The valuation was cut by $36 billion! SHEIN, which "reduced its price to raise funds", also "suffered from the cold"

As an industry unicorn, SHEIN 's every move will attract a lot of attention, whether it is the cross-border e-commerce circle, the technology circle, or the capital circle, everyone is watching closely.

In recent years, there have been constant rumors about SHEIN going public in the US, but none of them came to fruition. As the Spring Festival approaches, there is more news about SHEIN, which not only mentions that it plans to go public in the US as early as this year , but also says that it plans to raise up to $3 billion.

However, in the context of economic downturn, the capital market has also reassessed its valuation, which has been reduced from US$100 billion to US$64 billion, a 35% decrease . The market environment in 2022 has made many sellers feel the chill, and now giants such as SHEIN have not been able to escape the cold.

The market is cold and super sellers are forced to cut prices to raise funds

According to the Financial Times, SHEIN is in talks to raise a new round of financing.

Shein is seeking to complete a new round of financing from existing investors, including Abu Dhabi sovereign wealth fund Mubadala, venture capital group Sequoia China and private equity group General Atlantic, according to people familiar with the negotiations .

The three also participated in SHEIN's last round of financing in April last year. At that time, SHEIN's valuation was slightly over $100 billion, making it the third most valuable private company in the world, second only to ByteDance and SpaceX.

Unexpectedly, in less than a year, the valuation took a big dive.

Since SHEIN received its $100 billion valuation, market conditions have declined dramatically, venture capital funding has tightened rapidly, and the initial public offering (IPO) market has basically closed, all of which has led to a shortage of funds for many private technology companies in the past year.

A wave of layoffs has swept across the tech sector to cut costs, but as time goes on, more and more companies inevitably run out of cash and are forced to enter so-called "down rounds" - accepting financing at a much lower valuation than the company had previously received.

Obviously, SHEIN is one of them.

It is reported that the financing amount that SHEIN negotiated with investors is between US$1.5 billion and US$3 billion, but the valuation is only US$64 billion (approximately RMB 433.92 billion at an exchange rate of 6.78) , which is about one-third less than the previous peak valuation.

In fact, last October, media reported that SHEIN's valuation was between US$70 billion and US$85 billion in the private equity market where the price was not publicly disclosed, reflecting that the market had already adjusted its valuation.

However, compared with other e-commerce peers, SHEIN's valuation shrinkage is relatively mild. For example, Pinduoduo's market value has plummeted from a peak of US$240 billion in February 2021 to around US$100 billion, a loss of more than 50%.

SHEIN's current round of financing is expected to be completed in the next few months.

Not only that, according to people familiar with the matter, SHEIN still expects to conduct an IPO in the United States, its largest market, as early as this year. The company achieved revenue of $30 billion last year, including $6 billion in cash income , which the person said would be used to diversify its payment business.

It can be seen from SHEIN's entry into the payment field that it is no longer satisfied with positioning itself as a cross-border e-commerce seller, but chooses to go a step further and start a diversified layout.

In addition, SHEIN is also trying to break through the original business model. Not long ago, the Wall Street Journal reported that a memo from SHEIN to investors showed that SHEIN was preparing to introduce third-party sales, allowing other brands and retailers to sell on its platform and develop into a third-party online market.

In fact, this is not the first time SHEIN has tried to build a third-party platform. Last October, it launched a resale platform, Shein Exchange, which allows American users to buy and sell second-hand goods in the fast fashion retailer's mobile app. This is nothing short of a test run for SHEIN on third-party platforms.

The trend of going overseas is surging. In recent years, Alibaba, Pinduoduo, ByteDance and others have stepped up their efforts to expand overseas markets and have launched cross-border e-commerce businesses in North America and Europe. With the participation of major giants, the competition faced by overseas companies has increased dramatically, and even unicorns like SHEIN are inevitably affected.

Especially the appearance of Temu is a stimulation to SHEIN.

Temu suddenly emerged, challenging SHEIN's low-price strategy

Since Pinduoduo, famous for its "low prices", launched Temu in the United States in September last year, the competitive relationship between SHEIN and Temu has been formed.

Affected by inflation, the consumption of European and American people has been seriously downgraded, and high-quality and low-priced goods are sought after. The emergence of Temu just meets their consumption needs. Therefore, only two months after its launch, it became the most downloaded shopping app in the United States, beating Amazon, SHEIN and other predecessors.

Temu's "low-price strategy" is generally seen by the outside world as a benchmark against SHEIN. SHEIN did not underestimate this competitor and took decisive measures to deal with it: notifying platform merchants that they would close their stores if they entered Temu.

Temu also did not shy away from its intention to "learn" from SHEIN. In the recruitment, it clearly expressed its interest in job seekers with SHEIN work experience, and also offered an attractive salary of double the amount to poach them.

In addition, Temu and SHEIN have many similarities in website style design . As far as the clothing category is concerned, whether it is the interface design or the picture layout, it is difficult to tell which one it is if you don’t distinguish carefully.

Not only that, the two also have many similarities in marketing strategies. As we all know, SHEIN's social media marketing is very successful and is also its main source of traffic. It is understood that Instagram and Facebook occupy an important position in Temu's main customer acquisition channels. These two platforms account for 30% of Temu's traffic, which happens to be SHEIN's main customer acquisition channels.

According to Meta, Temu has run more than 1,000 ads in English and Chinese on its platform since September last year.

Similar Web shows that SHEIN currently has a total of 205,000,000 visits, ranking third in the US fashion and apparel category, and Temu has a total of 53,900,000 visits.

In addition, in the 2022 US download ranking, SHEIN ranked second with 40 million installations. Temu, which has been online for less than half a year, ranked eighth on the US shopping app download list with 16.5 million installations.

Comparing the two, we can still see that there is still a big gap between Temu and SHEIN. However, despite Temu's unshakable position in the short term, SHEIN still feels unprecedented pressure.

This may also be the reason why SHEIN entered the payment field and transformed into a third-party platform.

With your own payment platform, you no longer need to pay commissions to third-party payment companies, so you will get greater profits from each order.

Introducing third-party sellers plays two roles: first, it can fully tap into users’ consumption needs and enhance user stickiness; second, it can unlock multiple sources of revenue. For example, Amazon’s online marketplace has driven billions of dollars in listing and fulfillment fees.

And these efforts made by SHEIN may also be an attempt to slowly break free from the low-price competition.

SHEIN