What does SHEIN rely on to support the valuation of 100 billion US dollars?

The industry thinks shein is worth $30 billion, but we think it's a hundred billion dollar behemoth.

”

Author | Dai Runze

Edit | Li Zongren

When it comes to going global, TikTok is one of the most successful Internet platforms in China's globalization, and also known for ITIN.

Recently, there have been many reports related to SHEIN, which has caused a lot of discussion in the industry. Reuters reported that SHEIN, or changing the controlling entity to a Singapore company, is stepping up recruitment efforts in Singapore, while SHEIN's LinkedIn page, the company profile has been changed to the Singapore headquarters. There are also reports that founder and CEO Xu Yangtian has become a permanent resident of Singapore, and industry insiders revealed to Leifeng that SHEIN has recruited a large number of people in Silicon Valley, requiring its leader to be American, and at the same time placing the data center in Texas, USA... All indications are that SHEIN is preparing to go public in the United States for an IPO.

However, SHEIN denied the IPO report, saying that "the company has operation centers in China, Singapore and the United States" and that Xu Yangtian is a Chinese citizen who has long been rooted in China. In fact, the rumors about SHEIN's impact on the IPO are not once or twice, they have been mentioned in 2020 and May 2021, to a certain extent, which reflects the popularity of the cross-border e-commerce industry and the industry's attention and confidence in SHEIN.

The focus is on when SHEIN will be listed, and how much it will be valued after listing.

1

Can SHEIN enter the $100 billion club?

Regarding the valuation, the industry is given 30 billion to 50 billion US dollars, for which some insiders believe that considering SHEIN's revenue and net profit, market sentiment and other factors, if calculated by 5 times GMV, the data of 50 billion US dollars is high, so 30 billion US dollars is more appropriate.

However, "from the data alone, it is not appropriate to directly assess the level." Mr. J, a key account manager of a stock exchange, told Leifeng Network that to discuss the market value of a company, it is necessary to look at the same kind of enterprises as the target, to see the GMV, repurchase rate, profit, industry and other factors, but also to see the type and definition of the company, and the market value of the same enterprise in different markets is also different.

If SHEIN is defined as fast fashion, then the benchmark company is ZARA, H&M, lululemon, UNIQLO and other clothing companies. In terms of market capitalization, at present, ZARA's parent company Inditex is about $90 billion, H&M Group is about $28 billion, lululemon is about $41 billion, and Uniqlo's stock market value in Hong Kong is about $59 billion. Based on SHEIN's GMV, customer unit price, estimated gross profit margin, etc., zara's valuation of about 30% is finally given. Shein and ZARA have many similarities, and the industry often compares them.

Let's start with ZARA.

As a fast fashion industry tycoon, ZARA went public in 2001, and the parent company Inditex exceeded the $100 billion mark in 2015, and founder Amancio Ortega surpassed Bill Gates with a value of $84.9 billion in 2017, becoming the world's richest man at the time. To sum up, ZARA has a number of characteristics in operation, such as cost-effective, innovative marketing model, tracking personalized consumer demand, full control of the supply chain, heavy investment in building IT systems, a large team of professional buyers and designers, and a perfect logistics and distribution system. ...

Specifically, the core of ZARA is to reduce a large number of inventory problems with multiple SKUs and small batches, the speed of new is fast, every 20 minutes to design a clothing, the supply chain has achieved 7 days of production, 14 days of cabinets, 30 days of cabinets... This is due to ZARA's early multi-party layout, in 1984 ZARA through the IT system to grasp the sales of each store, each SKU, and then empower decision-making, in order to further capture the market, ZARA spent about 30 million US dollars to reorganize the information system, but also recruited up to 480 people of a large team of designers; in order to keep up with the supply chain response speed of enterprises, ZARA through acquisitions and other ways to include 1200 production enterprises into the bag.

