As TikTok took over the world, a low-profile Chinese company known for its cheap wedding dresses joined the land grab. Videos of people trying on cheap, trendy clothes from Chinese fast-fashion group Shein have become a genre of their own. Surging sales mean Shein’s US listing may become one of the largest in the past decade.
Shein has filed paperwork for a US initial public offering. Backers include Abu Dhabi sovereign wealth fund Mubadala and venture capital group Sequoia China. The group has reportedly targeted a valuation as high as $90bn, not far from its $100bn private valuation last year.
Shein has achieved remarkable growth. Viral videos playing to viewers’ short attention spans have tapped unprecedented demand for garments, home furnishings and pet accessories, all of which Shein provides at less than $10. The group has made heavy and effective use of social media marketing. Here, influencers receive commissions for posts featuring Shein outfits.
Fledgling Gen Z video makers cannot be caught wearing the same thing twice. Zara now has high price points relative to other fast-fashion groups. H&M is cheaper but lags behind Shein in keeping up with viral trends.
The group has benefited from modest requirements for warehouses and inventory in the US. It ships most of its products directly from China. This allows it to avoid import taxes. A provision in US tariff regulations waives import tariffs if the package’s fair retail value does not exceed $800.
Yet this strength is also a big risk. The business model invites regulatory and political scrutiny. Shein’s biggest market is reportedly the US. Lawmakers there want Shein to disclose employment practices that they allege include forced labour. There have also been claims of import violations. Shein has denied all allegations.
Valued at an industry multiple, Shein would be worth about $70bn. That would be lower than the $126bn market value of Zara owner Inditex and higher than H&M’s $27bn.
The figure is conservative, given that Shein is expected to grow faster than peers. It has a target to more than double sales over the next two years.
However, the US listings market is lacklustre and Shein bears notable political risks. It was valued at $66bn in its last private fundraising. A flotation price not far from that benchmark would make sense.
The Lex team is interested in hearing more from readers. Please tell us what you think of the prospects for the Shein IPO in the comments section below.