The mysterious "roll king" SHEIN, the valuation is going to hit hundreds of billions of dollars

Produced by Radar Finance and | Zhang Kaijing, editor| deep sea

Recently, according to Bloomberg, China's fast fashion cross-border e-commerce brand SHEIN is secretly raising the latest round of financing of at least $1 billion, and after this round of financing, SHEIN's valuation may reach $100 billion. As the transaction has not yet closed, the valuation size is still likely to change.

What is the concept of a $100 billion valuation? This means that the valuation of SHEIN, founded in 2008, will exceed the sum of European and American fast fashion giants H&M and Zara. Even looking at the entire Unlisted New Economy Company in China, only Three are ByteDance, Ant Financial and Alibaba Cloud with a valuation of more than $100 billion.

It is worth noting that shein's valuation has been growing at a rocket-like pace for the past two years. When SHEIN completed its Series E funding round in 2020, it was valued at about $15 billion; in June 2021, Forbes magazine said shein's latest valuation could reach $47 billion.

In the eyes of industry insiders, SHEIN's success is inseparable from its further breakthrough in the existing business model. Usually, Zara takes about 21-33 days from design to product to home, while SHEIN only takes 14 days from product design to listing; Zara and Uniqlo need to pay high store expenses, and SHEIN eliminates offline stores and changes to pure online operations, which also makes it regarded as the "king of rolls" in the fast fashion industry.

But SHEIN's model is not perfect, and the biggest question from the outside world is whether companies that rely on production capacity and speed to hit the market can really build their own moat.

Mysterious 100 billion unicorns

To this day, SHEIN's popularity is still difficult to match its huge size.

Radar Finance learned that SHEIN's latest round of financing is led by private equity firm General Atlantic, and other investment institutions in this round include Sequoia Capital and Tiger Global Management.

Tianyan's investigation shows that BEFORE that, SHEIN has experienced a total of 6 rounds of financing, and there are many well-known institutions such as IDG Capital, Sequoia China, and Shunwei Capital.

However, SHEIN has never officially announced its financing records, and the specific amount of financing is rarely mentioned, and 3 of its 6 rounds of financing are unknown, and at present, it can only roughly sort out its financing process from public channels. So that in 2020, from China to the United States, from the media to research institutions, the Wall Street Journal, CBInsights, Crunchbase, FORTUNE, IT Orange, And Ai Media Consulting released a list of unicorn companies with more than one billion dollars, all of which have missed this company.

In the face of the market rumors that it is seeking a new round of financing of $1 billion, SHEIN's answer is still: no comment.

In 2020, SHEIN also reported that it began to seek to go public in the United States. In 2022, according to Reuters, SHEIN is considering restarting its plan to go public in the United States, and founder Xu Yangtian may choose to accelerate the listing process by obtaining Singapore citizenship. Shein's answer to this is that the company has no IPO plans.

However, this low profile is in stark contrast to shein's popularity in the international market.

According to SHEIN's public information, as early as 2016, its ranking in the US mobile e-commerce (the comprehensive ranking of shopping apps in the app store) has advanced to the top ten, surpassing Forever21, H&M, Zara; mobile e-commerce in major European countries is ranked in the top five, surpassing Wish, H&M, zara.

In 2020, in the United States, shein's largest market, the number of users searching for it on Google is already more than three times that of Zara; in 2021, app analytics platform Apptopia data shows that SHEIN is the second most downloaded shopping app in the United States, after Amazon. In terms of year-on-year growth in app installs, SHEIN was 68% and Amazon was down 2.4%.

In fact, according to App Annie's statistics, on May 17, 2021, SHEIN has surpassed Amazon for the first time and topped the list of in-store shopping app downloads for Android and Apple in the United States. At the end of March this year, SHEIN once again surpassed Amazon.

At the same time, SHEIN's revenue climbed from $600 million in 2016 to $15.7 billion in 2021.

Thanks to the rapid development of the company, 37-year-old Xu Yangtian debuted on the Hurun U40 Young Entrepreneur List and ranked third. When he was on the list, his net worth was 40 billion yuan, second only to Zhang Yiming and Ye Gang of Donghai Group, Li Xiang of Ideal Automobile, Su Hua of Kuaishou, Tang Binsen of Yuanqi Forest, Wang Ning of Bubble Mart, and Yang Tao were all left behind by Xu Yangtian.

