Shein’s breakneck growth slows, testing $100b valuation

Bloomberg

Shein, the Chinese fast fashion giant that’s quickly become the third-most valuable startup in the world, is seeing a reality check with sales growth slowing from the lofty heights of the pandemic, just as it faces mounting pressure to live up to a $100 billion valuation.
The online-only retailer of inexpensive clothes, beauty and lifestyle products has become a global phenomenon, with a following of mostly tweens and teenagers in the West making its app one of the most downloaded in the world. Shein, however, saw annual sales growth slow to around 60% in 2021, according to people familiar with the business. That’s a steep plunge from an eye-popping 250% growth in 2020, when the arrival of Covid-19 turbocharged e-commerce demand from consumers stuck at home.
Overall, annual revenue reached at least $16 billion in 2021, up from $10 billion in 2020, said the people, who declined to be identified as they’re not authorised to speak publicly.
While revenue last year was overall in line with company expectations, what worries Shein’s top executives is that expansion was strong in the first half of the year, but decelerated at a worse-than-expected pace in the second half, with the slowdown continuing into 2022, according to the people.
The trend is reflected in transaction data in the US, Shein’s biggest market: for the first quarter, sales growth fell to 57%, down from a quarterly range of 105% to 264% in 2021, according to figures from Bloomberg Second Measure, a research firm which analyses US consumer transactions to measure revenue.
While sales growth in the high double digits still outstrips fast-fashion giants like Hennes & Mauritz AB or Inditex SA’s Zara, Shein’s slowdown comes as it’s persuaded investors including General Atlantic that it is worth about $100 billion — more than the market capitalisations of H&M and Zara combined, and behind only ByteDance Ltd and Ant Group on Crunchbase’s list of most valuable startups.
That’s despite having no network of physical stores and a myriad of challenges, including the threat of legislation in the
US that would erode a cost advantage which currently allows Shein to sell dresses, crop tops and bikinis for a fraction of competitors’ prices.
A representative for Shein said the company doesn’t comment on speculation about its business. “As one of the top online exporters in China, Shein’s slower growth shows the increasing challenges suffered by the
entire sector,” said Wang Xin, head of the Shenzhen Cross-Border E-Commerce Association, an organisation representing some 3,000 exporters.