Wen 丨 Chen Zhiyan, Zhou Youhui
Edited by Liu Jing and Peng Xiaoqiu
Recently, some media said that fast fashion brand SheIn is seeking a new round of financing of $1 billion, with a valuation of about $100 billion.
In response to this news, 36Kr received an exclusive response from SheIn: it does not comment on market rumors.
In addition, whether the financing means that SheIn restarts the IPO process, SheIn replied to 36Kr: "As explained before, the company has no IPO plans. ”
According to 36Kr from a number of independent sources, the main investors in this round of SheIn contacts have a large investment group in addition to the transatlantic investment group mentioned in the news. This large investment group intends to become the lead investor and is willing to pay $700 million in investment. In addition, sequoia China, Tiger Tiger Fund and other old sheIn shareholders are also included in the list of investors.
As for whether the $100 billion valuation is true, according to 36Kr's multiple independent sources, since the transaction has not yet been closed, the valuation scale may still change.
Among China's unlisted new economy companies, there are currently only three with a market capitalization of more than $100 billion: ByteDance, Ant Financial and Alibaba Cloud , all of which have outstanding technological attributes. If the valuation of 100 billion US dollars is finalized, after this round of financing, SheIn will become the first Internet company in the consumer field to win 100 billion US dollars.
How was the 100 billion dollar beast born?
Since SheIn has never officially announced its financing record, we can only roughly sort out its financing history through public information: from 2013 to 2020, SheIn completed a total of 6 rounds of financing, including Asia's established venture capital institutions Jifu Asia, IDG Capital, Jinglin Capital, Sequoia China, Tiger Tiger Global Fund and Shunwei Capital.
For example, in early 2021, it was valued at $50 billion by some media outlets, and in less than a year, SheIn's valuation has doubled.
Many people think that SheIn's first benchmark company is Zara, which is also a fast fashion brand. As far as we know, in SheIn's 2018 financing business plan, its positioning entry point is also expressed as "Internet version of Zara".
As of the end of October 2021, Zara's parent company, Inditex, had a total annual revenue of about $29 billion, while according to media reports, SheIn's revenue in 2021 was about $15.7 billion — about 1/2 of Inditex's. But Inditex's current market capitalization is less than $68 billion, well below SheIn's $100 billion valuation.
Valuation represents an investor's judgment about the future of a business. The reason why SheIn can get a higher valuation in the case of lower revenue stems from an industry consensus: Zara subverted the traditional garment industry with fast fashion, and SheIn further iterated fast fashion by relying on online methods.
In SheIn, "a new product is designed into the hands of the consumer, and can be in 20-30 days at the earliest." "Experts from Third Bridge's High-Pro consulting told us.
In addition, the success of SheIn also has a very important point: unlike domestic trade cross-border enterprises that still rely on mature E-commerce platforms such as Amazon in the United States, SheIn has been an independent platform + free brand model from the beginning, more autonomous, and has also built a certain barrier in the apparel category.
Compared with SheIn, which is still expanding its territory in the rising period, Zara and its parent company Inditex have obviously entered the throes of corporate middle age. A few years ago, as soon as inditex group completed its second-generation succession, its stock price plummeted, and the capital market expressed concern about Marta Ortega, the daughter of Inditex founder Amancio Ortega. On the other hand, at the beginning of 2021, Inditex's position as the world's largest apparel retailer has been surpassed by Uniqlo's parent company, Fast Retailing Group.
For how to continue to grow bigger and higher "ceiling", SheIn further answered this question in two other aspects.
The first is to strengthen the efficiency of fast fashion's core supply chain. SheIn has built a back-end supply chain ecology, with three main departments: commodity center, supply chain center and system research and development center, which can realize real-time tracking of each order. Some experts in e-commerce logistics told 36Kr that SheIn currently has sufficient logistics resources, and there are more than 200 global logistics and supply chain partners, who are also building their own logistics systems, including the construction of local delivery capabilities in major destination countries, "demand will drive the redistribution of logistics resources."
At the beginning of this year, SheIn invested 15 billion yuan to build a new supply chain headquarters in Guangzhou. This move will once again strengthen SheIn's control of the supply chain, and will once again enhance SheIn's ability to integrate small and medium-sized garment factories with a "flexible supply chain". Mr. Yun Hai, who has served in SheIn's supply chain, previously believed in an interview with 36Kr that SheIn has a clear understanding of the strategic layout of the supply chain and a long-term vision. "In fact, SheIn has not yet made full use of the maximum advantages of its supply chain, and there is still room for improvement."
The second is more diverse. Whether SheIn can enter the mid-to-high-end market after occupying the sinking market, explore more categories outside the apparel field, and build a matrix is the only way for it to expand the future.
In December 2020, SheIn launched her independent website, SHEGLAM, to operate its beauty product line independently. Since then, SheIn's product line has expanded to men's wear, children's wear, footwear, home, home textiles, beauty, accessories and many other categories. In April 2021, SheIn announced that its high-end brand SheIn Premium has changed its name to MOTF, and will soon launch an independent website to enter the mid-to-high-end consumer market of fast fashion clothing, and released MOTF's supply chain investment plan.
Of course, For a company founded in 2008 and experiencing 6-8 years of rapid growth, SheIn is also facing new problems.
