A Chinese fast fashion company without a network of physical stores is close to surpassing the joint stock market value of Spain’s Inditex, Zara’s parent company (about 62.8 billion euros), and Sweden’s H&M (about 21 billion). Social networks, celebrities and influencers have been crucial to its success from the beginning. The pandemic underpinned his strategy, almost entirely online. With its low prices, it attracts teenage consumers and promotes customer loyalty.
Who are we talking about? Shein, of course.
A company turned gold. The budget clothing, beauty and lifestyle retailer that produces more than 6,000 new items daily and only sells online is in talks with investors, including General Atlantic, for a financing round that could put the company at around $100,000. million in value, as reported by Bloomberg a few days ago.
If Shein succeeds, it would make the brand that has only lived a decade twice as valuable as Fast Retailing Co., which owns Uniqlo, which last year had more than 2,300 outlets in 25 countries. It would also make Shein the most valuable startup in the world after ByteDance Ltd. and SpaceX, according to CB Insights.
Outshine your rivals. His valuation proposal would surpass that of the owners of H&M, Uniqlo and Zara. Data from the consultancy Euromonitor suggest that Shein went from having a share of 0.4% in 2020 to reaching 0.7% of the fashion market in Western Europe during 2021 (equaling Levi’s), which is equivalent to a growth of 75% in one year. At the head of the classification are H&M, Zara and Primark, with shares of 3.2, 2.9 and 2.6%, respectively, but with much lower growth rates, after more than four decades, all of them at their back opening market: the leader has even fallen two tenths, while its two rivals climbed at a rate of 10%.
How do they do that? Shein’s model focuses on young people under the age of 25, to whom it offers online low prices and daring designs that it renews at breakneck speed. “Basically we are an online store with very cheap clothes, Primark type, and our audience is mainly generation Z, that’s why our strategy focuses on influencers,” an employee of the textile firm in London pointed out in an EFE article.
On TikTok, Shein sweeps his rivals with 3.9 million followers for Zara’s 1.2 million and H&M’s 150,000, while on Instagram he is still behind both, but getting closer: 24 million for the Chinese brand compared to 38 million. of the Swedish and almost 50 of the Spanish. The company has accelerated on a trial-and-repeat basis. That is, you continuously add a wide variety of items but in small quantities to your app and only increase the production of those that are successful. With this “ultra-fast” model, the firm controls its inventory and reduces risk.
Business model. Another key is that their prices are low and the package is sent by mail, which means that on many occasions their shipments are not subject to tariffs, contrary to what happens with other giants in the sector. One of its hallmarks is that it does not have a network of physical establishments, although it occasionally opens ephemeral stores. Despite concentrating the manufacture of its products in China, it does not sell them in the local market and focuses entirely on foreign markets.
A meteoric journey. Since its launch in 2012, Shein has developed an extensive network of low-cost providers in southern China. But during the pandemic, she worked with celebrities like Lil Nas X and Katy Perry to boost her profile among Gen Z shoppers outside of China. Shein thus benefited from changes in consumer behavior as they shopped on mobile and desktop. Sales more than tripled in 2020 to 10 billion, making it the world’s largest online fashion brand.
Environment. Shein’s staggering valuation also hides some of the adverse impact the fast fashion industry has on the environment. Although the company has not commented on its carbon footprint, the sector is often blamed for its heavy reliance on petroleum-derived petrochemicals. Fashion accounts for up to 10% of global carbon dioxide production, according to the UN. It also accounts for a fifth of the 300 million tonnes of plastic produced globally each year, a product that is the backbone of polyester, which has overtaken cotton as a raw material in textile production.
Put obstacles to compete. The Chinese brand is also facing headwinds from countries like the US, with lawmakers in Washington considering a law that could hamper its sales in the world’s No. 1 economy. The House of Representatives passed the America Competes Act in February, which would prevent Chinese companies from using a current exemption that allows duty-free imports of packages worth less than €800. Hard hand with the competition.