(Reuters) – China-founded fashion company Shein has confidentially filed to go public in the United States, two sources familiar with the matter told Reuters on Monday.
Here are some key facts:
WHO IS SHEIN?
Founded by Chinese entrepreneur Chris Xu in 2012, Shein has since grown into a global fashion marketplace, serving customers in more than 150 countries and employing with more than 11,000 people, according to its website.
Churning out thousands of new designs a day, Shein has a direct-selling model that targets its millions of social-media followers and makes heavy use of influencers and discount codes.
Shein, known for its $10 tops and $5 biker shorts, says it has more than 250 million followers on social media, and a portfolio of 10 brands including Romwe, MOTF and Cuccoo.
It does not disclose its revenue publicly but sources say the company made around 100 billion yuan ($15.7 billion) in 2021.
BUSINESS MODEL
Shein produces clothing in China to sell online in the United States, Europe and Asia excluding China.
It does not own or operate any manufacturing facilities and instead works with around 5,400 third-party contract manufacturers, mainly in China.
It uses an on-demand manufacturing system that allows it to quickly boost production of popular items and drop products that do not sell as expected. The process helps improve production speed and inventory management.
Shein says the approach has helped it consistently achieve average unsold inventory rates in the low single digits.
U.S. SCRUTINY
Shein ships the majority of its products directly from China to shoppers by air in individually addressed packages.
Its strategy helped the firm avoid unsold inventory piling up in warehouses and avoid import tax in the United States, one of its biggest markets, as it allows the e-tailer to take advantage of the “de minimis” provision that exempts cheap products from tariffs.
The tax provision is now under growing congressional scrutiny, with critics saying it allowing the companies to evade higher tariffs on Chinese goods.
The decades-old tariff exemption for packages valued at $800 or less is open to all retailers but is most heavily used by Chinese firms including Shein, PDD Holding’s Temu and potentially by TikTok’s new e-commerce business.
Its online only sales strategy has helped it keep overheads down, but growing wait times – up of two weeks or more to receive goods in the U.S. – has put it at a disadvantage against rivals such as Target, Walmart and Amazon.com.
It is now sending more low-priced apparel and home goods to U.S. warehouses to speed up shipping times, according to trade analysis firm ImportGenius.
VALUATION
The company was valued at more than $60 billion in a $2 billion private fundraising round in March, making it bigger than Swedish retailer H&M which is worth $27 billion.
At that valuation, Shein would still trail Uniqlo owner Fast Retailing’s $80 billion valuation and Zara owner Inditex’s $126 billion.
Shein moved its headquarters to Singapore from Nanjing, capital of China’s eastern Jiangsu province, around late 2021, a shift that analysts said helps the firm circumvent China’s tough new rules on overseas listings.
(Reporting by Miyoung Kim; Editing by Stephen Coates)