Judging from the sales growth rate, the pressure on SheIn is emerging. From revenue of only $600 million in 2016 to $10 billion, SheIn took only 4 years. But since the second half of 2020, its growth rate has begun to slow. If the 2021 revenue of $15.7 billion is true, it is the first time in nearly 8 years that SheIn has failed to achieve 100% annual growth. Of course, this is related to the fact that the volume of SheIn is already quite large, but how to continue to ensure that the sales growth rate is moving forward quickly has been placed in front of SheIn.
At the same time, as it continues to expand its business scope, SheIn will sooner or later face cross-border e-commerce giants such as Amazon, eBay, and Wish. While the valuation level is rising, whether it can gain a long-term foothold in the process of "breaking the wrist" with the giants, and copy the barriers built in the clothing category to other categories, will also be a problem that SheIn must solve to break through the ceiling.
IPO challenges for cross-border companies
Founded in Nanjing in 2008, SheIn has since grown into a global B2C fast fashion brand. It is a typical cross-border company: it manufactures ready-to-wear in China, sells online in the United States, Europe and Asia, and operates in more than 150 countries and regions around the world.
Objectively speaking, because its core business is not in China, for a long time, SheIn is a company that is not known to the Chinese people, and even most investors know very little about it.
Previously, foreign media quoted sources familiar with the matter as saying that SheIn is considering restarting its IPO plan to the United States and has hired Bank of America, Goldman Sachs and JPMorgan Chase to be responsible. But the news was denied by SheIn. As early as 2020, there was news that SheIn would go public as soon as the fourth quarter of that year, and said that at least $700 million had been raised, after which the plan did not materialize.
However, some investors close to SheIn said that SheIn's cash flow is stable at present, and the demand for funds to raise funds in the open market in the short term is not strong.
By 2022, the environment for Chinese Internet companies to IPO in the United States has changed. SheIn is special in that it is also a cross-border e-commerce company.
There is an argument that because SheIn has a large amount of overseas market data, this will make the SEC worry that its data is difficult to verify, thus hindering the IPO in the United States. In this regard, a lawyer told 36Kr that such "technical problems" often occur in the process of corporate IPOs, but it is not difficult for companies to provide direct or indirect evidence. People familiar with SheIn's internal affairs also told us that from 2021 onwards, the company will be sorting out compliance issues internally.
Some insiders believe that if There is an IPO obstacle in SheIn, "it may be a chain problem brought about by the company's structure."
"The choice that overseas companies have always faced is whether to be a Chinese company or an overseas company." The above-mentioned person told 36Kr.
Therefore, when operating overseas, singapore companies as the main body have become a common choice for many technology companies after comprehensive consideration. Recently, some media have also reviewed public documents and found that SheIn has changed the company's controlling entity to a Singapore company and increased recruitment efforts in Singapore.
On the other hand, due to SheIn's dual brand and supply chain attributes, overseas media and European and American regulatory authorities pay close attention to its business behavior and compliance. The large number of outsourced factories and complex supplier management systems make SheIn often questioned in overseas markets about supply chain opaque, environmental protection and compliance with employed labor.
SheIn also began to act on this. At the end of 2021, SheIn appointed a global environmental social governance (ESG) head to deal with a series of environmental and labor issues facing the global fast fashion giant. The executive, adam Whinston, previously worked at Walt Disney Company and U.S. clothing retailer J.C. Penney has up to 15 years of experience in the ESG space.
For the future ESG strategy, SheIn replied to 36Kr: SheIn has always focused on the use of technological innovation, management and public welfare humanistic care and other three-dimensional ways to empower ecological partners, and is committed to creating a sustainable ecology: including empowering factories, helping factories achieve information upgrading, enhancing operation and management capabilities, and helping them comprehensively improve market competitiveness; empowering small and medium-sized brand merchants around the world, while helping brand merchants expand global sales channels, and further enhancing their brand influence Empowering independent designers around the world to provide designers with rich commercialization opportunities to achieve their own commercial success. At the same time, SheIn actively promotes sustainable fabrics, innovative environmental processes, reduced plastic packaging, supply chain carbon reduction and philanthropy around the three major strategies of protecting the planet, supporting communities and empowering entrepreneurs, and continues to practice sustainable development and corporate social responsibility.
In any case, SheIn is already a company that cannot be ignored, and at the same time, it has triggered a wave of venture capital about cross-border overseas ventures in China. According to incomplete statistics from the media, DTC overseas brands have accumulated 58 financings in 2021, involving categories including clothing accessories, home furniture, home appliances, mother and baby children, beauty and cosmetics, and 3C accessories. Leaders such as Citer, a DTC brand, have completed four financings in one year of its establishment, and its valuation has directly crossed the $1 billion mark.
A senior investor in the cross-border field analyzed to 36Kr that SheIn also represents the form of a future company: "The founder originated in China, but from the beginning it was a global business." With the maturity of China's supply chain system, the beginning of the overflow of various technical capabilities, and the return of high-quality talents from global backgrounds to China, there will be more and more founders like Xu Yangtian who are "based in China and look at the world".
But investors shouldn't overlook that sheIn, founded in 2008, experienced more than a decade of growth before it became a talking company. In this "business myth", the ambition to establish an online platform company, the courage to spend huge sums of money on self-built logistics, and the patience of long-term deep ploughing of cross-border e-commerce are indispensable necessary conditions.
The cross-border track should no longer belong to the outlet of opportunism, but to Chinese entrepreneurs with global ambitions and investors who believe in it.