Image source @ Visual China
Text | Planet Planet, by | Chiron, Editor | Tang Fei
SHEIN, the mysterious company, has recently become the top of the venture capital circle.
According to foreign media reports, the global fast fashion e-commerce brand platform has completed the latest round of financing, investors include Transatlantic Capital, Tiger Global Fund and Sequoia Fund, raising funds in the scale of 1 billion to 2 billion US dollars. After this round of funding, SHEIN valuations could be as high as $100 billion.
What is the concept of $100 billion?
This figure has exceeded the sum of European and American fast fashion brands H&M and Zara. Second only to ByteDance and Ant Group after the shrinking valuation, it is almost on par with Musk's SpaceX on the other side of the ocean. If you use the listed companies as a comparison, the SHEIN valuation is almost equal to one Meituan, or two Pinduoduo and three Xiaomi groups.
According to public reports, 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 had grown to $47 billion.
The question is, why is SHEIN, which has only been established for 14 years, so valuable?
01 Aiming at global "small-town youth"
In 2008, SHEIN was established in Nanjing, and in the early days, it mainly engaged in wedding dress foreign trade business.
Until around 2015, SHEIN moved its headquarters from Nanjing to Panyu and began to develop rapidly. In the next two years, SHEIN continued to expand its supply network, developing more than 300 core garment factory suppliers within the "2-hour circle" of the headquarters.
For these supplier partners, SHEIN also never skimps on it. According to media reports, in order to ensure the safety of the supply chain, SHEIN often takes the initiative to subsidize the factory and never defaults on payments to suppliers. For the required clothing products, SHEIN's information system can access the browser, probe the fashion trends around the world, and then send them to suppliers for reference to ensure that they keep up with the trend, enough is also "fashionable".
According to reports, in October-December 2021, SHEIN will meet 5,000-6,000 new SKUs every day, and the inventory turnover days will be more than 30 days, which is a very low number in the apparel retail industry. For comparison, H&M and ZARA have 138 turnaround days (fiscal year ending november last year) and 92 days, respectively, and are only one-times the efficiency of SHEIN.
At the same time, the "real-time supply chain system" is also the core of SHEIN. According to official disclosures, it only takes a short period of 20 days for a garment to be sampled and delivered to consumers, far exceeding that of its peers.
For fast fashion, just as important as speed is price. For example, the average price of ZARA is 35.9 euros, and the average price of H&M is 26.2 euros, which is enough for Europeans. But the price of SHEIN clothing is only single digits, coupled with continuous activities, so that a "consumption downgrade" carnival swept abroad.
From 2013 to 2020, SHEIN achieved revenue growth of more than 100% for 8 consecutive years. Guojin Securities Research Institute predicts that the scale of SHEIN in 2021 can exceed 16 billion US dollars, of which clothing is the mainstay, and women's clothing accounts for more than 60%. Similar fast fashion companies ZARA and H&M have 2020 revenue of $31.6 billion and $20.2 billion, respectively. If it can maintain the previous high growth rate, it is only a matter of time before SHEIN catches up with the two "old predecessors".
Who is supporting SHEIN's $10 billion sales?
According to SHEIN's plan, Gen Z, born between 1995 and 2009, is its main target user. In order to attract this part of the consumer, SHEIN also uses "low price & trend" as the main selling point.
In the early days, SHEIN ran a lot of ads on Google and Facebook, and it gained a lot of user attention. With the rise of the "internet celebrity economy", SHEIN has also quickly cooperated with a wave of overseas Internet celebrities, with low and cooperative costs and excellent results to harvest user traffic.
Today, SHEIN has nearly 25 million followers on Facebook and more than 22 million on Instagram. According to the latest statistics, SHEIN's Instagram global page in 2022Q1 has a total of 900+ posts and 17 million interactions; the #SHEIN# hashtag video has been played more than 20 billion times on TikTok.
In terms of marketing methods, SHEIN adopts Affiliate Marketing alliance marketing, and gives KOC/KOL rebates according to the proportion of sales, and the rebate ratio is about 10% to 20%. Sufficient rebates also make more Internet celebrities willing to join the promotion of the SHEIN brand.
At the same time, SHEIN also attaches great importance to the feedback of Internet celebrities and fans, and plans production according to feedback to achieve a virtuous circle.
In addition to external traffic, SHEIN's own app is also one of the company's direct channels to users. App Annie data shows that in May 2021, shein app downloads surpassed Amazon; in 2021, the number of SHEIN app downloads was 32 million, second only to Amazon's 40 million.
And SHEIN's PC side is very addictive, Zhongtai Securities data shows that in ZARA, H&M, GAP and other opponents, SHEIN's PC user access depth is the strongest, access time up to 8:37 minutes.
Some American users even 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" and so on.
02 Crowded costume track
In fact, not only SHEIN, but also on the basis of China's "big and complete" supply chain and with the support of cross-border trade policies, cross-border e-commerce is ushering in a new wave of development.
