Shein is the company that has benefited the most from the pandemic and the rise of e-commerce. Entering the US market secured its status as one of the fastest growing retailers in the world. Now it is feared that it could even threaten Amazon’s position.
- Shein is currently the most downloaded shopping app in the world.
- The popularity is due to the surprisingly low prices, which are achieved thanks to a business model focused on producing as many models as possible in the shortest possible time, while maintaining a minimum inventory.
- The app becomes a competitor to Amazon, creating competitive sales channels that go beyond the fashion segment.
Shein is getting stronger! Who can she threaten?
The company was founded in China but moved its headquarters to Singapore in response to rising tensions between Beijing and Washington. This exodus was aimed at protecting Western consumers, who are a significant part of the fashion empire’s customers.
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Shein’s estimated valuation is currently at $66 billion. By comparison, Inditex (Zara, Stradivarius, Bershka) is worth about $114 billion. According to GlobalData, Shein had about 0.1% of the US apparel market in 2017. By 2022, it was already 1.6%.
Shein’s share of the global fast fashion market
Source: GlobalData, FactSet
The Chinese giant managed to secure financing from Tiger Global and Sequoia Capital China. Despite this, there are still doubts about the observance of labor rights in smaller suppliers. Shein is regularly attacked and accused of toxic price competition, reflected in low wages in outdated Asian factories.
“I think that transparency and traceability of products are becoming more and more important. When you start to see price points that may be too good to be true, you start to wonder: Isn’t this too good to be true?” Michael Felice, an analyst in Kearney’s communications, media and technology division, told CNN. .
The company has long since moved beyond China and plans to open more factories in countries like Brazil, India and Turkey. According to some estimates, the influx of new projects is about 6-8 thousand. daily. This volume is unattainable even for the largest retailers. Shein’s business model is completely different from the approach of other market players. In the case of the Singapore-based Chinese giant, persistent trend imitation works. By tracking website traffic and search history, new products are ordered quickly. Other retailers have to order thousands of units of a model, risking not selling volume and incurring additional storage and disposal costs. In the case of Shein, this risk has been minimized by establishing cooperation with thousands of smaller suppliers based in China, allowing it to order 200-300 pieces of the project, reducing the risk of not matching market trends. market.
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Will Shein threaten Amazon’s position?
Amazon is the undisputed leader in the e-commerce ranking. Over the years, it has established its position in the market, fighting for dominance and developing many alternative sales channels. The business model is based on cooperation with smaller entities. Shein, who is still considered one of them, may pose a serious threat in the future. According to data collected by Bloomberg Second Measure, Shein accounted for half of the fast fashion segment in the US as of November 2022. It also competes directly with retailers like Target and Walmart.
According to Measurable.ai data, the average value of an order placed through the Shein website and app in the US in April this year was approximately USD 70. For comparison, the average value of an order in Zara in the analyzed period was USD 93, in Walmart USD 52 and in Amazon USD 46.
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Despite talk of potential competition for the company founded by Jeff Bezos, its representatives treat Shein primarily as a partner. According to a statement obtained by Barron’s, the platforms are linked by a trade association and some Shein products are sold on Amazon. However, the Chinese giant wants to go a step further, as evidenced by the launch of an external market platform in Brazil in April. If it works in the local market, it will probably relocate to the US. The site’s goal is to work with local retailers, reducing shipping times and allowing you to sell more expensive items.
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Shein also plans to debut on the US stock market. These rumors have been circulating in the environment for three years, but have not yet been officially confirmed. Although the company doesn’t comment on its plans to go public, it certainly plans to increase its market share there. In 2022, the first distribution center in the US will open, with two more to be built by 2025. Brendan Ahern, chief investment officer at KraneShares, told Barron’s that going public in the US would be a shot. of capital, which would stimulate development and thus threaten the market position of other retailers.
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