Text丨Gu Ruofei.
Produced 丨 Consumption at the forefront.
Shein is getting bad news one after another.
Recently, the news of SHEIN's listing in the United States has been very loud, but according to the latest reports from a number of **, SHEIN's listing in the United States has not been approved so far.
This means that SHEIN's road to listing in the United States will still be full of thorns in the future.
However, the disaster is not a single line, and there is even the news that SHEIN's valuation has shrunk and investors have transferred their shares. According to the report, investors' valuation of the company has been as low as $45 billion, far lower than the valuation of about $66 billion in a round of financing in May last year, and it has shrunk to 7%.
In April 2022, SHEIN's valuation was as high as nearly $100 billion, once exceeding the market value of JD.com and Pinduoduo at that time, standing shoulder to shoulder with ByteDance and SpaceX. Now the valuation can be said to be directly "cut in half".
In less than two years, SHEIN has seen such a large number of **, and the speed is really staggering.
As a unicorn that was once in the limelight, SHEIN seems to have recently fallen into a dilemma after a period of blindfolded running. Looking back at SHEIN's sudden rise, the reason why it is facing the current situation has long been traced.
The SHEIN myth is shattering
The key to the success of SHEIN's business model, the low-price strategy can be said to be a great contribution.
On SHEIN, $4 a pair of pants, 11$5 a dress dress, 1A pair of sunglasses for $5 is widely available. Although this kind of ** is commonplace in China, and even has no features at all, it can be called a dimensionality reduction blow when placed overseas, with the highly developed ** chain industry in China, which quickly helped SHEIN attract various consumers from developed countries in Europe and the United States, to third world countries such as Asia, Africa and Latin America, and created the "myth" of SHEIN's rise.
Therefore, as a dark horse in the field of fashion e-commerce, SHEIN has been soaring all the way, with more and more traffic, more and more users, and a rising GMV.
But with the gathering of magnesium lights, under the halo, some of SHEIN's problems have gradually been exposed.
At the end of last year, Temu filed a lawsuit with a court in the District of Columbia, alleging that SHEIN illegally detained ** merchants, stole business information from the platform, forced small and medium-sized businesses to choose one of the two, launched tens of thousands of false and malicious complaints against copyright agencies, and abused the U.S. legal system to disrupt the market.
According to data given by TEMU, as of May 2023, about 8,338 manufacturers have signed non-reciprocal agreements. And once these lawsuits are finally confirmed, it will be a very fatal blow to the brand image of SHEIN. And SHEIN is so strong and domineering in dealing with ** business resources, it will inevitably suffer backlash in the long run.
But SHEIN's troubles clearly don't stop there. On January 16, Uniqlo's parent company, Fast Retailing, announced on its official website that Uniqlo had launched a lawsuit against three companies under SHEIN, suing SHEIN for violating the "Anti-Unfair Competition Law" and should immediately stop selling counterfeit UNIQLO round mini shoulder bag products and compensate the company for the losses suffered.
This is not an isolated case. Levi was previously included'Brands such as S, Zara, H&M, UGG, Levi Strauss, Stussy, Oakley Sunglasses, Tribe Tropical and ** retailer Dolls Kill have also initiated intellectual property lawsuits against SHEIN. In 2021 alone, there were at least 40 lawsuits against SHEIN for infringement in the United States. Many world-renowned brands and independent designers have sued SHEIN for plagiarism.
To this day, the lawsuits from designers and industry brands against SHEIN have never stopped. The issue of intellectual property rights has become a sword of Damocles hanging over SHEIN's head, and there is a danger of "cutting off" at any time.
Delocalization is a "stupid" decision
As we all know, SHEIN is an e-commerce platform founded in China for overseas markets. The cornerstone of SHEIN's business is actually built on China's developed related chain system. It can be said that it is the domestic ** chain and industrial cluster effect in China that has pushed SHEIN to today's heights.
However, there have been a number of ** reports that in order to go public in the United States, SHEIN is taking many measures to de-"sinicize".
For example, at the beginning of 2022, Shein, a fast-fashion platform founded in Nanjing, China, and relying on the rapid rise of Guangzhou's garment industry belt, quietly moved its headquarters to Singapore, and the holding entity changed from Zhuotian Business to a Singaporean company, Roadget Business Pte.
Then came the news that SHEIN was going to apply for an IPO in the United States.
According to the company's investigation, SHEIN is also canceling its Chinese companies in batches before preparing to go public in the United States. As early as 2009, Xu Yangtian has established more than a dozen companies, but many of them have now been deregistered. Especially in April 2021, Nanjing Lingtian Information Technology *** applied for cancellation, which was once the operating entity of SHEIN, and completed multiple rounds of financing of SHEIN.
And Xu Yangtian is no longer the legal person of any domestic related company.
It has been pointed out that SHEIN's move hopes to bypass the regulations on domestic overseas IPOs and cater to the U.S. listing strategy. But unfortunately, the U.S. legislature still strengthened its scrutiny of SHEIN, so that its path to listing continues to be full of unknown variables.
