Widely criticized but also extremely popular: the originally Chinese online clothing store Shein – which sells shirts or sweaters for a few euros – is preparing an IPO in the US. The company has submitted an application to the American regulator. It would be one of the largest IPOs on Wall Street in years: Shein was valued earlier this year at 66 billion dollars (about 60 billion euros), which is expected to rise to 90 billion dollars (about 60 billion euros) upon introduction. 83 billion euros). The IPO would according to The Wall Street Journal (WSJ) could take place next year.
The web giant started selling cheap wedding dresses in China fifteen years ago. It now sells all kinds of clothing worldwide – in more than 150 countries. This is not uncontroversial: the clothing is said to be made under duress Chinese Uighurs and factory workers would Working 75 hours a week with only one day off per month. The clothing is often described as ultra-fast fashion and is, among other things, unsustainable and unsuitable for recycling due to its low quality. Meanwhile, cheap clothing items are in great demand, especially among teenagers.
The IPO of Shein – original name: She Inside and therefore pronounced She-In – to enter the stock market comes at a logical time: the company has grown rapidly in recent years. In 2021, Shein became the largest clothing company in the world, surpassing fashion giants such as H&M and Zara. In 2022, it recorded $23 billion in revenue and $800 million in profit, while in 2018 revenue was only $1.3 billion. The United States is the largest sales market, followed by Europe.
Use influencers
Shein’s success is partly due to the company’s online marketing strategy: it uses influencers on social media and collaborates with American celebrities such as Katy Perry and Lil Nas the brand is especially popular among young women.
In addition to its own sales, Shein’s website also acts as a platform for third-party sales and it bought shares in the clothing brands Forever21 (American) and Missguided (British). Sales are almost exclusively online, apart from a pop-up store here and there, although it opened its first physical store in Tokyo last year.
The IPO draws attention not only to Shein, but also to founder and owner Sky Xu, who has so far managed to stay out of the public eye. Although he managed to grow his company with the help of social media, Xu does not use it himself. He also never gives interviews, writes the Financial Times in a profile. Xu is at the helm of a large international company, most popular in the United States, but speaks virtually no English.
According to FT, Xu grew up in poverty in Zibo, a city in China’s Shandong province. His mother was a seamstress in a clothing factory. Xu himself has experience in marketing as a search engine specialist, which influenced Shein’s marketing strategy: Shein follows new fashion trends through data analysis, which it immediately responds to. The company faced a lawsuit from H&M, which accused Shein of copying designs.
Until 2021, Shein was headquartered in Nanjing, China, where Xu moved after studying international business. Xu’s net worth was estimated at $10 billion by Forbes at the end of 2022.
Moving to Singapore
Two years ago, Shein moved its headquarters to Singapore, probably because of rising tensions between the United States and China, which could complicate the group’s business operations, according to The Wall Street Journal. The supply line still largely runs from the Chinese province of Guangdong. US Congressmen suspect that the materials come from the Chinese province of Xinjiang, where Uyghurs, a Muslim minority, are oppressed and their human rights are violated, including by forcing them to do forced labor.
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Undercover investigative journalists from the British channel Channel 4 got in the documentary Watch Inside The Shein Machine: UNTOLD see how textile workers are exploited. They have to sew hundreds of garments a day, working from early in the morning until late at night, often for only a few cents per garment. Shein responded by pointing to the code of conduct, which is said to correspond with “the core values of the International Labor Organization (ILO)” and said it would take action against suppliers who do not adhere to the code. The company told WSJ no materials from China to get more. To maintain its gigantic and dirt-cheap offering, the company has signed contracts with thousands of suppliers, especially in Asia.
In the meantime, Shein faced competition last year from another Chinese online store with a similar revenue model: the Temu app. That app copied Shein’s social media strategy and has twice as many active users as Shein in the United States. Temu receives similar criticism as Shein.
The news of Shein’s IPO comes at the end of a year with few newcomers to the American stock market. Just like on European stock exchanges, companies were more cautious this year – just like in 2022 – than in other years, due to the uncertain and fluctuating market. High inflation and interest rate increases by central banks to curb inflation contribute to the uncertainty that makes companies reluctant to make an IPO at this time. Companies that did enter the stock exchange generally performed less well than expectedsuch as sandal brand Birkenstock.
Successful introductions
Yet there were a few success stories: the British chip group ARM, for example, started with a strong price on the Nasdaq technology exchange. Although the price dropped quite quickly, several large companies such as Apple, Google and Nvidia bought shares, making the IPO a success. ARM’s IPO was followed with great interest because it was the first major one in years, and therefore a benchmark for the market. Grocery company Instacart also made a successful debut on Nasdaq – but this company also had to deal with share price declines. This shows that the current economic conditions are still not ideal for an IPO.
In Europe, private equity fund CVC Capital Partners explored the possibilities for a stock exchange listing in Amsterdam this year, but the company ultimately postponed that until next year. If the market calms down in 2024, it is expected that more companies, in addition to Shein, will still want to go public.