The core of the small single fast reaction is the supply chain response speed, ZARA's main production base in Spain, the basic model is placed in Asia and other low-cost areas, through the establishment of 20 highly automated dyeing, cutting centers, the labor-intensive work outsourced to the surrounding small factories, family workshops, and in between the establishment of logistics systems. Such a production site would require an investment of several billion euros. In terms of logistics distribution, trucks arrived within two days of truck transportation in the European market, and the U.S. and Japanese markets used higher cost air freight to improve the speed of distribution.

In terms of marketing model, ZARA's stores are often "out of stock", not on the shelves sold out of style... These measures have greatly improved customer purchase decisions and speed, enhanced brand influence, and greatly increased customer loyalty. As a result, ZARA has grown rapidly, and the data shows that from February 1, 2019 to January 31, 2020, the Group's net revenue reached 28.3 billion euros year-on-year, a new historical record, and net profit reached 3.6 billion euros, an increase of 6% year-on-year.

SHEIN has been a follower of ZARA in its early days.

Many years ago, during the grassroots development of cross-border e-commerce, ZARA's website, advertising pages and other elements were imitated by garment companies including SHEIN, and the anecdotal saying was "what ZARA does to copy". And ZARA's small single fast reaction, cost-effective and other trump advantages, SHEIN not only followed, but even surpassed to a certain extent.

Compared with ZARA, SHEIN's SKU is more and faster, and the data shows that SHEIN has 6,000 new products every day, of which about 3,000 are clothing, and SHEIN requires suppliers to complete design and production in 7-14 days, ZARA about 21 days. Of course, this is related to the fact that ZARA's style is relatively complex than SHEIN, the cost of surface accessories is relatively high, and the operation of offline stores is relatively complex. In other respects, SHEIN is less expensive, more favorable, has a large team of designers, buyers, has a strong IT system... More importantly, SHEIN has placed its supply chain entirely in China and is very stable, which is particularly prominent during the epidemic.

Because ZARA's supply chain is spread all over the world, the lack of any link will lead to serious consequences, while the cost of offline stores is high, and the shutdown caused by the epidemic has generated a large amount of inventory, and the capital chain is easy to break, eventually forming a vicious circle. According to the data, in February-April 2020, a quarter (parent company) Inditex net loss reached 3.2 billion euros, followed by ZARA stores closed more than 1200, the stock price also fell out of the $100 billion club. However, the situation eased in 2021, and the data shows that in the first three quarters of fiscal 2021 (February-October), net sales were 19.325 billion euros (about 21.9 billion US dollars) and net profit was 2.5 billion euros, compared with 671 million euros in the same period last year.

In contrast, SHEIN sales have grown rapidly during the epidemic, reuters has said that SHEIN sales reached $15.7 billion in 2021, compared with $10 billion in 2020; market research agency Euromonitor International data shows that SHEIN ranked first in the United States in 2021 and exceeded H&M and ZARA combined, which shows its growth.

Although many of SHEIN's models follow ZARA, what ZARA does not have is that SHEIN is an e-commerce company with content as the core, and it has followed the development of the times and laid out mobile terminals early, has a powerful recommendation engine, and also transforms and upgrades the apparel supply chain.

Over the years, SHEIN has cooperated with major social media around the world, relying on Pinterest and other Internet celebrity dividends in the early days, relying on Facebook in the early stage of mobile development, and cooperating with TikTok in the past two years, data show that TikTok has reached 6.2 billion views, and has also become the second most downloaded shopping App in the world. The recommendation engine and data analysis capabilities can capture the user's usage habits to match the preferences and then carry out targeted push, which can continuously improve the user stickiness. Regarding the supply chain, SHEIN has "subverted" a variety of traditional foreign trade models, such as early checkout, advance payment, help enterprises improve digital capabilities, relying on strong digital capabilities, SHEIN helps production enterprises to develop strict and careful scheduling plans and assessment indicators, real-time monitoring, improve the supply chain situation. Logistics and distribution with industry partners in-depth cooperation, and select designated partners, the pursuit of stability and efficiency.

