Image source @ Visual China
Mr. Wen | Yiguan
Shein is again a concern.
According to Bloomberg, Shein is raising a new round of financing, which will be valued at $100 billion (equivalent to about 636.2 billion yuan).
How big the money is, many people may not have a concept, but compared with byteDance's valuation, it may be clearer.
As a world-class unicorn, ByteDance holds two major nuclear bomb-level social products, Douyin and Tik Tok, with a valuation of about $140 billion, while Shein is almost on the same runway as it with a gap of $40 billion.
Many people wonder why "a cross-border e-commerce independent station selling low-priced clothing" can be compared with ByteDance, which has a strong technological color and sat on 1.9 billion users (at the end of 2020) it.
The source of the image @Shein the official website
Of course, the valuation is only a reference, but behind this valuation stands the "shoulder handle" of the investment community such as Sequoia Capital, IDG Capital, and Shunwei Capital. This round of financing will also be led by the famous General Atlantic (Bloomberg).
Data source @ Qichacha, LatePost, CITIC Securities
Why is Shein so valuable? This is a concern for many people.
We see many familiar answers to the answers to this question.
"The flexible supply chain is very strong," the 'small single fast return' model is very powerful," "a large number of factories are scrambling to supply it with clothing."
"Shein clothing is cheap, there are many styles, and it can afford to shop", "Shein's traffic is very large, and the cost of sales and promotion is very low, which is enough to support its continuous expansion." And all that.
Mr. Yiguan believes that these are all correct, but it seems impossible to explain, why is it worth so much money? It was able to stand on almost the same line as ByteDance.
In addition, Anker Innovation( also as a cross-border e-commerce benchmark brand, has excellent innovation capabilities, frequently launches explosive products, and constantly dominates Amazon's best-selling list, but in the past year, it has not been optimistic about the market, and its market value has gone from the peak of 80 billion yuan to 30 billion yuan (Oriental Wealth data on April 9: 25.247 billion).
Many people say that Shein is making clothing, with independent stations (App) as the main sales channel, Anker Innovation is doing 3C, with Amazon and offline B2B as the main sales channels, there is no comparison between the two.
However, we can still ask why there is a geometric difference in the estimated (market) value between the two cross-border e-commerce brands that are also the heads.
Why is Shein so valuable?
Mr. Yiguan believes that the value of Shein is not only how many clothes it has sold, how high its sales are (CITIC Securities data: 70 billion yuan in 2020), nor how many factories cooperate to supply it, but more importantly, its own "core value".
This "kernel value" includes "user entrance that will not be easily choked on the neck", "high-viscosity user tool attributes", etc., of course, including "intelligent supply system" and brand mental cognition.
However, Shein's most important "kernel value" is to have an independent, self-contained entrance to reach users. This is extremely important.
The strongest is Apple, which relies on mobile phones, tablets and iOS systems to firmly control the "first-level Internet entrance" of nearly half of European and American Internet users. Whether users are shopping, watching news, or socializing, they must first pass through the entrance of Apple. (Scan the code at the end of the article, make a friend with Mr. Yiguan)
So, what entrance does Shein have?
Shein has an entrance that allows consumers around the world to "shop for countless rich styles of cheap clothing".
Many people will say that there are many independent stations selling clothing, so isn't every independent station with an entrance? The answer is clearly no.
To be an entrance, it must be "independent enough + large enough + sticky enough", i.e. the user is large enough, sticky enough, and then reused enough times.
Having an independent, direct entrance to the user is an important criterion for evaluating the value of an Internet company.
Shein's website and app have a strong degree of independence.
Although it also has to buy traffic from the first and second entrances such as Apple, Google, and Facebook, its organic traffic and App downloads give it enough independent support.
The so-called natural flow, that is, the traffic that can be obtained without repeated payment, is like a bamboo shoot, without fertilization and medicine, growing naturally in the forest and becoming a bamboo that rises straight up to the sky.
How much of Shein's organic traffic is there?
SimilarWeb shows that at least more than half of the desktop traffic on shein is organic traffic. [Direct access traffic reached 37.34%, search traffic reached 45.2%, and the organic search for the brand word "shein" accounted for the largest proportion. 】
What does this mean? At least more than half of users visit Shein's official website directly, or in search engines such as Google, by searching for Shein brand terms, directly access the website.
It can be seen that a large number of consumers are going directly to "Shein", rather than being attracted by ads on Facebook and Google.