According to Frost & Sullivan data, China's cross-border B2C will be about 2.3 trillion yuan in 2020, and the ratio of platform sellers to self-operated websites will be about 3:1. The compound growth rate of platform sellers in 2016-2020 is 32.9%, and the compound annual growth rate of self-operated websites in the past five years is 42.8%.
In 2020, consumer electronics accounted for 23.5%, apparel accounted for 20.2%, and household products accounted for 20.7% of China's cross-border exports of B2C e-commerce.
Of course, there is competition where there are people, and there are many pretenders of the cake of cross-border clothing.
IT orange data shows that in 2021, there will be a total of 55 domestic cross-border e-commerce financings, with a total amount of nearly 5.7 billion yuan, becoming an investment hotspot. In addition, cross-border e-commerce companies, including ZiBu Whisper, Zhiou Technology, And Huabao New Energy, have actively sought to land on the capital market and rushed to submit prospectuses.
In addition, many large Internet companies are also actively laying out this field. In 2021, ByteDance launched the women's cross-border e-commerce independent station Dmonstudio, as well as the tiktok-dependent e-commerce TikTok Shopping; Alibaba has a number of mature cross-border e-commerce companies such as Alibaba International Station, AliExpress, Lazada, and the latest e-commerce platform Allylikes.
Among them, Byte's Dmonstudio has been regarded as the most direct challenger to SHEIN. But just 3 months after registering the domain name, Dmonstudio suddenly shut down. Prior to this, Dmonstudio has sprinkled hundreds of millions of dollars, covering more than 100 countries and regions, and has laid out overseas warehouses around the world. ByteDance's overseas strategy, which comes and goes in a hurry, makes people scratch their heads.
Ali's Allylikes, which went online in the European and American markets at the end of last year, focused on women's clothing purchases, and the industry generally believes that it is the product of benchmarking SHEIN, and the user base is also aimed at Generation Z, but the price range is between $20-40, slightly higher than SHEIN.
According to industry insiders, Allylikes is aimed at the mid-range crowd, and whether it can stand out in the future depends on how much Money Ali is willing to burn. It is understood that Ali has also launched an e-commerce platform 11 Main in the United States, focusing on fashion and style, family and outdoor, mother and baby and children and other categories, but 11 Main also ended hastily after a while.
In addition to the above giants, many startups also use overseas markets as a base camp for their rise. According to Vogue Business statistics, there are at least 12 e-commerce platforms on the market that are similar to SHEIN in terms of operating model, target market, marketing methods, etc., and operated by domestic companies.
Typical examples such as Jolly Chic, founded in 2012, mainly in the fashion and apparel category, mainly targeting female customers aged 25-40 in the Middle East market, has completed six rounds of financing, and the latest financing amount is $65 million. Founded in 2020, Cider, which focuses on ins and takes the original route, has also received four rounds of financing, the latest of which is $130 million.
Domestic companies are playing hot, and foreign giants are not absent. According to foreign media reports, Microsoft is internally testing the first cross-border e-commerce platform, Buy with Microsoft, which will be launched as soon as April or May. Mainly selling household daily use, electronic accessories, 3C, clothing shoes and hats, gardening tools, etc. The report also shows that the platform is commission-free, and the settled merchants need to have online or offline sales of more than $1 million.
Under the blossoming of a hundred flowers, cross-border e-commerce has approached the Red Sea, which also forced SHEIN to evolve. Guojin Securities Research Report believes that in the future, SHEIN's "circle-breaking" path will rely on the two lines of "high-end" and "expanding categories".
In 2020, SHEIN launched the high-end brand SHRINE Premium and changed its name to MOTF, the price point remained between 5 and 75 US dollars, SHEIN's official website description of MOTF is: "Customers can enjoy high-end clothing without paying a high price".
In March, SHEIN opened its first pop-up store in Rio de Janeiro, Brazil, featuring about 3,000 items including clothes, shoes, accessories and bags, so shoppers can feel the fabrics and textures and try out products sold online. According to relevant sources, SHEIN has opened pop-up stores around the world, the main purpose is to change consumer stereotypes about the low-end of its products.
At the same time, SHEIN also extends SKU to many categories such as beauty, home, and clothing. Among them, the household category covers more than 50,000 kinds of products including pet supplies, decoration, office supplies, etc., and the clothing category covers men's wear, women's wear, children's wear and so on. The latest news also shows that SHEIN has launched its own underwear brand independent station Luvlette in a low-key manner.
As one of the representatives of Chinese enterprises going to sea, SHEIN is being welcomed by more and more global consumers, but in the process of increasingly large supply chains, SHEIN still needs to strictly control quality control, reduce the negative controversy caused by it, and further improve the recognition of Chinese brands abroad.
The valuation of $100 billion is not a small amount, and the introduction of global capital also validates the investment value of Chinese companies. A few days ago, there was news in the media that SHEIN was seeking to go to the United States for an IPO, but SHEIN immediately denied it.