In just a few years, Shein has gone from a mysterious Chinese site with a strange interface to a Generation Z favorite that makes up 40% of the American fast-fashion market.
Founded by Chris Xu in 2008, the shopping site has seen astronomical rise in many countries outside of China to a current valuation of over $100 billion. The clothes sold on the site mirror major trends from popular designers and, with prices like $11 for pants or $4 for a tank top, they have found a large customer base. They are seen by many as an even more affordable alternative to longtime fast-fashion giants like H&M (HMRZF) and Zara.
Shein's popularity with younger people in particular has often been attributed to its presence on TikTok — Piper Sandler's recent "Taking Stock With Teens" survey found that it is was the second-most downloaded e-commerce site after Amazon (AMZN) among teens in 2021.
The reason goes back to more than "cheap clothes" and "young people like it." For years, Shein has invested serious money in targeted ads and paid popular influencers to promote their clothing via "hauls." The resharing creates a snowball effect both for individual styles (from the $47 wedding dress to the cross-wrap crop top) to the company itself.
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On TikTok, the #shein hashtag alone has over 3.33 billion views. Some estimates say that sales rose from $10 billion in 2020 to $16 billion in 2021.
Shein Considering Next Step
While Shein is currently a private company, there has been talk of a U.S. IPO for at least a year now. Major investors include Sequoia Capital China, IDG Capital and Tiger Global Management. Reports emerged recently about Xu trying to obtain Singaporean citizenship in order to facilitate this process. China's securities regulators tightened rules to make it very difficult for local companies to trade overseas in 2021.
People familiar with Shein's plans told Bloomberg that a U.S. IPO could come as soon as 2024 as the company works to both overcome the Chinese government's hostility to foreign trading and criticism of the company's human rights and environmental records.
The cheap prices that fueled Shein's astronomical growth are one of the main things catching the eyes of Western regulators — probes have previously drawn attention to everything from employees being forced to work 75-hour work weeks to the clothes themselves not lasting more than a couple of wears and being a major contributor to textile waste.
There Are Many Hoops Ahead for Shein
But even if Shein is able to overcome ESG concerns for an American IPO, big hurdles will remain thanks to growing antagonism between China and the U.S.
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In December 2020, the Securities and Exchange Commission (SEC) started requiring Chinese companies submit their documents for more extensive audits. After refusing to comply due to risk of running into trouble from authorities at home, Chinese companies like JD.com (JD) and JinkoSolar Holding Co Ltd (JKS) have all been added to the list of those who are at risk of expulsion from U.S. markets.
"The intricacies indicate how difficult it will be for large Chinese companies to list overseas," Alex Frew McMillan wrote for TheStreet's RealMoney in February. "Shein appears to be in the process of recasting itself as a Singapore corporation. Then again, the Chinese authorities have said their long arm applies to companies that do a substantial amount of business there."
Shein did not immediately respond to TheStreet's request for comment.