In terms of app download now, it reflects Shein's ability to reach direct users.
In May 2021, the Shein App surpassed App Annie; for the full year of 2021, the Shein App was downloaded 3,200 times, second only to Amazon's 40 million (eMarketer).
This means that the young Shein, in terms of expanding user access, has the strength to break the wrist with amazon, a super predator founded in 1994.
Of course, whether it is the organic access to the website and the organic traffic generated by users after downloading the app, a large and lasting manual intervention and paid intervention such as SEO, brand marketing, and social media operation are required in the early stage.
This is the result of Shein's continuous snowball driven by long-term doctrine, and this persistence is more than 10 years.
Here, we do not need to repeat how much traffic Shein is, Mr. Yiguan wants to explain that shein's biggest "kernel value" is that like Amazon, it has an independent and self-sufficient user entrance.
The first of the valuable features of this entrance is that it can be open 24 hours a day, 365 days a week. When Shein's team turns off the computer and goes to sleep, it can still receive a steady stream of visits and orders from consumers around the world.
Second, this entrance has a high degree of independence and becomes the most important support for its value (valuation). This independence includes two aspects, one is the independence of traffic, and the other is the independence of ecology.
As mentioned above, Shein itself has a large amount of organic traffic, which can be obtained without repeated payment, and secondly, Shein has purchased a large amount of traffic from third-party traffic platforms such as Facebook, Instagram, and Google since 2012, and has trained the ability to deliver, filter and filter accurate off-site traffic.
As a result, Shein has a stable foothold in independently acquiring traffic.
Anker also has an independent station, but it brings a small proportion of traffic and revenue. The traffic of Anker Innovation mainly comes from Amazon [the revenue contributed to Anker Innovation is about 65%-70% (company financial report)].
Of course, Anker Innovation also has organic traffic on Amazon, including organic ranking of product links, as well as organic traffic that users search for in the search box with "Anker brand terms" or "big category keywords + Anker brand words".
However, the "throat" of these natural flows, pinched in Amazon's hands.
In view of Amazon's huge self-operated business that competes with third-party sellers, and at the same time, Amazon has strict operating rules on the site, and since May 2020, it has closed the 100 million-level stores of first-line large sellers, including Patoson and Tongtuo.
Therefore, Mr. Yiguan believes that the third-party seller whose throat of traffic is pinched in Amazon's hands, no matter how strong, its security is far lower than that of players with huge private domain traffic entrances such as Shein.
To use an inappropriate analogy, taking the flow on the Amazon is like connecting the water pipe, the water comes at once, but once the water pipe is removed or pinched, there is no water; and Shein's private flow is to dig the well by itself, which is difficult and tired at first, but as the well is dug deeper and deeper, straight to the rock wall, the water will rush and can be enjoyed for a long time without restriction.
The value of this natural flow entrance to Shein is endless.
2. The entrance to Shein, with a high degree of ecological independence.
Although Shein's website also needs to be opened on Google Chrome, and the app depends on the underlying ecological infrastructure such as Apple's iOS system and Android system, Shein is generally not pinched by them.
Because, as an ecological infrastructure, Apple and Google must not only abide by their own honest and fair business principles, but also "follow the rules" within the red line of anti-monopoly law.
For example, Google, as the ecological alliance owner of the website and Android system, generally does not hurt the hand, reduce the keyword ranking of the Shein website, or interfere with its indexed pages, or block the Shein App download.
Of course, in reality, there have indeed been cases of ecological alliance owners and Internet first-level entrances "pinching their necks".
For example, Apple introduced the ATT Privacy New Deal, which prohibits Facebook from crawling user access trajectories across apps through the IDFA advertising logo of Apple devices through pop-up windows, resulting in a sharp drop in the accuracy of Facebook's personalized recommendation ads, and a loss of $10 billion in annual revenue. For details, please refer to Mr. Yiguan's article "After 200,000 independent site sellers "lame", they were hit again, and Google Sandbox strangled the traffic throat again"
However, Unlike Facebook, Shein doesn't have this problem.
As an independent e-commerce portal, Shein itself has precipitated a large number of users' browsing trajectories, shopping cart abandonment quantities, shopping records, mailboxes, home addresses, phone numbers and other first-hand data.
With a wealth of data, Shein can accurately identify users and make accurate demand judgments, without being "neck-pinched" by Apple's first-level entrance.