In summary, shein's advantages are very obvious, along with the cultivation of user minds, in the long run, the development of overseas e-commerce is still rapid, relying on the innate advantages of China's supply chain, the layout of social media, the deep cultivation of mobile terminals, super cost-effective, therefore, by continuing to improve GMV, increase user stickiness, SHEIN surpassed ZARA in valuation, it seems that it is only a matter of time.

That means SHEIN is worth a hundred billion dollar club.

2

SHEIN is worth more than 100 billion

"In fact, the valuation of enterprises depends on positioning." Mr. J gave an example, "Just like Amazon and Shopify, which are both the basic construction parts of cross-border e-commerce, Amazon's special feature is not only the e-commerce platform, but also cloud services and logistics." ”

As we all know, SHEIN is an internet platform company, while ZARA is a clothing company. At the same time, as one of the most successful enterprises in China's globalization, SHEIN integrates and empowers the apparel supply chain, promotes the development of shopping mobile apps, redefines achievements such as fashion, and cannot only define SHEIN as a "cross-border e-commerce platform".

From a development point of view, between SHEIN and ZARA, to a certain extent, it is like Amazon and Walmart in the retail industry that year.

As mentioned earlier, SHEIN has followed many models of ZARA, and Amazon has also followed many models of Wal-Mart, such as copying Wal-Mart's logistics warehouse management and recruiting a lot of talents from Wal-Mart. In the early years, Walmart and Amazon mediated between acquisition or investment, which is a business classic, and the industry has also questioned whether Amazon is wal-Mart's online version. However, today, Amazon's market value has reached $1.6 trillion, and Walmart's is about 390 billion, a 4-fold difference between the two.

Before the rise of e-commerce, Walmart was the king of the retail industry and one of the business legends.

In 1993, Walmart surpassed Sears, founded in 1886, as the founder of the global mass mail order and retail industry, with sales of $67.34 billion, walmart mainly relied on brand management strategy and Sam's membership. After World War II, some of the consumption structure levels in the United States changed from the original lower and middle classes to the upper and lower levels, for the lower level, Wal-Mart has Sam's Club and Wal-Mart Shopping Plaza, for the middle and upper levels, Wal-Mart has a comprehensive department store, and the decoration is grand, the scale is huge, the service is super, the products are more diverse and more distinctive, and finally seized all the markets that originally belonged to Sears, plus the membership system, and finally the ran Sears began to change careers.

Wal-Mart's core concept is "daily parity, consistent", and to achieve the lowest price in the industry, the lowest cost in the industry, so that its business continues to grow rapidly, the reputation continues to improve, relying on Wal-Mart's concept of continuous cost savings to consumers, as well as a strong logistics distribution and supply chain.

For example, in the most expensive transportation part of the logistics process, Wal-Mart prioritizes the construction of logistics distribution centers around the distribution center in terms of location. Inside the distribution center, computers take care of everything, loading platforms operate 24 hours a day, and all of the company's trucks are equipped with satellite positioning systems. In this way, the shelves of Wal-Mart stores can be replenished twice a week, and the speed of that year is 4 times that of most friends, relying on the IT system to calculate inventory, saving space and reducing inventory costs. The data shows that in the 1990s, compared with the three major retail companies in the United States, Wal-Mart logistics costs accounted for 1.3% of sales, while Kmart was 8.75% and Sears was 5%, and the gap was amazing.

This is due to Walmart's introduction of cutting-edge technology into the logistics system 10 years ahead of schedule. In the 1970s, it introduced IT systems and established the world's first logistics data processing center; in the 1980s, it spent a huge amount of $400 million to buy commercial satellites to achieve global networking, adopted pos machines in 1983, and opened paperless in 1985; in the 90s, it relied on GPS to control the company's logistics... Walmart is also the first in the world to realize 24-hour computer logistics network monitoring within the group... By 1997, Walmart's sales had exceeded 100 million to a staggering $105 billion, and in 1999, the total number of employees reached 1.14 million, making it the world's largest private employer.

