What does the future hold for Shein?
The popular fast-fashion startup based in China has reportedly raised $2 billion at two-thirds of its valuation, according to The Wall Street Journal.
The company rose through The Crunchbase Unicorn Board ranks during the pandemic, receiving a valuation of $100 billion and ranking just under the likes of TikTok owner ByteDance and SpaceX. But this new round of funding cut its valuation down to $66 billion. No big deal — it’s still the fourth-highest-valued startup in the world.
Shein quickly won the hearts of American consumers as e-commerce and delivery exploded during work-from-home orders, and investors took note — in 2021, funding rose to more than $27 billion, around three times higher than the year before.
The company has remained relatively quiet as rumors swirled that the e-commerce giant had a plan to raise money and, later on, go public. But while Shein contemplates its lofty plans, the company faces numerous obstacles to going public, including weaving through complex international regulations and declining activity in e-commerce.
E-commerce loses its luster
Funding toward e-commerce has seen a slow but steady rise in the last 10 years.
That all changed in 2021, when the tech industry pinpointed e-commerce as a long-lasting consumer behavior much like working from home was. Funding jumped around 3x higher than 2020, and then immediately crashed to normal levels in 2022. Several big tech giants like Amazon and Meta were quick to build up their e-commerce services, only to lay off thousands of workers when those strategies didn’t play out.
It’s unclear if Shein will face a similar, less drastic fate. The company reportedly garnered $23 billion in revenue in 2022, on par with other fast-fashion retailers like H&M and fashion conglomerate Inditex, which owns popular brands like Zara. But the e-commerce model isn’t as popular as it once was, and global regulations around environmental and sustainability laws could dwindle its popularity even further.
Stricter environmental regulations
Shein’s clothing is known for being extremely cheap — women’s shirts sell for as little as $2. The company has had to dodge questions over forced labor and environmental impacts of its production line.
Despite telling U.S. congressional members Shein worked with third-party firms to audit its supply chain of forced labor, the company used cotton from Xinjiang (which has been cited for using forced labor) in at least two instances. In some instances, workers spent 18-hour days in the factories, or were given one day off a month, which violates China’s labor laws.
The European Union is also setting strict sustainability standards on imports, taxing companies more based on how high their carbon footprint is. This could drive up the price of Shein-made items, or require the company to make changes to its supply chain in order to lower its environmental impact.
If Shein does go through with its IPO, it has the potential to disrupt the $1.53 trillion apparel industry, but changing headwinds could ruin its course.
Correction: A previous version of this article incorrectly stated Shein raised money at a third of its previous valuation. We have updated the story to reflect the accurate number.
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Illustration: Dom Guzman
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