Secretly Pursuing IPO, Entering Public Offering Process
Lowering Inventory Ratio Using AI and Chinese Supply Chain
"May Face Difficulties Due to US Government Regulations"
Chinese company Shein (Shein·希音), known for producing faster and selling cheaper than traditional fast fashion with its 'ultra-fast fashion' model, is planning to go public on the US stock market next year.
Chinese Fast Fashion Company Shein Aims to Raise $116 Trillion, Seeks US Listing
On the 27th (local time), the Wall Street Journal (WSJ), citing sources, reported that Shein has secretly applied for a listing on the New York Stock Exchange (NYSE) and has officially entered the initial public offering (IPO) process. According to foreign media, Shein has selected Goldman Sachs, JP Morgan, and Morgan Stanley as lead underwriters.
Industry experts believe that if Shein lists on the US stock market, it will have the largest market capitalization among companies listed in the US since Didi Global (Didi Chuxing) went public in 2021. Didi Global was valued at $68.4 billion (about 88.2 trillion KRW) at the time of its IPO but was delisted 11 months later.
In May, Shein was valued at $66 billion (about 85.107 trillion KRW). Foreign media evaluated that "it is likely to receive a much higher valuation at the initial offering." Shein is reportedly aiming to raise $90 billion (about 116.352 trillion KRW) through its IPO.
During last year's fundraising, Shein was valued at $100 billion (about 128.95 trillion KRW), ranking as the third most valuable startup in the world. This valuation exceeds the combined market capitalization of Inditex, the owner of clothing brands H&M and ZARA. An online-only fashion company with no offline stores worldwide has grown to a size comparable to global fashion giants.
AI-Driven Demand Forecasting Reduces Inventory Ratios and Shortens Inventory Turnover Days, Gaining Popularity Among Global Consumers
Shein is a Chinese online fast fashion (SPA) company. Founded in 2012 in Nanjing, China, Shein's rapid growth over 11 years is attributed to its 'ultra-low price strategy,' which has even been criticized for 'disrupting the fashion ecosystem.' Shein rapidly expanded by offering ultra-low prices such as $5 skirts and $9 jeans.
Additionally, an artificial intelligence (AI) prediction model analyzes various variables such as the latest trends and sales rates to automatically create and order new products, releasing over 310,000 inexpensive items annually.
Furthermore, Shein's competitive edge lies in its supply chain system with over 6,000 partners in China, producing small batches of 100 units per new product. Competitors produce thousands of units per product. Shein also collects real-time customer response data on new products online and uses proprietary algorithms to improve demand forecasting accuracy for additional production.
According to Boston Consulting Group (BCG), Shein's unsold inventory ratio is less than 2%, compared to the industry average of 30% and competitor Zara's 10%. Its inventory turnover days average 40 days, much shorter than H&M's 4 months.
From trend forecasting to production, Shein has secured the capability to supply over 1,000 new products every day within three days, gaining tremendous popularity among teenagers and young women in the US, Europe, India, and the Middle East.
As of November last year, Shein held a 50% market share in the US fast fashion market, ranking first ahead of strong competitors such as H&M (16%) and Zara (13%).
Recently, Shein launched a marketplace in the US that allows third-party sales, expanding its business beyond clothing to household goods and kitchenware. This move has attracted attention as Shein is expected to grow into a comprehensive e-commerce platform similar to Amazon or the Chinese online shopping mall Temu.
Shein Strengthens Its Position in the US Market Amid Strong US Government Scrutiny
Last year, Shein recorded sales of $23 billion (about 29.66 trillion KRW) and a net profit of $800 million (about 1.03 trillion KRW). In August, it also acquired about one-third of Spark Group, the parent company of Forever 21.
In 2021, Shein relocated its headquarters from Nanjing, China, to Singapore. Foreign media interpreted this move as Shein judging it advantageous to have its headquarters outside China amid escalating geopolitical tensions, although Shein did not disclose specific reasons for the relocation.
Shein is also diversifying its supply chain. Besides China, it has started manufacturing in Turkey and Brazil and formed partnerships with major retailers in India.
Particularly, Shein views the US as its largest market and is making efforts to solidify its presence there. Recently, it hired Francis Townsend, a former executive of the US gaming company Activision Blizzard and a former official in the George Bush administration and the US Department of Justice, as a senior advisor.
However, Shein faces strong scrutiny from the US government. In 2021, Guangzhou workers accused Shein of violating labor laws by working over 75 hours per week. In June last year, the US enacted the Uyghur Forced Labor Prevention Act, restricting imports of products originating from Xinjiang. In November of the same year, foreign media reported that cotton used in Shein's clothing was produced in Xinjiang.
In response, in May, bipartisan US lawmakers requested the US Securities and Exchange Commission (SEC) to halt Shein's IPO until it confirms that no raw materials produced by forced labor in Xinjiang are used.
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