But such a rich man hardly appears in public. According to later reports, the investors of SHEIN's previous rounds of financing had refused to be interviewed on the grounds of "cooperating with the company's low-key requirements".

Baidu Encyclopedia's introduction to Xu Yangtian only has 7 words of "founder of Xiyin Company", and it is difficult to find a clear close-up photo of him on the Internet. Almost everyone who knows about his life before becoming famous is sketched out from another early partner, Li Peng.

The ultimate in the supply chain

The low-key Xu Yangtian, in terms of enterprise management, is not ambiguous at all. Under his leadership, SHEIN has built a strong supply chain and has a precise grasp of marketing practices. In the eyes of the outside world, this is the key to the rapid rise of SHEIN.

In the early days of its establishment, SHEIN mainly did the channel business model of domestic takeaway from the country. At that time, coinciding with the first golden age of cross-border e-commerce, Xu Yangtian also seized this business opportunity and rapidly expanded the scale of the company.

It is worth mentioning that in 2011, when overseas social media was just starting out, SHEIN began to use Internet celebrities to promote on international social platforms such as Facebook, Twitter, and Instagram. At that time, the Internet celebrity had not yet been officially commercialized, and SHEIN also took this opportunity to complete the original accumulation at a very low cost.

Pei Yang, a product partner at SHEIN, once revealed that a YouTube influencer with a cooperation fee of up to $50,000 and 1.7 million followers only cost $30 six years ago.

However, with the surge in orders, the company gradually realized that such a wholesale model could not meet the demand for overseas consumption. So Xu Yangtian came to Guangdong, where the goods had been purchased before, and decided to personally run through the supply chain.

Unlike most apparel companies, SHEIN's requirements for the supply chain are "small orders and quick returns", each product starts with only 100 pieces, and then puts them on the market for testing, adjusting the design according to sales until it is polished into a blockbuster.

Usually, due to the long clothing assembly line, the larger the single volume, the lower the cost, so in 2014, almost no factory was willing to take orders.

In order to solve this dilemma, shein gave a plan to take the initiative to subsidize funds for the factory, keep the pressure of inventory to yourself, and ensure the safety of the capital chain, never default on supplier payments, and even settle the account in advance. It will also lend money to factories that are not large enough to buy equipment and factories when expanding production capacity.

During the same period, SHEIN also created a powerful supply chain information system that can be accessed to major browsers to detect current trends in any region, and the information collected through the system will be provided to SHEIN's suppliers to guide them in designing products and responding instantly to consumer preferences.

After several explorations, the company gradually organized a huge supplier network in Guangdong. According to late reports, SHEIN has developed more than 300 core garment factory suppliers in the area of two hours' drive from Panyu headquarters, with more than 2,000 suppliers. Earlier this year, SHEIN continued to invest 15 billion yuan to build a new supply chain headquarters in Guangzhou.

Another advantage of relying on "Made in China" is that compared with the cumbersome design of fast fashion brands such as Zara from Europe, to Southeast Asia and China production, and to the central warehouse and then unified delivery, SHEIN only takes 2 weeks from new product design to completion, which has significant advantages in efficiency.

In this context, SHEIN has been able to innovate in large quantities. Radar financial search found that on April 5-7, 2022, the new volume of women's clothing on the SHEIN independent station was 6854 models, 6850 models and 7291 models, respectively. Professor Sheng Lu, who studies the global textile and apparel industry at the University of Delaware, said that between January and October 2021, SHEIN was more than 20 times more innovative than Zara and H&M combined.

In addition, because there are no offline stores, SHEIN has greatly saved rental costs, which is one of the important reasons why it can supply low-priced products to the market for a long time.

It is also because of the focus on online, in the past two years, due to the epidemic caused by many fast fashion giants to close stores to survive, SHEIN is riding the dust, its download volume in many countries and regions has shown explosive growth, but also many times in the application rankings to achieve Amazon surpass.