However, Amazon came.

The millennials of Bezos and Amazon are still struggling, companies have reported losses one after another, and Wall Street is also rumored to be "Bezos built a house of cards" joke. Just over a decade later, the company, which started by "selling books online", has become a business giant in the Internet industry in the 21st century. Among them, the core business philosophy of "customer-centric", a strong logistics system and the construction of cloud services are important parts.

As an e-commerce company, the most feared thing is that customers can't receive goods normally, the website crash page can't be opened, and Amazon has encountered it.

At the beginning of the business, Amazon borrowed from Wal-Mart's warehousing management system in an all-round way, such as the product placement of the warehouse, but the inventory management system of e-commerce is different from that of retail stores, and some insiders told Leifeng Network: "E-commerce companies often have more SKUs and light pieces, while traditional heavy warehouses often cannot meet the high elastic demand of e-commerce." Due to the surge in orders, Amazon's warehouse management was extremely chaotic, an angry Bezos personally rushed to the warehouse and climbed the shelves, working with engineers to find solutions, replacing Walmart's management system, and exploring new models, such as borrowing part of Toyota's logistics management system. Gradually, Amazon's logistics warehousing system has been continuously improved, and in 2007, it began to open up to sellers and introduced FBA services to further improve the user experience. Amazon, which has built multiple warehouses across the United States, has also been eager to find ways to improve the automation of logistics centers, such as spending $775 million to acquire kiva systems, a warehouse robot company, and the addition of Kiva has greatly improved the operational efficiency of warehouses. Over the years, Amazon's FBA has become one of the best logistics services in the United States.

The increase in volume also tests the digital ability of enterprises, before Amazon purchased Oracle's system, the result of a downtime accident, Bezos frowned, decided to form a stronger IT team to build a system, and gradually replaced each link with self-research. Because the retail industry is affected by the season, the company's revenue fluctuates greatly, and Bezos gradually faces the company with the idea of selling his own services to other companies to increase their revenue. Around 2005, Google's take-off "stimulated" Bezos to a certain extent, although defined as a technology company, but compared with Microsoft, Apple, etc., the market still feels that Bezos is the "boss of online book sales". Therefore, Bezos has become more determined to increase technology investment, and Amazon cloud services have also developed rapidly. In 2013, the market considered Amazon's cloud services to be performing very well, and in 2015, Amazon began to disclose the financial results of the AWS division separately, and the latest financial report showed that AWS accounted for a staggering 33% of the world's share.

Adhering to the "customer-centric", the continuous development of business at the same time, Amazon has been improving the basic services of the enterprise, in the logistics management and cloud services of the two-wheel drive, Amazon's e-commerce business is developing rapidly, in 2013, Amazon's sales have exceeded the total sales of other 12 e-commerce platforms, in 2015 the company's revenue reached 107 billion US dollars, September 4, 2018, Amazon's stock price once exceeded $2,050.50, becoming the second American company after Apple to break the trillion-dollar market value.

Seeing the high-rise buildings leveling up, Wal-Mart, the veteran king of retail, could not help but "panic in his heart" and accelerate the layout of the e-commerce business. In 2010-2011, Walmart began to lay out neighborhood supermarkets to "fight" FBA; in 2016, Walmart ShipingPass began to provide 2-day delivery services, and in 2017 it was fully free; benchmarking Amazon Prime's 1-day delivery service, Walmart launched a free 1-day delivery service...

However, the arrival of the epidemic challenged the traditional supply chain, due to the surge in online shopping and online business, Amazon's previous layout in logistics, cloud services, Amazon's rapid growth, taking the second quarter of 2020 as an example, Amazon's net sales reached $88.912 billion in the quarter, an increase of 40% year-on-year, and the net profit was $5.243 billion, an increase of 100% year-on-year, while the market expectation at the time was only $620 million. Among them, AWS's net sales of $10.808 billion accounted for only 12%, but the profit accounted for as high as 58%.