According to another report, in order to further achieve the goal of IPO, SHEIN will realize the localization of the Latin American ** chain in 2026. To put it more bluntly, it is actually de-localization.
In July last year, SHEIN not only invested in the establishment of the first Latin American factory in Brazil, but also signed partnerships with 330 local ** merchants and logistics service providers in 12 states. In an interview, Fabiana Magalhaes, SHEIN's Brazilian production director, has said that by 2026, 85% of SHEIN's sales in Latin America will come from Brazil.
Prior to this, SHEIN had been looking for a local manufacturer in Turkey, and its largest businessman, Sinbad, also went to Istanbul to build a factory, and the factory has now been put into production. According to a late report, by the end of 2023, 20% of SHEIN's sales in the EU region have mainly come from Turkish factories.
It can be said that in order to be able to successfully IPO in the United States, Shein has gambled on red eyes, completely ignoring that the foundation of its success is precisely from the original Chinese genes. It is not yet known whether this change in the ** chain will really help SHEIN successfully go public, but it is certain that this will inevitably weaken SHEIN's original competitive advantage and leave a great opportunity for competitors.
People's ** Overseas Network once quoted the views of industry insiders as saying that Chinese enterprises have begun to go overseas and enter the global market after their development and growth, which is in line with business logic. It is understandable to choose a country or region with a good investment environment as the base camp of globalization. But companies need to realize that China has the most complete industrial system in the world, and it is also crucial for them to keep their roots in China.
It's clear that Shein doesn't seem to be listening.
And it is really incomprehensible that shein is so radical and stubborn. I just hope that this move will not end up displeasing both at home and abroad. At least to grasp one direction to continue to grow, after all, in the environment of enemies on all sides, every step of SHEIN's development to today has a significant impact on its own future, and unfortunately, the error rate of its decision-making is increasing.
Will SHEIN's valuation continue to fall?
Looking at the valuation changes of SHEIN in the past two years, it is not an exaggeration to describe it as a cliff-like**.
According to reports, from 2016 to 2023, SHEIN's annual revenue will be $600 million, $1.6 billion, $2 billion, $3.2 billion, $10 billion, $16 billion, $22.7 billion, and $30 billion, respectively. 2023 is its fifth year of profitability. However, it is surprising that its valuation has shrunk from nearly $100 billion at its peak to $45 billion.
According to the above set of data, from the perspective of normal business logic, SHEIN's valuation should not have shrunk by such a huge span, so how is this caused?
On January 26, Peter Pernot-Day, head of strategic communications for the UK and the United States at SHEIN, was interviewed by CNBC and responded to the recent spate of negative news. In the interview, Pernot-Day said that SHEIN's listing in the United States is in sight, and the valuation of investors' secondary sales does not necessarily reflect the value of the real world.
But this is clearly very unconvincing. After all, such a depressed valuation just proves that it is indeed difficult for SHEIN to find buyers. While private deals don't typically equate to the level a company ends up in the public market, they also reflect waning investor interest in the U.S.-listed company amid growing competition and policy risks. And this will further increase the likelihood that SHEIN's valuation will continue to be the best.
At the same time, with the rapid development of SHEIN, although the GMV reached $30 billion last year, it still needs a lot of money to continue to fill the business. According to data released by OpenSecrets, SHEIN's lobbying spending in 2023 will increase by 657% compared with the previous year, and the number of lobbyists hired will also increase from 8 to 14, which is enough to show that the policy pressure faced by SHEIN in the United States is also multiplying, and the prospect of an IPO can be said to be precarious.
In addition, the sustainability of SHEIN's profit model is also being tested. As we all know, the rapid rise of SHEIN is largely due to its low-price strategy and social marketing, which is completed with the developed ** chain in China. But with overt and covert de-localization, it has become less certain whether this model will be sustainable in the long term.
It is particularly noteworthy that because of the rise in SHEIN's operating costs and the improvement of consumers' requirements for quality and environmental protection, coupled with the strong overseas strategy of many domestic e-commerce giants, SHEIN's low price and ** chain advantages may also be gradually weakened. In addition, SHEIN's own endless intellectual property disputes will not only increase management pressure and first-chain risks, but also directly affect consumer confidence and market recognition, which in turn will have a greater negative effect on valuation.
These are all difficult problems that SHEIN needs to face. If it can't be resolved in time, it will only make Shenin drift away from its $90 billion IPO target.
In the past few years, SHEIN has quickly occupied market share with its fast-responding ** chain and low-price strategy, and has become the darling of the market. However, luck won't always be on one side or the other.
As a representative enterprise of cross-border e-commerce, at the beginning of the rise of SHEIN, we also saw the tenacity and vigor of domestic overseas enterprises, but in just a few years, from market strategy to intellectual property disputes, to valuation and chain changes, these problems have become a veritable thunderstorm area for SHEIN, making it from glory to trouble.
It's time for SHEIN, who is running blindfolded, to calm down and rethink where the future development path is, otherwise, a little carelessness may lead it to slide deeper into the abyss.
At the forefront of consumption, the new professional consumer industry provides you with professional and extremely neutral business observation. This article is an original article, and it is forbidden to retain any form of author-related information**.