To this day, SHEIN still pays attention to the promotion of social media platforms.

Taking Instagram as an example, in addition to having official accounts, SHEIN has also set up social accounts for different countries and regions, and by the end of 2021, the number of fans on Instagram alone on the official account alone will reach nearly 23 million. SHEIN was one of the earliest companies to settle on TikTok, and in early March this year, #Shein标签视频在TikTok上的播放量已经超过200亿次, #sheinhaul播放量42亿次, shein's official TikTok main account had more than 3 million followers.

Can business be evergreen?

With such a large volume, there has also been a lot of controversy surrounding SHEIN.

Like most FMCG brands, SHEIN also faces a "design dilemma" and a "quality dilemma".

On the one hand, in the eyes of some Western media, SHEIN's "design" is to break up and reorganize the creative elements of big-name designers. At present, many clothing brands have taken SHEIN to court, such as AirWair International, the manufacturer of "Dr Martens" footwear products, which said that there are more than 20 counterfeit "Martin boots" on SHEIN's platform. Another clothing brand, Levi Strauss, accused SHEIN of copying the "Arcuate" stitching style commonly used in the back pockets of its jeans.

In addition, many designers have complained on social media that their painting designs were stolen by SHEIN after they were published online. One of the illustrators and digital artists from Edinburgh said SHEIN had stolen her work nearly 10 more times since the first infringement in 2020, using it on stickers and various prints. Each time she patiently wrote to the infringing team and spoke out on social media, but months later, they would infringe again.

On the other hand, a survey by the Canadian consumer magazine Marketplace in late 2021 found that toddler jackets purchased from SHEIN contained almost 20 times the amount of lead set by Health Canada.

In addition, some market participants believe that SHEIN, while providing opportunities for suppliers, also stirs up the apparel production chain, potentially exacerbating the inner volume.

Because SHEIN controls a huge supply chain in China, some suppliers have to reduce prices in order to win orders, but this will not only reduce the profits obtained from processing, but also double the burden on workers.

According to industry insiders, SHEIN has always put speed in the first place of the supplier parity system, and 90% of KPIs are related to speed and production capacity, which leads to extreme losses for factories whose main business is to produce more complex clothing types.

The relevant people calculate that the profit of shein processing is not higher than that of small and medium-sized clothing brands in the past, but the pressure is not proportional, and the orders that pursue production capacity and speed make the factory almost overloaded.

In a report on a visit to a garment factory in Guangzhou, the self-media "tailor" mentioned that workers reported that the unit price of piece-count production was mostly only a few cents to a few cents. "If I want to get paid seven or eight thousand a month, I have to work about 15 hours a day. You have to get your hands faster. Cervical spine problems and bad butt sitting are everyone's problems. ”

On this basis, there is a view that SHEIN is returning Chinese factories to the trap of low-end manufacturing. After all, it is not difficult to see from the trajectory of the transformation of brands such as Zara and H&M that there is no end to the competition for low prices and efficiency. When the technology matures, there will inevitably be more efficient new players to compete for the market.

SHEIN understands why. Since 2018, SHEIN has begun to open pop-up stores around the world, hoping to change its stereotype of low-cost products by allowing consumers to experience the appearance and material of clothing on the spot.

The company also launched a premium version of the brand SheIn Premium in 2020 and renamed it MOTF in 2021. It is explicitly mentioned in MOTF's brand introduction that it is made of "higher quality" materials.

But from the perspective of consumer choice, climbing from the low end to the high end is never an easy task.

Many brands have similar experiences, such as Xiaomi initially occupied the market with cost performance, but so far its exploration of high-end is still difficult to say successful; Pinduoduo also started from the sinking market, and it is extremely difficult to get rid of the inferior product impression so far.

Relying on the advantages of the supply chain, SHEIN has maintained rapid growth in the early stage. By 2021, the company achieved at least 100% revenue growth for seven consecutive years, but if you look at the company's revenue performance of $10 billion and $15.7 billion in public reports in 2020 and 2021, its growth rate has declined.

In this case, the real test of SHEIN may have just begun.

Note: This article is the original of Radar Finance (ID: leidacj). Unauthorized reproduction is prohibited.