Analysis | Shein’s $ 100 billion valuation is a win for fast fashion

“We know about them, but it doesn’t bother us at all,” Kamani said.

Anyone older than Generation Z has probably had the same answer until recently. But he doesn’t make mistakes. Amidst Shein’s glamorous competition, like Boohoo, whose shares have dropped more than 60% since that call, we’ll all soon feel the impact of her $ 5 dress and her $ 10 jeans.

The $ 100 billion retail business is weighing on a string of funding and is in talks with investors, including General Atlantic, to raise nearly $ 1 billion, people on the matter told Bloomberg News this week.

These numbers aren’t particularly extravagant. According to Morgan Stanley, Shein could generate $ 20 billion in revenue by 2022, enough to surpass Fast Retailing Co. to make it the fourth largest apparel retailer in the world. At least five times the sales forecast is more or less a ritual for flashy fast fashion brands (Boohoo had a selling price 10 times higher at one point), and for Shein it looks like it’s more than just a double-digit increase. . Report.

This shows that the Chinese clothing trade, long believed to have lost ground to its competitors in Bangladesh, Vietnam and even Europe, still has a long life to go. It’s also proof that fast fashion doesn’t slow down much, it just speeds up. The final margin goes from the speed of production of clothing, to the understanding of the same by the consumer, to the estimation of consumer tastes.

In a sense, Shein’s work is purely traditional. Rather than relying on a global network of factories or high-tech automation, the core of the supply chain didn’t look like it did in the 19th century. According to a report published last year on a local business news website in Jiangyang, the company operates as a close-knit group of more than 300 vendors sweating through ceiling fans and making hundreds of servings a day on table-top sewing machines. .

Inditex SA’s Zara was able to revolutionize fashion in the 2000s by reducing the time it takes to buy new clothes in retail stores from month to week, from concept design to new clothes. Shein makes the leap, the product cycle only takes a few days at the most. It is also the result of outdated efficiencies, such as placing small orders and using local clothing stores. Most are within a five-hour drive of the Guangzhou office, Bloomberg reported last year. Most are in a suburb.

Shein’s uniqueness lies not in the supply chain, but in the way it combines traditional business style with rapid market research and customer acquisition. Founder Chris Xu has experience in search engine optimization (the dark art of getting your results to rank higher on Google) and this talent is evident in Shein’s extensive social media presence. It’s the most visited fashion site in the world, and Google searches for the brand recently passed both H&M from Hennes & Mauritz AB and Zara from Inditex SA:

With her sudden rise, Shein has received a fair amount of criticism, accusing her of selling racist phone cases, firing designers, and contributing to overuse. You also took advantage of the Trump-era tax policies that allowed the company to reduce competition, both in China and in its end markets.

But the biggest threat to Shein at this point is not a response from any of these angles. Inditex and H&M were once unethical and trendy children’s posters. But as their core demographic grew with age, they improved their image and entered the market, which Shein is already doing with the MOTF brand. While these tax cuts certainly give businesses an unfair advantage, the advantage could be surprisingly sustainable given China’s willingness to support future export industries and the reluctance of Western governments to cover costs in the few product categories where prices are on the rise. Down these days.

The biggest risk for Shein is, in fact, the same risk that conventional fashion brands are currently exposed to: lowering the barriers to retailing world-famous clothing. Once upon a time there was Zara and H&M who destroyed the traditional textile business. So Asos Plc and Zalando SE have put in-store retailers on the defensive with faster, cheaper, and online-only models. Shin’s arrival at night as the new giant killer suggests that the mold is far from the game. In a work that changes continuously with the seasons, winter will come one day.

Regarding Bloomberg’s opinion:

Concerned buyers hurt Aso and online explosion: Andrea Felstede

What did your favorite brand do during the war, Dad ?: Ben Shot

From Gucci to Ruchi, innovation has always grown thanks to imitation: David Fikling

This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion commentator, which focuses on industrial and consumer companies as well as commodities. He has been a reporter for Bloomberg News, Dow Jones, Wall Street Journal, Financial Times and Guardian.

Source: Washington Post