China-based fashion brand Shein has quietly filed to go public in the US, as reported on Monday, according to two people familiar with the situation.

Here are some important details:

Who Is Shein?

Since its founding in 2012 by Chinese businessman Chris Xu, Shein has expanded to become a worldwide fashion marketplace that, according to its website, employs over 11,000 people and serves clients in over 150 countries.

Shein, which releases thousands of new designs every day, has a direct-selling strategy that heavily leverages influencers and discount codes to reach its millions of social media followers.

Known for its $10 tops and $5 biker shorts, Shein claims to have more than 250 million social media followers and ten brands in its portfolio, including Cuccoo, Romwe, and MOTF.

Although sources claim the corporation made about 100 billion yuan ($15.7 billion) in 2021, the company does not publicly reveal its revenue.

Business Model 

Shein manufactures apparel in China for online sales in the US, Europe, and Asia, with the exception of China.

It works with about 5,400 third-party contract manufacturers, mostly in China, rather than owning or running any production facilities.

Its on-demand manufacturing approach enables it to immediately increase the production of items that are in high demand and decrease the production of those that do not meet sales targets. The procedure increases output speed and management of inventory. 

Shein claims that by using this strategy, their average unsold inventory rates have continuously been in the low single digits.

U.S. Scrutiny 

Shein sends most of its merchandise directly to consumers by air in personally addressed shipments, straight from China.

Because its approach enables the e-tailer to take advantage of the “de minimis” rule, which exempts inexpensive products from tariffs, the company was able to avoid unsold inventory building up in warehouses and avoid import tax in the United States, one of its largest markets.

Congress is now paying more attention to the tax provision, as detractors claim it lets the corporations avoid paying greater taxes on Chinese imports.

Though it is available to all retailers, the decades-old tariff exemption for packages priced at $800 or less is mostly utilised by Chinese companies, such as Shein, Temu from PDD Holding, and maybe TikTok’s new e-commerce venture.

Its online-only business model has allowed it to reduce expenses, but it is now at a competitive disadvantage to competitors like Target, Walmart, and Amazon.com due to its increasing wait periods, which can reach up to two weeks for goods to arrive in the United States.

To shorten delivery delays, it is now delivering more inexpensive clothing and household items to American warehouses, according to trade research company ImportGenius.

Valuation

In a $2 billion private funding round in March, the company’s valuation surpassed that of Swedish retailer H&M, which is valued at $27 billion, to exceed $60 billion.

Shein would still be behind the $126 billion valuation of Inditex, the owner of Zara, and the $80 billion valuation of Fast Retailing (9983.T), the owner of Uniqlo.

Around late 2021, Shein relocated its headquarters from Nanjing, the capital of Jiangsu province in eastern China, to Singapore. According to commentators, this move allowed the company to evade China’s strict new regulations for foreign listings.

(Adapted from Reuters.com)