In this regard, it is very similar to Amazon. After Apple's ATT privacy policy was introduced, Facebook's revenue plummeted and its stock price fell, while Amazon's advertising revenue continued to soar and the company continued to grow.
This is because Amazon, as a first-class e-commerce portal, has huge ecological independence, and then has its own strategic depth and security margin.
Shein's volume, while not comparable to Amazon's, has the same "kernel value."
To sum up, the biggest reason why Shein is so valuable is that it has an independent traffic entrance and ecological entrance that will not be easily "neck-choked".
The second "kernel value" that makes Shein valuable is its "tool attribute" in the minds of consumers.
Internet tools have great value, such as Baidu, which we often use to search for information; WeChat, which we use to socialize; boss direct employment, which is the tool we use to search for jobs, understand companies, and compare with peers.
In fact, when Amazon sold books as early as 1996, it built itself into a tool.
Through a Web technology, Bezos allows Amazon users to browse a database of 1.1 million books through "themes" or "titles," five times the number of books in the largest book supermarket inventory.
In this way, Amazon is not just a website for buying books, but a "data tool" and "book review tool" for querying and reviewing millions of books.
Amazon has positioned this tool as a tool for consumers to "search for products", "compare prices", and "hang out and play time".
Shein is no longer a regular website and app for buying clothes, but a tool that consumers often use and sticks firmly to them:
1. Shein is a "one-stop tool for consumers to choose clothing", what styles are needed, and everything is available;
2. Shein is a "one-stop tool for matching clothing" for consumers, and it is easy to find matching styles in Shein. For example, according to LatePost, some consumers have bought high-end clothing such as GUCCI and Prada, and even went to Shein to find clothes to match, without any sense of violation.
3. Shein is a "one-stop shop for addictive hangouts + discovering new outfits" for consumers. Many consumers do not lack clothes for the time being, but they know that Shein's clothing styles are very rich, and a large number of new models are available every day, and the price is very cheap, which is really addictive.
As soon as many users have time, they go up to hang out, refresh, pick clothes, and play time. In this sense, Shein has become an entertainment app.
These judgments are consistent with Shein's user profile. Shein's main consumer group is young women aged 18-35. According to media reports and statistics from research institutions, many consumers are college students, technical school students, full-time mothers, waiters, chefs, etc. Among them, the disposable income is not too high, but the disposable time is very large.
Much of the data also proves that Shein is an "addictive" website and app.
Among Zara, Nike, H&M, Zara, Asos and other opponents, Shein's PC and mobile users have the strongest access depth, with up to 8:37 minutes of access.
This means that Shein's clothing styles are very numerous, the pages are very rich, and the most let consumers linger. (As of May 2021, Shein received more than 150 million visits on mobile and PC.)
Zhongtai Securities June 2021 Research Report
As evidence, a large number of American users complained on Twitter, Quora, and Facebook that they suffered from "Shein Addiction", "I bought a lot of them, I can't stop", "I obviously don't lack clothes, but I can't help but buy on Shein", and so on.
Therefore, Shein is a tool for consumers to find clothes, a tool to find clothes to match, a tool to discover new styles, and even a tool to kill time.
These tool properties are built on top of Shein's two capabilities.
First, the extremely low price is enough to beat the low price of peers; second, the nearly endless new ability, the nearly endless rich style.
Don't stress how low shein is. A large number of clothing, concentrated in the range of 2-5 US dollars, a small number of higher prices are concentrated in between 100-200 US dollars. Many products with similar designs or even the same model, Shein's price, is about 8-10 times cheaper than ZARA.
In fact, low prices are not capabilities, and being able to be new at high frequencies for a long time and maintain low prices is the ability.
This has also been reported by many media and research institutions. Some institutions said that Shein has about 3,000 new styles every day, nearly 20,000 per week, while Zhongtai Securities Research Report said that the new SKU is as high as 40,000 to 50,000 every week.
In short, it is a very large number.
Shein's official website
Shein has built its standalone station (App) into a "super maze" of clothing, with a dizzying selection and huge style. A basic T-shirt may have 10 colors, 6 sizes and 2 collars. Only one product, possibly up to 120 SKUs.
The richness of its clothing styles is enough for hundreds of millions of users to be deeply "addicted", addicted to it, and bought and bought. As long as you brush your fingers down, there will be a steady stream of short skirts, swimwear, panties, tops, pants, accessories, and very accurate poke at your interests and needs.
