Source: Tech Planet (ID: tech618) Author: Lin Jing
SHEIN, a cross-border e-commerce brand with a valuation of $100 billion, has recently attracted attention again because of the listing process and disputes involved.
Although SHEIN officials have denied the news related to the listing several times, since the beginning of 2023, the rumors of its listing have never stopped. According to upstream news previously reported, for the listing in the United States, SHEIN has taken multiple strategic measures to break the situation.
At the same time, SHEIN is also involved in disputes. The latest news is that, according to surging news reports, on January 16, Uniqlo's parent company, Fast Retailing Co., Ltd., announced on its official website that Uniqlo had filed a lawsuit with the Tokyo District Court on December 28, 2023 against three entities under the retail brand Shein, including Shein Japan, saying that the form of the imitations sold by Shein was very similar to its own product "Dumpling Bag" (round mini shoulder bag), and demanded that the three companies immediately stop selling imitations and compensate the company for the losses suffered. Prior to this, many artists and designers also questioned SHEIN's plagiarism and infringement on social platforms. In this regard, SHEIN has not yet made a public response.
However, the other side of the coin is that SHEIN's performance continues to grow. Jamie Salter, founder and CEO of SHEIN partner Authentic Brands Group, revealed in a fireside chat at the ICR conference that SHEIN's revenue in 2023 has exceeded $30 billion.
In the past two years, SHEIN, which has always been low-key, has stepped into the spotlight. After passing the stage of rapid growth, SHEIN is constantly exploring new growth space through platform transformation and developing high-end price line products. The rise of the "Four Little Tigers" has made the competition in the cross-border e-commerce market more intense. As a leading player in cross-border e-commerce, SHEIN is difficult to "lie flat", and the challenges it faces are also increasing.
A year of accelerated expansion
At the end of 2023, rumors of SHEIN's listing came again.
In November, according to the Shanghai Securities News, SHEIN secretly went public in the United States with a target valuation of $90 billion, invited investors to participate in the roadshow, and has completed the submission of the form. Regarding the listing rumors, SHEIN responded to a number of media interviews and said that the news was untrue.
If SHEIN goes public, it will be one of the largest IPOs in the world in 2023. In response to the listing rumors, SHEIN's voice to the outside world is still "no response for the time being".
In recent years, SHEIN has been accelerating its expansion and promoting internationalization. On the one hand, SHEIN has "recruited" a team with an international vision and a sense of capital.
In October last year, SHEIN announced the appointment of Marcelo Crowle, former CEO of SoftBank Group, as vice chairman. Crowle, a former right-hand man of Mr. Son, is best known for helping SoftBank-invested companies turn things around.
Tang Wei's addition, who served as chairman and CEO of Bear Stearns Asia, facilitated Wanda Group's $2.6 billion acquisition of the cinema chain AMC.
SHEIN is also promoting the layout of internationalization. As a cross-border fast fashion e-commerce brand established in Nanjing in 2008, The Paper reported in November 2023 that starting in 2022, SHEIN's headquarters will move to Singapore, expand the size of the team in Singapore, and increase the number of employees in Singapore.
On the other hand, SHEIN is open to the platform, with the women's clothing category as the core, and further expands to all categories, which also opens head-to-head competition with Amazon in the North American market.
At the same time, SHEIN also opened the "buy, buy, buy" mode. At the end of August last year, SHEIN acquired a 1/3 stake in SPARC Group, an American apparel brand operator. SPARC Group owns several apparel brands, including fast-fashion womenswear brand Forever 21, outdoor brand Nautica, mid-range menswear brand Brook Brothers, and more.
At the end of October, SHEIN acquired Missguided, a fast-fashion brand owned by British fashion retail group Frasers Group, and all its intellectual property rights.
Both acquisitions were completed by Tang Wei. Through the acquisition, SHEIN has further enhanced the richness of its product line and made up for the shortcomings of offline scenarios. Up to now, SHEIN has cooperated with Forever 21's offline channels, and SHEIN has landed the first pop-up store opened in Forever21 stores.
After many business attempts, SHEIN also laid out second-hand clothing trading. According to 36Kr, SHEIN will launch SHEIN Exchange in Europe, first in France and Germany.
It is not difficult to see that in the past year, SHEIN has been accelerating the pace of exploring new models in order to seek new growth space.
"Small order quick return": changes in supply chain dividends
At the same time, SHEIN is also constantly optimizing the supply chain and formulating a more stringent quality inspection, price verification, and reward and punishment system. The suppliers behind SHEIN are the most directly aware of these changes.
The "small order quick return" model is the core advantage of SHEIN, that is, each new product will first produce hundreds of pieces for testing, and then quickly adjust the output according to sales performance. Under the ultimate production efficiency, the "multi-fast province" composed of cheap prices, many styles, and fast new products has allowed SHEIN to counterattack global fast fashion giants such as ZARA and HM all the way.
According to the CICC research report, it only takes 7-15 days for a new product to be designed to be finished in SHEIN, SHEIN is updated 2,000+ times a day, 20,000+ a week, and more than 1 million new products per year, while ZARA is updated twice a week, with 12,000 new products per year. According to this calculation, the new rate of SHEIN is about 100 times that of ZARA.
Under the "small order quick return" model, many factories that cooperate with SHEIN have made a lot of money. However, with the further development of SHEIN, suppliers have also begun to show a different state.
