Shein’s long-awaited debut on the stock market on Tuesday 1 September proved to be underwhelming, with shares falling 9% as investors fretted about the company’s growth potential.
This followed a lukewarm IPO which saw the fast-fashion giant’s valuation drop to nearly a quarter of its peak market value. In 2022, Shein was valued at $100 billion. Just four years later – and following unsuccessful attempts to list in both New York and London – it was launched on the Hong Kong Stock Exchange with an IPO of $26.5 billion.
Why has its stock fallen?
Market analysts have pointed to changing trading conditions, including the removal of the de minimis tax exemption for low-value imports in the US and tighter scrutiny of cross-border ecommerce in Europe, as key factors behind the company’s sharp decline in valuation. Shein benefited from strong growth in the US and Europe by manufacturing at low cost in China and shipping directly to consumers, often avoiding the costs associated with traditional retail supply chains.
Others have highlighted the rise of TikTok Shop – which has built on the ‘gamification’ approach to retail pioneered by Shein and Temu, setting trends as well as enabling shoppers to follow them – as a significant factor. Bryan Gildenberg, managing director of Retail Cities, told CNBC that Shein was “getting caught up a little bit, particularly by TikTok.”
Ben Wright, managing partner at global management consultancy Argon & Co UK, said that Shein’s poor supply chain visibility has also impacted its value. “Its fall from a valuation of almost $100bn at its 2022 peak to around $27bn today cannot be attributed to supply chain concerns alone. But the scrutiny surrounding its sourcing and labour practices shows that supply chain transparency is now an investor issue as much as an operational one,” he said.
He described this as a “wake-up call” for businesses preparing to access public markets. “Investors increasingly expect companies to know not only who their suppliers are, but how they operate,” he said. “Technology and AI are making much greater visibility possible, which also means there is less tolerance for businesses that cannot answer fundamental questions about where their products come from and under what conditions they are made.”
Can Shein win over investors?
The challenge for Shein is to build loyalty with its customer base without the reliance on ultra-low prices enabled by tariff-free shipping. “This is less a Shein problem, but more so the end of an era for cheap cross-border shipping,” Josh Gilbert, lead analyst for Asia-Pacific at eToro, told CNBC. “The brand’s reach is unquestionable, but a large share of that loyalty has always belonged to the price tag.”
Shein has expanded its third-party marketplace and acquired US fashion brand Everlane as it looks to diversify revenue streams. But the reaction to Shein’s market debut suggests investors remain unconvinced that those initiatives can offset slowing growth, higher trading costs and increased competition.
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