By 2021, Amazon's full-year revenue increased by 22% year-on-year to $469.8 billion, and net profit increased by 56% to $33.4 billion, which triggered a 13.54% surge in the stock price at The close on Friday, and the market value increased by $191 billion, the largest single-day stock market value increase in the US market. Of course, Wal-Mart's results are also good, in fiscal 2022, Wal-Mart's annual revenue was $572.754 billion, an increase of 2.4% year-on-year, and net profit was $13.676 billion, an increase of 1.2% year-on-year, but the gap between the market value and Amazon was further expanded.

At present, Walmart is still the world's largest retail company, and Amazon is not only a retailer, but also a market platform, logistics express network, payment credit provider, leading cloud service platform...

Looking back at SHEIN and ZARA, at present, ZARA's positioning is a clothing company, and SHEIN is not only a clothing company, but also integrates and optimizes the clothing supply chain, relying on algorithms and recommendation engines, with its own traffic App... If you refer to the comparison of the market value of Amazon and Walmart, in the future, SHEIN can surpass ZARA in terms of market value, and breaking through 100 billion is just around the corner.

3

Is now the best time to go public?

Putting aside the valuation, when it comes to listing, from the perspective of qualifications, SHEIN has a large volume, no lack of traffic, no lack of growth, and considerable profits, while there are red shirts, IDG and many other well-known investment institutions in the industry... In fact, SHEIN's conditions are enough to go public. For the compliance problem speculated by the outside world, some people believe that the degree of supervision of the market in Europe and the United States is basically unlikely to exist, and an analyst said: "If it is really non-compliant, why does the European and American markets not block SHEIN?" "Therefore, there are three points to consider when companies choose to go public: where, how to go public, and when to go public.

Let's see where it goes on the market.

There are many capital markets in the world, and on the whole, SHEIN is the most likely to be listed in the US stock market, but this should take into account the impact of geographical factors. As a Chinese Internet company that earns Money from Europeans and Americans, it may involve some relevant local policy issues, and at the same time, since Didi Chuxing's IPO in the United States last year was regulated due to data security issues, many Chinese companies have terminated their IPOs in the United States, and Chinese companies have a tendency to stop IPO in the United States, but this year, this situation has a warming trend, data show that as of January 31, 10 Chinese companies have submitted prospectuses to the US Securities and Exchange Commission (SEC) in 10 days.

So, how should SHEIN go public?

The listing of e-commerce companies itself is more difficult, because to synthesize a lot of content, for e-commerce companies involved in retail, there are too many contracts, flows, goods in and out of the warehouse and other data, so the synthesis of documents is very difficult, and easy to counterfeit, such as luckin coffee fraud incident. And SHEIN not only has online, there is retail, but also involves entities such as logistics, daily outbound warehousing to calculate, about 300-400 million orders per day, the traffic is super large... Although e-commerce companies such as three squirrels, good shops, and Anker have been listed, they are not at all an order of magnitude with SHEIN in terms of volume, so industry insiders believe that the listing process of SHEIN is very energy-consuming. However, this is not an insoluble solution, "find more securities institutions, accountants, and carefully check the data." ”

When is the most appropriate time to go public?

From its own conditions, SHEIN does not have a substantial listing problem, and what time to list is the focus. This should be considered, what is the purpose of listing, generally speaking, it is to appear in front of capital, form a better review and then empower the development of the company. If the company itself has sufficient capital flow, there is a steady stream of oxygen supply behind the investment institutions, which can independently complete many growth, and it seems that there is not much of a problem in choosing to go public, such as the old dry mother, wahahaha, and Fangtai. Tao Bihua, the old mother, is full of resistance to listing, and even believes that not to invest in shares, not to hold, not to list, not to lend, in order to let the children and grandchildren do it; Zong Qinghou, the former richest man in China, also said that Wahaha will not be listed and is committed to digging deep into the needs and potential of the food and beverage industry; Mao Zhongqun, chairman and president of Fangtai Group, even said that he did not want noise to interfere with the enterprise.

