SHEIN's valuation shrinks by 30 billion. Can the fast fashion giant maintain its position?

Recently, the fast fashion cross-border e-commerce SHEIN encountered another "episode". It is reported that its valuation has shrunk by 30%, and its initial public offering may be affected . However, its market position in the European and American markets remains solid.

Valuation shrinks by 30%, may SHEIN's IPO be affected?

SHEIN , which entered the overseas market with its low-price, fast-moving consumer goods model , has repeatedly been rumored to be going public. In April this year, SHEIN's valuation reached 100 billion yuan, and its download volume in overseas markets also ranked first. However, a source recently said that the company's valuation has shrunk by 30 billion yuan.

According to Bloomberg , some SHEIN shareholders are considering cashing out before the company's IPO, and the private price is 30% lower than the $100 billion valuation in April. However, the two parties to the transaction have not taken further action due to valuation issues. In April, SHEIN's valuation reached 100 billion, which once exceeded the total of H&M and Zara, attracting great attention from industry insiders.

It is reported that the company's recent slowdown in business growth and some scrutiny are important factors that have led to the shrinking valuation and affected its IPO. Although SHEIN's annual sales revenue increased from US$10 billion in 2020 to US$16 billion in 2021, its sales growth rate has slowed from the previous 250% to 60%. In addition, some reviews on copyright and environmental issues have also posed potential risks to SHEIN's strong growth.

In fact, there have been constant reports about SHEIN's upcoming listing in recent years, but the company has always responded negatively. In the latest news about SHEIN's IPO, a source revealed that the company plans to IPO in the United States as early as 2024 , and its investors include Tiger Global, IDG Capital and Sequoia Capital China. However, the current valuation reduction may affect its listing process to a certain extent.

SHEIN has always been very " low-key ". Initially, the company focused on wedding dresses , and later transformed into the fast fashion clothing industry. With the advantages of high-quality and extensive supply chain and low-price, fast-moving consumer goods development strategy, it quickly entered the overseas market, and its popularity in the European and American markets soared. In 2015, it jumped to the leading position in the overseas fast fashion clothing industry.

At present, SHEIN 's sales categories have covered many categories, including clothing, home furnishings, and pets. With two major brands , SHEIN and ROMWE, it later launched MOTF (a high-end clothing brand), PETSIN (a pet product brand), and Luvlette (an independent underwear website). With the joint efforts of multiple parties, it has rapidly grown into a benchmark enterprise for domestic overseas brands and the world's third most valuable startup .

The shrinkage of SHEIN 's valuation actually reflects the development trend of the industry to a certain extent. The overall bonus period of the cross-border e-commerce industry has begun to fade. Not only SHEIN , but also many domestic companies that sell goods overseas have also seen their sales growth slow down. Under this circumstance, the development of overseas companies like SHEIN has become more stable.

As for SHEIN , although its valuation has been reduced, its precise consumer marketing positioning has ensured the company's market share and made the foundation it has laid in overseas markets more solid. In the second quarter of this year, SHEIN's downloads in the United States exceeded Amazon, setting a new record, and there is still huge room for market development.

Still a favorite among consumers, SHEIN hits a new high in downloads and installations in the US

According to the latest data from Sensor Tower , SHEIN's downloads and installations in the United States reached 6.8 million times in the second quarter of this year, an increase of 13% from the previous quarter, setting a new record, and its audience continues to expand. It is worth noting that SHEIN 's mobile installation volume exceeded Amazon for the first time. Amazon's downloads were 6.3 million times, a decrease of 7%, and its growth has slowed down.

In May this year , SHEIN surpassed Instagram and Twitter to top the App iPhone download rankings in the U.S. In this regard, some industry insiders believe that SHEIN may be able to compete head-on with Amazon in this regard and seize more market share and consumer audiences in Europe and the United States.

Compared with the relevant data of the past three years, SHEIN has achieved continuous quarter-on-quarter growth. If the figure is compared with the second quarter of 2019, its average active installation volume in the United States has increased by more than 430%, accounting for about 15% of the monthly active users in all online shopping applications.

Currently, the United States has become SHEIN 's largest lifetime installation market. SHEIN 's global downloads have reached 525 million times, of which American consumers account for 14%, followed by Brazil. Since the fourth quarter of 2020, SHEIN's installations in Brazil have risen rapidly. In the first quarter of this year, its installations on the Brazilian App Store and Google Play exceeded 10.7 million times, a month-on-month increase of 15%, and the lifetime installation volume was approximately 68.3 million times, accounting for approximately 13% of the total lifetime installation volume. This shows that the company's strategy of focusing on market layout has achieved remarkable results.

In fact, it is not surprising that SHEIN is so popular in the US market. Price , audience positioning and supply chain advantages are the three magic weapons that capture consumers, and they are applied throughout the entire product category.

Audience, low prices, and supply chain: SHEIN 's three ways to make money

SHEIN 's rapid rise in the European and American markets is naturally inseparable from its marketing strategy. SHEIN focuses on promoting low-priced high-quality products and strengthening the supply chain, mainly targeting the "Generation Z" group.

Being in the fast-moving consumer goods industry, the company first targeted the "Generation Z", a consumer group that not only values ​​product quality but is also more sensitive to price. The lowest price of products on its beauty independent website is only around $5, and there are more than 400 products at this price. SHEIN 's clothing prices are also only around a few dozen dollars, and the price of a dress does not even exceed $15.

In order to strengthen the stickiness of the audience, SHEIN has also increased its product promotion efforts on major social media. The number of posts on major social media is close to tens of thousands. At the same time, SHEIN also uses Instagram, Facebook, Pinterest, TikTok and other platforms to promote its products through influencers, with significant results in attracting traffic and conversion.

In addition, strong supply chain advantages are also an important guarantee for SHEIN to conduct "real-time sales" of products . According to industry analysis, SHEIN orders start with a small scale of one or two hundred pieces. If the market feedback is good, it will continue to return orders. If it does not meet expectations, it will stop production and make timely adjustments based on market conditions. The flexible supply chain method has high flexibility.

It is understood that in order to maintain high operating efficiency, SHEIN will be divided into multiple systems according to different roles. Its matching factories can see the real-time demand of SKUs on sale and shorten the production cycle through precise matching. Compared with its competitors ZARA and H&M in Europe and the United States, SHEIN's production cycle is half as short. An industry insider once said: "30% of SHEIN's clothing supply chain in Guangzhou is supplying it." This shows why SHEIN's products can be supplied in real time.

As a benchmark company in the cross-border e-commerce industry, SHEIN's development has boosted the progress of overseas brands. From the current situation, its valuation shrinkage will affect the possible capitalization process, but it may also have a positive impact on the company's future development to find new breakthroughs.

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