Lights and shadows of Shein’s IPO, the Chinese giant that changed the rules of the game

Shein’s IPO is one of the most anticipated in recent years. The Chinese online fashion giant is preparing to make its debut on the London market under scrutiny from its main rivals and after a failed bid to list in the US. With an initial valuation of around 60 billion euros, the company aims to increase its capitalization by opening up to new investors and improving its public image, especially in terms of sustainability. Although it is positioned as Zara’s main competitor, the momentum of other platforms such as Temu threatens to gain ground on Western soil.

“She in still lived like a startup, making unilateral decisions, since it is not owned by any investment group and is not a public company. What changes its IPO is that it will be a company that will have to have a lot more clarity about what it does, and it’s clearly trying to do its homework in that regard. Especially due to problems in the distribution system and supply chain, which can reduce its cost,” explains Armando Salvador, director of the MSc in Digital Marketing and E-Commerce at EAE Business School, in an interview with ON ECONOMIA.

According to Sky News, the Asian multinational is considering debuting on the New York stock market, but recent leaks suggest London could be the final destination to begin its stock market journey. “Given the political relationship between China and the United States, the possibility of a UK debut is more than open.although his main goal for a long time was to list in New York,” says Salvador.

An attempted listing on the New York Stock Exchange late last year was met with lukewarm reception from US authorities. Disagreements with companies such as TikTok and Alibaba highlight geopolitical tensions between the world’s two largest economies.. As leader Shane Donal Tan explained financial times, The company could make progress to demonstrate that it is not under Chinese control, but not enough for the country’s regulators to support it in going public.

Shein strives to improve its environmental image

According to estimates following the latest round of funding, Shein’s net worth is currently valued at around 60 billion euros. Likewise, the company’s profits have increased manifold in recent years, reaching $2 billion (approx. €1,840 million) in 2023. A staggering figure, but it still can’t compete with Spanish company Inditex’s $5.831 million profit and market value close to €140 billion.

The publication will help the Singapore company gain liquidity and increase its value, but this is not the only interest it sees in its activities. “She’s trying to improve her valuation in the market and, first of all, to improve your perception, which is why the environmental actions that you begin to implement have a strong impact. An example would be reselling returns or purchasing second lines of fabric to reuse. In the end, we are talking about a serious corporate identity when everything is public,” says the EAE professor.

In this sense, Shein has repeatedly found himself at the center of controversy due to the environmental impact of its activities, as well as legal issues related to counterfeits. “Investors want to bet on companies that are becoming more resilient, and Shane still has some way to go. There are various investigations into returned products that are not returned to the market and are discarded due to high costs. that they have a profit,” says Amador.

In terms of intellectual property, Brussels has decided to put an end to the Asian giant starting this summer. Last April, the European Commission recognized Shein as a major online platform because it has more than 45 million monthly users in the European Union. A measure that means you must ensure that your website does not sell counterfeit products or promote illegal content. thus complying with the Digital Services Act since the end of August.

Leadership in online fashion in Spain

Without a doubt, its IPO will not leave anyone indifferent, especially among its competitors. In recent years, the company has created a massive revolution in the fashion industry, becoming the main standard-bearer of the so-called fast fashion. Aggressive low price strategy and powerful marketing on social networks such as TikTok, through “micro-influencers” to gain significant market share in the US, Europe and especially Spain.

This is evidenced by a recent study by Fashion Lab Elogia, which shows that Spaniards spend €460 annually on fashion purchases online, with Zara topping the chart with 25% of consumers preferring its platform over others. It is followed by Shein (23%) and Zalando (17%) as online fashion shoppers’ favorite brands.. While H&M and Mango are also relevant, they are suffering a significant loss of customers compared to 2023 and ultimately do not contribute to customer loyalty.

Except, Shein is one of the fashion brands with a clearer image profile and distinctive features., chosen by consumers for its promotions as well as its wide product selection and economical shipping costs. The report therefore highlights Shein as a firm that benefits from good prices and offers, positioning itself in this territory alongside H&M and Kiabi.

Other studies, such as those from the consulting firm ECDB, also point to its dominance in Spain and Mediterranean countries. According to the German company, Shein ended the year with a share of 11%, down from 12% a year earlier, with Zara in second place, whose share fell from 8% to 6%. and third for H&M, which fell from 4% to 3%.

In Spain, Shein was the top fast fashion retailer in 2023, ECDB analysis shows. total net sales were $702 million (€660 million), followed by Zara with 357 million in sales. dollars (335 million euros). The Chinese e-commerce giant ended 2023 as a leader in Italy, Portugal and Greece, increasingly outperforming rivals, the study shows.

Temu threatens his dominance

What’s most notable about the report, however, is that the Chinese company is consolidating its global leadership by overtaking Zara, which has seen its market share shrink. “The most remarkable thing is that although Zara remains in second place in terms of market share, there was a slight fall, which Shein uses to tighten it up,”

– says Armando Salvador.

In addition to this circumstance, competition is also relevant, which is beginning to affect the sector from other companies that have exerted pressure in recent months. “Reading between the lines of the report, there is an increase in the market share of other competitors, especially Temu. Shein has a strategy to compete with Inditex, but others players people like Temu create problems,” explains the teacher.

In this sense, he assures that he has “rested on his laurels a little” and Temu is gaining momentum in the West through aggressive advertising campaigns. “What it has done well is set up its headquarters in Ireland to gain a foothold in the Western market. The data shows that other players are starting to appear in the market who are not doing any better because they don’t have Shane’s capabilities. , But are starting to get more web traffic in some market niches, especially in the US.” – concludes Salvador.