"Shein is a chameleon": Fast fashion firm preps blockbuster US IPO with supply chain prowess as its superpower
Chinese fast fashion giant Shein has filed confidential paperwork for an initial public offering with the US securities regulator, according to people close to the matter.
Shein has disrupted the clothing industry with its on-trend $5 skirts and $9 jeans in the past few years. The 11-year-old company is now one of the largest fashion brands in the world.
It has hired JPMorgan Chase, Morgan Stanley and Goldman Sachs to advise it on the IPO.
Shein is backed by investors including Abu Dhabi sovereign wealth fund Mubadala, venture capital group Sequoia China and private equity group General Atlantic.
Chinese retailers and logistics companies are ahead of the curve, Brittain Ladd, a supply chain consultant and former Amazon executive, observed in a LinkedIn post.
“Most brands and apparel retailers have dismissed Shein as a threat to their business. In 2022, I spoke with a CEO at a major retailer who told me, “Shein is a fad. We aren’t concerned.” Big mistake,” he commented.
Shein, now based in Singapore, was valued at around $66 billion in a fundraising round in May.
A year before the latest fundraising, it had been valued at $100 billion, making the company worth more than the combined market capitalisation of H&M and Zara owner Inditex.
Ladd said: “Note to all retailers: The number of years you’ve been in business doesn’t matter. A better business model and a better value proposition can and will destroy your company.”
“Shein recorded $23 billion in revenue and $800 million in net profit in 2022 and told investors it delivered record revenue and income for the first three quarters of 2023. The retailer sells to online shoppers in more than 150 countries but not those in China. The US is Shein’s largest market.”
He added: “After dominating online clothing retail, it has been moving into other arenas including becoming a marketplace for third-party sellers. That puts it in competition Amazon and Temu.”
“I’m amazed at the number of analysts claiming that Shein isn’t a threat to Amazon and other apparel retailers like Target and Gap. It has already proved that it can and will pivot its business and form partnerships when strategic to do so.”
“For example, it acquired a stake in the operator of retailer Forever 21, which will allow the online only retailer to sell in its bricks and mortar stores, and bought British women’s fashion brand Missguided.”
Shein’s supply chain prowess is its superpower, Ladd believes.
It subcontracts thousands of factories, and places orders in small quantities to test the market appetite and replenish orders on demand.
“This is what makes its fashion fast. Only the apparel in demand is manufactured,” Ladd said.
He concluded: “Shein has also diversified its supply chain by manufacturing in Turkey and Brazil and India. It is a chameleon. It can become anything it wants and that makes it a dangerous competitor.”
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