By Anushree Dave
Shein’s rise in popularity among Gen Z and millennials and talk of an IPO in the U.S. have raised concerns and scrutiny around the app
Last week, 22 members of the U.S. House of Representatives urged the U.S. Securities and Exchange Commission to increase scrutiny of Chinese fast-fashion giant Shein.
Shein, for those unfamiliar with the company, has had a meteoric rise in the past few years, going from $15.7 billion in revenue in 2021 to $30 billion generated in 2022, according to some estimates. Shein was also downloaded around 200 million times in 2022, making it the most downloaded app in the shopping category in the U.S., according to Business of Apps. The company plans on growing even larger in the next few years, according to the Financial Times, which reported in February that the company was working to convince investors it was on track for an initial public offering later this year.
In a letter, the bipartisan group of lawmakers asked the SEC to require Shein to certify that products made in China are not using Uyghur forced labor, which would be in violation of the Uyghur Forced Labor Prevention Act. The Act was signed into law by President Joe Biden in December 2021, in an effort to ensure that American entities are not funding forced labor among ethnic minorities in the Xinjiang region.
The letter states that “Shein is aggressively raising capital and plans to executive an IPO before the end of this calendar year,” and that the company should certify via independent verification that it doesn’t used forced labor.
In an email to MarketWatch in April, Shein said it currently had no plans for an IPO. The company also said it doesn’t have suppliers in the Xinjiang region of China, stating that their suppliers are based in regions including Brazil, Southern China, and Turkey, and that their “suppliers must adhere to a strict code of conduct.” Shein didn’t respond to a more recent inquiry.
An SEC spokesperson said the agency declined to comment on individual companies and that Chair Gary Gensler would respond to members of Congress “directly, rather than through the media.”
Here are four things to know about the retailer:
Valuation reportedly cut
The company was said to be worth $100 billion in 2022, making it one of the most valuable private companies in the world along with SpaceX and TikTok parent company ByteDance, Bloomberg reported. But that valuation was cut earlier this year, Reuters reported, as the retailer sought to raise around $2 billion in March.
Shein didn’t respond to a request for comment on its valuation.
Tik Tok fueled growth
The hashtag #shein has 57.3 billion views on TikTok and #sheinhaul has around 9.8 billion views on the platform. The videos usually feature a young shopper showing off what they bought online from the store, which has its headquarters in Singapore. The prices for items can be as low as $3 for a top, and $15 for a dress. Though the brand started in 2008, platforms like TikTok and Instagram have only recently made it popular in the West.
Slowing growth
In the U.S., Shein’s growth slowed dramatically starting in early 2022, according to a Business of Fashion report. In June 2022, the retail giant saw its first year-over-year sales decline since the start of the pandemic, with sales continuing to fall for the next five months, according to the report.
Shein didn’t respond to a request for comment on its growth plans.
Expansion plans
Shein projects that its revenue will nearly double by 2025, hitting $58.5 billion, the Financial Times reported, citing a private presentation. Shein plans to achieve growth by converting new customers into repeat buyers, according to the report. Shein earlier this week announced the launch of its global integrated marketplace. SHEIN Marketplace, which the company introduced in Brazil last month and plans to launch next in the U.S. before rolling out to other global markets.
By 2025, the company is planning on converting most of its shoppers into loyal customers, projecting that 60% of an estimated 261 million people will have shopped with them before, according to The Financial Times.
Shein did not respond to a request for comment on its expansion plans.
-Anushree Dave
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05-10-23 1716ET
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