It all starts with Xu who is an unlikely person to reach the top of global fashion.
Born in China’s eastern Shandong province in 1983, Xu, who also goes by Chris, studied international trade in college and briefly worked in an online marketing company to help boost search traffic for websites and promote sales. He later set up his first e-commerce venture with two partners in 2008 to sell women’s clothes and accessories.
Shein’s chief executive officer Chris Xu (also known as Xu Yangtian) is believed to have a net worth of around $US23.5 billion.
The project didn’t take off, but he met the people who would soon become his most trusted executives: Miao, Gu and Ren were among the handful of staff who joined him to start Shein (pronounced “she-in”) in Nanjing a decade ago. The company now has its merchandise development, supply-chain management and operations.
Based on the 7.6 percent stakes, each is valued at more than $US5 Billion. All have remained out of the public eye and don’t appear on the retailer’s official website.
A Shein representative said the company doesn’t disclose financial details as it’s privately owned and disputed the accuracy of the founders’ fortunes, declining to elaborate.
Pandemic booster
The founders’ roots in online marketing are key to the company’s success. Shein uses real-time data, algorithms and identifies the hot products and adjusts production so that inventory rotation is quick and deliveries are speedy.
It was the pandemic that turbocharged growth as teens and 20-somethings stuck at home and often on limited budgets turned to the company’s ultra-cheap online offerings. Gen Z is the group of people born in between late 1990s to early 2010. More than half its customers come from Gen Z.
The retailer offers a wide range of products under $US10, and suppliers need to deliver new designs in around 10 days, even faster than Zara’s famous three-week turnarounds.
Shein has drawn audiences across Europe and the US — its dominant markets — with its viral “clothing haul” videos, featuring influencers modelling “dream wardrobes” with pieces starting at $US3. Videos of Shein’s “clothing haul” videos have been republished on TikTok, YouTube, and other platforms. Shein releases thousands of products every week. Virtual concerts featuring major celebrities are a way for Shein to sprinkle star power into his marketing.
In 2018, Shein’s value was $US2.5 billion. It had more than doubled in value a year later. An April 2022 funding round pegged it at $US100 billion — more than Hennes & Mauritz AB and the firm behind Zara combined.
While concerns over slowing growth and turmoil in China’s tech sector have recently dimmed its prospects, secondary trades in July indicated the company was still worth $US70 billion.
Shein’s success has rewarded early backers including Sequoia China and IDG Capital.
But few have benefited as much as Chase Coleman and Scott Shleifer’s Tiger Global. Bloomberg documents show that the New York-based firm spent $US72million in initial funding rounds for 2018 in order to acquire a 2.7% share. This bet has been increased more than twenty times.
Tiger Global injected even more money this year, and Shein remains one of the firm’s biggest successes amid a currently dire environment for private tech companies. Tiger Global representatives declined to comment.
International focus
Shein has a major advantage over another Tiger Global investment in China — ByteDance Ltd., operator of TikTok, which has also soared in value but is struggling to go public partly because of political concerns in Washington. Shein told investors that it plans to launch an initial public offering in America by 2024.
Virtually none of Shein’s sales are in China. In the US, it’s amassed a 40 per cent share of the fast-fashion industry. The sales of the company surpassed $US10 billion for 2020, and reached $US16 billion.
“Investors are more comfortable with Shein knowing that it depends on foreign consumer demand and not Chinese,” said Allison Malmsten, public research director at Daxue Consulting. “It means Shein can dodge the impact of China’s slowing economy.”
The focus on overseas consumers has also kept Xu — who’s not given an interview since he founded the company — clear of any potential trouble with the authorities at a time when many Chinese tycoons have suffered from Xi Jinping’s “common prosperity” push and a crackdown on tech and property companies.
Xu is increasing his presence in Singapore. Local filings list Xu’s personal residence as a city-state address. This shows that the Chinese citizen also lives there permanently.
Shein is not new to controversy. However, it seeks to rehabilitate the image of its company as it pursues an IPO in America. Credit:Bloomberg
There are growing threats to Shein’s business.
As the pandemic recedes, new competitors have emerged and sales gains have slowed. There has been increased scrutiny of its business practices, with concerns about the industry’s promotion of waste and copyright theft. A Bloomberg investigation found that clothes shipped to the US were made with cotton from China’s Xinjiang region, where US officials say Xi’s government abuses the Uyghur minority.
Shein’s main challenge is to rework its image and become a sustainable player, says Guoli Chen, professor of strategy at INSEAD in Singapore. “The next generation will pay more attention to a company’s social responsibility efforts.”
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Shein will be expanding its offline presence for the moment to increase brand awareness and connect with customers. It opened three pop-up shops in New York, Sydney, and London this year.
The app and website are the only way to sell at its Tokyo first permanent store.
“They are not really selling products in-store,” said Jitong Li, analyst at market research provider Euromonitor International.
Instead, the primary aim is to attract potential customers and influencers — music artists, models, travel bloggers — to the stores and make them share their outfits with social-media followers. Li explained that Shein uses artificial intelligence technology to track the consumer’s behaviour and help them get more online clients.
Bloomberg
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