Pre-IPO pedia | Rumors swirl: Gen Z ultra-fast fashion retailer SHEIN eyes 2022 U.S. IPO

According to Reuters, Shein, the fast fashion e-retailer based in China, is rekindling plans for an initial public offering in New York later this year.

Chinese ultra-fast fashion retailer Shein (styled as SHEIN, also referred to"SheIn") was founded in 2008 by Chris Xu, who started his entrepreneurial career selling wedding dresses. This Nanjing-based company is aimed squarely at Gen Z customers and has been a fast fashion phenomenon.

The company entice young shoppers via Instagram and TikTok influencers and a barrage of discount codes for its low-cost styles, uploading new products in their hundreds every week.

According to China-based market research and consulting firm Daxue Consulting, Gen Z females and parents of children under 15 are the fast fashion retailer's main customers.

SHEIN changed its strategy around 2015 to target international shoppers. It ships to over 150 countries and territories from its many global warehouses, with the U.S. its top market, followed by other western countries and the Middle East.

The company's rise has been meteoric and dizzying: In 2020, less than a decade after its founding, its sales reached $10 billion and accounted for 28% of all fast-fashion sales in the U.S., as much as H&M and Zara combined.

SHEIN pursued a few key strategies to make its business model succeed. The company started with a big bet big on social media. Platforms like Instagram, TikTok and Snapchat became SHEIN's principal portals for selling, and marketing to young consumers.

It also roped in celebrities and digital influencers online to shore up its brand and promote its trendy and budget-friendly clothes. Last year, Khloe Kardashian partnered with SHEIN for a fashion challenge supporting young designers. Musicians like pop singer and country rapper Lil Nas X performed at a SHEIN virtual fashion show in 2020 and television star Madelaine Petsch, star of the Netflix T.V. show Riverdale, was the face of SHEIN in 2019.

SHEIN's fast-moving, in-house production and distribution centers worldwide also contribute a lot to its rapid growth.

The e-retailer sells via social media and has no brick-and-mortar shops, though it has launched a few temporary pop-up shops in cities like London and Los Angeles. It has operations in Guangzhou, Singapore and Los Angeles and "along with other key global hubs" (cited from SHEIN's spokesperson).

According to Daxue consulting, in 2020, the company on average released over 10,000 new items monthly, and launched 150,000 new items that year.

In addition, as Bloomberg pointed in a report last year, SHEIN has been able to dodge export and import taxes for its shipments into the U.S.

Also, an investigation from Rest of World revealed its success was propelled by smart internal management software which links a sprawling network of 6,000 Chinese clothing manufacturers. It empower the company to react to real-time shopping data with lightning-fast reflexes just minutes after customers peruse its pages, queuing production of more sweater vests or curbing distribution of jean jackets.

SHEIN doesn't disclose its financials. But according tothe Fortune, it is believed to have made around $10 billion in revenue in 2020—on par with firms like music streaming provider Spotify and VF Corporation, the owner of brands like Vans, Timberland and The North Face.

Reuters' source estimates that its sales in 2021 surged to nearly $16 billion, riding on the back of the shift to online during the pandemic.

As a result of soaring sales, Shein's valuation has been increasing dramatically each year. According tothe Fortune, in January 2019, Shein raised $500 million from Sequoia China and Tiger Global at a $5 billion company valuation.

In August 2020, SHEIN's estimated valuation was thought to be $15 billion during a fresh funding round, and this figure had ballooned to $50 billion by early 2021 from the same sources the media cited.

According to a report from Reuters in January 2022, Shein is reviving plans to list in New York this year and its CEO Chris Xu, a Chinese citizen, is considering obtaining Singaporean citizenship in a bid to help smooth the IPO process (Since Chinese regulators enacted a series of stringent laws targeting homegrown firms listing overseas last year, citing national security).

A company spokesperson responded that SHEIN has no IPO plans in the works, and that neither Xu “nor other executives have applied for Singaporean citizenship." The company hasn't publicly filed any IPO paperwork.

If forthcoming, a Shein IPO could set records. Last year, it was rumored to be chasing a $47 billion initial public offering—the largest in history—before those plans vanished into the U.S.-China chasm.

Mooers, what's your opinion about this Chinese ultra-fast fashion retailer?