What do we know about the Shein IPO?
Shein privately filed for a US IPO on Monday, November 27. The Chinese-based internet retailer is expected to go public sometime in 2024, and its most recent valuation of $66bn would easily make it one of the largest US listings in the past decade.
The IPO market has been in a slump for the past two years. Several big-name listings in the second half of 2023 such as Klaviyo, ARM and Instacart excited analysts and investors. However, those stocks soon fell below their initial listing prices, scaring off other companies looking to IPO.
Shein first floated IPO plans in 2022 but halted them due to market volatility caused by Russia’s invasion of Ukraine. Equities analysts have suggested more favourable market conditions are on the horizon, and several large companies—Shein included—are expected to go public in 2024.
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When it lists, you’ll be able to trade Shein shares in the same way you would any other company on the stock market.
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What is Shein?
Shein is an ‘international B2C fast fashion e-commerce platform’. It primarily sells clothing, accessories and shoes, but also features home goods, beauty, health and pet supplies. The company was founded in 2008 by Chris Xu.
Originally, the company was a wholesaler of wedding dresses in China, called SheInside, which just shipped clothes to other third parties with no influence over design and production. But in 2013, it established itself as a fully integrated retailer with its own supply chain – that year its order volume exceeded 5 million and it was successfully renamed SHEIN.
Shein is now one of the most visited e-commerce fashion sites by net sales and even overtook Amazon as the most downloaded shipping site in the US in 2021.
The company is still based in China but mainly targets customers in the US, Europe and Australia. Shein’s largest target consumer group is GenZ, which has become known for consuming large quantities of trend-led clothing at extremely cheap price points.
The brand exploded in popularity among these international markets in part due to aggressive advertisement on the social media platform TikTok. It also benefited from competitors experiencing logistical pressures from supply chains breaking down during the Covid pandemic.
Shein is the definition of fast fashion, with over 10,000 new products being put on the website per day – yes, per day.
How much is Shein worth?
Shein was most recently valued at $66bn in a March 2023 fundraising round. Before that, Shein was valued at $100bn in 2022; however, a sector-wide decline in venture funding resulted in a credit crunch for many tech companies, including Shein competitor Pinduoduo.
Is Shein profitable?
It’s unknown whether Shein is profitable. As a private company, they have no obligation to disclose financial earnings reports. However, the retailer has released yearly revenue reports.
Shein revenue by year
What is Shein’s business model?
Shein’s business model is what’s known as ‘test and repeat’, which was made famous by rivals Inditex and H&M. The idea is that they produce small batches of clothes – only 50-100 per item – and if it does well, they create more and if not, it’s discontinued. According to the BBC, just 6% of Shein's inventory remains in stock for more than 90 days.
Shien has taken fast fashion to the extreme and can turn around garment manufacture in just 25 days – it takes most companies months. This enables it to leverage fashion trends quickly.
As GenZ are its target audience, the firm largely brings consumers through social media, especially TikTok. It uses influencer culture and celebrities who have high numbers of followers to entice younger users to buy their products. Searching ‘Shein haul’ on most platforms will bring up countless videos of shoppers showing off their goods, many of them for under $10 apiece. Even Shein’s website showcases consumers’ styles via its Style Gallery.
However, Shein has faced various controversies. Criticisms are largely based on its ‘throw-away’ business model, which encourages users to buy now and never wear the same outfit twice. The website also uses countdowns for how long product mark-downs will continue, to really get those quick ‘impulse’ buys.
A staggering amount of Shein returns end up in landfill because it costs more to put them back in circulation. As issues of sustainability come to the forefront of public discussion, fast fashion retailers are likely going to have a lot to answer for, but in the meantime, Shein users don’t seem to mind.
Shein has now become one of the many fast fashion companies to attempt to rebrand its image by releasing a ‘sustainably sourced’ line of clothing called evoluSHEIN. Critics have been quick to brand it as greenwashing.
The company has also come under fire for allegedly ripping off designs from smaller businesses and independent designers. Most recently, Shein has been under scrutiny from US regulators for allegations of inhumane working conditions, including forced labour, and import violations.
Who are Shein’s competitors?
Global online retailers like HM, Zara, Amazon and Temu all compete with Shein.
H&M is a Swedish fast fashion retailer listed on the Nasdaq Stockholm under the ticker ‘HNNMY.’ The company is currently worth $27bn. Zara’s parent company Inditex is a Spanish multinational retailer that owns multiple fast fashion brands, with Zara having the largest international presence. Inditex is traded on the Bolsa de Madrid under the ticker ‘ITX’ and is valued at $126bn.
Amazon, meanwhile, is one of the largest companies in the world, valued at $1.5 trillion. The company has significantly more business operations than just fast fashion. Its global online marketplace sells everything you can think of, and a large portion of its revenue comes from Amazon Web Services, a cloud service provision used by businesses, government agencies and academic institutions. Learn more about Amazon in our comprehensive stock guide and read about the company’s more than 100 acquisitions.
The fast fashion giant also has competition in the Asia market. Pinduoduo, another Chinese e-commerce giant, has heavily promoted its sister platform Temu abroad in the US. The holding company has a market cap of more than $180bn on the Nasdaq under the ticker ‘PDD.’
CNBC has coined the “Temu effect” to describe the gamification strategy of Temu quickly winning over young users, similar to Shein. The storefront also sells small electronics and home goods in addition to apparel, earning the moniker of an “everything store.” After Shein, Temu is the next biggest player to watch in app-based shopping. Last September the app reported more than 82 million active shoppers, up from 4.6 million the year before.
Who owns Shein?
Shein is owned by parent company Nanjing Lingtian Information Technology, although the company’s ownership is frequently branded a mystery. It remains a private company, with four major shareholders so far: JAFCO Asia, IDG Capital, Sequoia Capital China, and Tiger Global Management.