Like the supplier Bailu, some suppliers are choosing to reduce SHEIN's orders or even quit. Bailu has cooperated with SHEIN for five years, which is an ODM (supplier independently designed and developed and pushed, and supplied according to orders) cooperation model, he admitted that the current dilemma is: orders are declining, and business is difficult to do.
Bai Lu told Tech Planet that the decline in orders is affected by the superposition of comprehensive factors, such as the rapid development of the "Four Little Dragons" in the past year, and orders will naturally be diluted.
On the other hand, the "small order quick return" model actually tests the supplier's ability to integrate upstream and downstream resources, especially for suppliers in non-Guangdong Panyu District. Bai Lu introduced that in his factory, for example, SHEIN generally orders 100~200 pieces for small batch production testing, but his upstream raw material purchase must start with 1 ton or 2 tons, which means that if the style fails to become a hit, it will lead to the problem of backlog of raw material inventory.
There is also stricter quality inspection. In Bailu's view, when SHEIN reaches a certain stage of development, it must pay more attention to product quality, which is also conducive to the screening of high-quality suppliers, but the challenge now is that products with higher quality requirements and more involuted prices make suppliers' profits more pressured.
According to Bai Lu, SHEIN has a special nuclear price department, on the one hand, the external market is fiercely competitive, on the other hand, SHEIN is also increasing its investment efforts in the country, with the continuous increase of suppliers, the price is also more involuted.
Yang Yang, another supplier of SHEIN, is currently worried about how to make the factory's production capacity further keep up with the fast pace of SHEIN. "First, if there is a hit, the factory will not be able to meet the stocking demand in time, like some plus-size shoes are sold out, but the factory's existing large-size molds can not meet the production; ”
In addition, SHEIN also has higher requirements for efficiency. Yang Yang said frankly that during the three years of cooperation with SHEIN, the initial time was relatively relaxed, and now it takes five days from pattern design to delivery, and the pressure on the factory in the footwear category is increasing.
As SHEIN moves towards full-category development, some new suppliers are also pouring in to seize the dividends of the early stage of the industry. A manufacturer of nail products said that it has only been cooperating with SHEIN for a year, and the current order volume is rising, which is becoming a new growth point for the factory.
SHEIN's Challenge
In the development process of SHEIN, the other side of rapid growth also faces more challenges, such as design copyright disputes, environmental governance, etc.
The core of fast fashion is "fast", and a large number of new styles need to be added every day. A designer who previously worked at SHEIN told Tech Planet that a designer needs to design about 80~100 products per month, and the workload is very large, and overtime is the norm.
In the process of rapid innovation, SHEIN has also been repeatedly involved in plagiarism disputes, which is also a relatively common phenomenon in the field of fast fashion, and ZRAR and HM have also experienced it. According to public records, SHEIN has been named as a defendant in at least 50 federal lawsuits in the United States over the past four years, alleging trademark or copyright infringement, according to the E-commerce Daily. In July 2022, SHEIN was claimed for plagiarism of more than $100 million.
A SHEIN supplier told Tech Planet that a product that had been sold in the past was suddenly removed from the shelves because it was complained by a short video platform influencer about design infringement. According to him, SHEIN has also vigorously improved its intellectual property-related capacity building in the past two years to reduce the risk of infringement.
According to public information, SHEIN has launched the "SHEIN X" designer incubation project since 2021, and SHEIN X's designers only need to be responsible for creation, while manufacturing, marketing and sales are completed by SHEIN. Designers can share in the profits and retain ownership of their creations.
In September 2023, SHEIN once again announced an additional $50 million injection into the SHEIN X Designer Incubator Program, which will total a total investment of $105 million by 2028.
On the other hand, the challenge is ESG (i.e., evaluating the sustainability of a company's operations from the three dimensions of environmental, social and corporate governance). The fast fashion industry is making changes, for example, brands such as Zara and Uniqlo are starting to use biodegradable fabrics, energy-saving and abate-reducing manufacturing processes, and more environmentally friendly paper packaging.
SHEIN is also currently improving its ESG capabilities. Last year, SHEIN announced that it would invest more than 1 billion yuan ($155 million) over five years to continue to promote "Equitable Empowerment", a pillar of its sustainability strategy "evoluSHEIN", to support the development of communities around the world, including designers, suppliers, women and youth, and vulnerable people.
In response to the two major issues of supplier copyright disputes and environmental pollution, the SHEIN team has also publicly responded. According to 21st Century Business Review, Tang Wei, executive vice chairman of SHEIN, said, "This is not an area that the company is good at, but we still do some things, such as second-hand exchanges, providing customers with fabric options, etc." In addition, Tang Wei explained that SHEIN has established a partnership with Queen of Raw to reproduce surplus fabrics from the industry.
SHEIN has quietly grown into a cross-border e-commerce giant in ten years, different from the doubling rate and valuation myth in the past, now, how SHEIN responds to the increasingly fierce competition in the cross-border e-commerce market and seeks its own new growth potential has become the focus of attention from the outside world. In the confusing listing rumors, it remains to be time to reveal the answer to when SHEIN will be able to IPO and land in the capital market.
(Note: Except for Marcelo Crow and Tang Wei, the names in the article are pseudonyms.) ）
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