Therefore, the huge and rich SKUs and the continuous new styles have made Shein a "one-stop tool for selecting cost-effective clothing", and this tool (brand) positioning is firmly occupied in the minds of the majority of European and American consumers.
This is a huge mental asset.
Many people will say that selling low-priced clothing, rolling up, the value is not large, but Shein can maintain low prices for a long time, maintain a high frequency of new, and can maintain a benign positive cycle such as capital flow, then, the positioning of "one-stop shopping for cost-effective clothing tools" is, of course, a huge brand asset of its, and one of the important "core values" that support its valuation.
Finally, Shein's other "core value" is still an entrance, but unlike the traffic entrance mentioned above, it is the entrance of "Small and medium-sized Chinese factories to deliver clothing to overseas markets".
In other words, as many people say, "the flexible supply chain of countless factories with the supply" and "intelligent digital system".
Shein's supply chain assets are offline physical and physical existence, which is completely different from Shein's huge online traffic assets, and has undergone a series of twists and turns before it is slowly established.
At first, Shein was also looked down upon by many garment factories, especially when it first opened a branch from Nanjing to Baiyun District, Guangzhou. At that time, the order volume was small, the requirements were fast, and the price could not come up, and many garment factories were unwilling to cooperate.
After arriving in Panyu in 2016, the situation slowly improved. Large and medium-sized factories do not cooperate, Shein had to target some small factories, talk one by one, strive to improve relations, strive for stable orders, so that small factories can support themselves, and even take the initiative to subsidize suppliers, but also cover the work of sample clothing, and then also provide loans, advance settlement of payments and other services.
It is with this kind of "upside down" low posture, family after family talks, to achieve the flexible supply chain that many people now envy, this is the victory of long-term doctrine, not overnight.
Of course, to maintain these factories, it is necessary to ensure a stable order volume and continuous explosive orders. Behind this is Shein's "intelligent supply chain system that connects hundreds of millions of users with domestic factories, and updates and adjusts order data in real time."
This system is already highly intelligent.
Shein connects her website and app to the ERP manufacturing end of the big and small factories. A dress is online, how many people have browsed, how many people have added to the shopping cart, how many people have finally purchased, all browsing, clicking, sales data will be crawled by Shein, and after processing by algorithms, quickly synchronized to the system, and then issue instructions to the factory to quickly adjust its output.
This system guarantees Shein with the factory and can be timely trial and error at minimal cost.
Each dress, only a small batch, is generally 100-500 pieces, often 100 pieces. After making it, take it to the website and app to test, go to run the data, see the consumer's reaction, how many people put into the shopping cart, how many people bought, everything is very clear, and then quickly feedback to the factory, the order is large, additional production, the order is small, the design elements are disassembled, redesigned or directly stopped production.
Through this model, Shein works with factories and even produces and tests thousands of clothes at the same time. (Large-scale automated testing and reordering (LATR) models).
Low cost and very efficient. Factories will be very cooperative, because they know that some styles are eliminated, and the next model may become a big hit.
In this way, Shein has formed an "intelligent supply chain alliance" with small and medium-sized factories, and has become a super entrance for these factories to export various styles of clothing (through OEM production, ODM design and production, etc.).
This "intelligent supply chain alliance" is based on Shein's "user-aware data kernel and algorithm kernel".
Shein will use its own and off-site user behavior data to filter and predict the latest trendy and most popular elements that consumers are interested in.
These data are brought together to form a clear user portrait, constantly "feeding" into Shein's system, making it more and more intelligent, but also more and more user-aware, but also for the designer team to provide rich inspiration, and then for the upstream factory, to provide optimization, transformation of the reference.
Shein recruits for algorithmic engineering conditions
As a result, Shein's blockbuster rate reached 50% and the unsalable rate was about 10% (Open Source Securities Research Institute).
To sum up, Mr. Yiguan believes that the reason why Shein is so valuable is not only the superficial brand influence and huge sales, but its grasp of the "independent and self-sufficient user entrance", and through continuous innovation, firmly stick to users, becoming a one-stop tool for users to select massive clothing. Behind everything is an independent private domain traffic and transaction ecology, an increasingly intelligent order data system, and a solid physical supply chain foundation offline. What runs through this is the persistence of the long time, and eventually the snowball gets bigger and bigger.