It can be seen that listing is not the first choice for all enterprises, "listing is only a means, not the end of the enterprise." "However, choosing the right time to go public involves the strategic level of the company," perhaps only Xu Yangtian himself knew. ”

4

Towards the super Internet enterprise

In the development of Internet giants, such as Ali, Tencent, Meituan, ByteDance, etc., they all adopt the "business + investment" two-wheel drive strategy, focus on their own business at the same time, through investment, mergers and acquisitions and other ways to seize the land, in the competition to obtain a long advantage and benefits. Such as ByteDance, the secret of investment is to combine its own business system and external resources, to achieve the most efficient value in the shortest time, quickly complete a product or surpass in the competition, TikTok is one of the representatives, the predecessor musical.ly was acquired by Zhang Yiming for $1 billion in 2017.

Similarly, along the way, the development of SHEIN is inseparable from a series of investments and mergers and acquisitions, such as the acquisition of cross-border tide brand ROMWE in 2014 and the acquisition of cross-border e-commerce shopping guide App ZZKKO in 2015. SHEIN is also expanding other categories, such as investing in the furniture DTC brand Outer in 2021, investing in the musical instrument DTC brand Guangzhou Lanshen Technology, and also investing in the industry's well-known Patoson. SHEIN, which has become more concentrated in investment, has also established Hainan Xiyan Technology Holdings Co., Ltd. to engage in various investment activities.

Regarding the continuous expansion of categories, there is a saying that "SHEIN steps are a bit chaotic", because THE ADVANTAGES OF SHEIN in other categories of supply chains are difficult to reach the same level as clothing in the short term, and the supply chain of some categories is relatively more complex, there are views that this may affect the company's own business, however, some people think that SHEIN itself is already a platform e-commerce with its own traffic, and the control of other categories can be carried out in a collaborative mode, so the problem is not big.

For the basic disk, SHEIN also further controlled, recently, SHEIN applied for the "Xiyin Bay Area Supply Chain Headquarters Project", located in Zhongxin Town, Zengcheng District, Guangzhou, with a total investment of 15 billion yuan and a total construction area of 3.3 million square meters, equivalent to 3 Baiyun Airport or 5 Guangzhou South Railway Station. This means that SHEIN is bound to deepen the supply chain of the garment industry and go all the way to the end.

As a sales-oriented platform company, SHEIN has taken a very big step ahead of schedule, and the results are remarkable, the industry is very optimistic about SHEIN, the future trend is considerable... However, "if you've used SHEIN's websites and apps, you'll find the experience to be very good, but how can you improve it?" "An industry insider believes that SHEIN has developed to the industry ceiling in many aspects, while the cost of marketing, labor, raw materials, logistics and so on has gradually increased, last year, Indonesia, Australia, the British market has put forward a challenge to SHEIN with tax issues, and rushing to raise prices is a very dangerous step... Therefore, further upgrades should be considered on the premise of maintaining high growth, increasing repurchases, and further reducing costs.

In addition to expanding categories, SHEIN has also stepped up its efforts to promote high-end brands, such as renaming Premium, which is priced at $25-99, to MOTF in April last year, and opening independent stations for it. So next, which direction will the SHEIN upgrade go? Will it become the infrastructure of the industry like Amazon and Shopify?

Looking at the cross-border e-commerce industry, as a benchmark company Amazon, the annual development has made opponents unattainable in the standard category, but the industry has never lacked forerunners, and Amazon's early development has also experienced hardships, and its experience can be described as "magnificent". So as a non-standard rookie hein, is it the same as Amazon in the past, crossing one mountain after another, and finally sitting on the "Iron Throne"? We'll see.

END