinese e-commerce will grow from the $28 billion in 2021 to $42 billion in 2024.
In this year, the China market has been battered by the Covid lockdown and every apparel retailer is looking for the overseas market.
We thought that this piece of information will be very important for our readers to know.