Chinese fast fashion company Shein valued at colossal $100 billion in latest fundraise

Shein, the Chinese fast-fashion retailer famous for its rock bottom prices, rapid ability to adapt to trends and skilful use of social media marketing, has been valued at a colossal $100 billion in its latest fundraising round. After bringing in a cash injection of somewhere between $1 billion and $2 billion, the Guangzhou-based business which was founded in 2008 is now worth more than the combined values of H&M and Inditex.

Until Shein’s most recent valuation, it was H&M and Inditex that were the world’s biggest clothing companies with respective market capitalisations of $20 billion and $68 billion but both have now been blown out of the water. Investors participating in the round included Sequoia Capital China, General Atlantic and Tiger Global Management.

The capital raise was reported by the Wall Street Journal but Shein has declined to comment. The fast fashion company whose dresses can cost as little as £5 started life as an online wedding dress seller before expanding into other lines. It now produces up to 6000 new items a day and ships to 250 countries. Last year it surpassed Amazon as the most downloaded retail app in the USA.

In 2020 the company generated sales worth $10 billion and while figures for 2021 are not yet available because Shein is still a private company, it can be presumed they represented significant growth to justify the new $100 billion valuation. It is now the largest fast-fashion retailer in the USA, ahead of H&M, Forever21 and Zara with an estimated 28% share of the market.

Its huge success is put down to a combination of social media marketing prowess, such as last year streaming a fashion design competition hosted by Khloe Kardashian through its app, and cheap prices. However, just as important is its use of sophisticated algorithms which pinpoint fashion trends just as they are taking off and tap deeply into user behaviour to keep the digital checkout ringing.

Shein is also effective in harnessing its own customer base to keep the wheel turning with its young shoppers often posting videos of their “Shein hauls” on social media apps like TikTok. It also offers reward points for positive reviews.

There are, however, some concerns over the vast troves of data the fast fashion retailer generates and leverages to great effect with Tom Tugendhat, chairman of the UK’s foreign affairs select committee recently commenting “we have no idea where that data ends up”.

Any suggestions of potential abuse of customer data are firmly  rejected by Shein, which says its data storage and use policies are “aligned with data protection regulatory goals and objectives . . . The [Chinese] government does not have any stake or control in the company”.

The fast-fashion sector is also criticised for fuelling a culture of consumerism which can often see cheap clothes worn just several times before going to landfill. Shein is estimated to produce around 600,000 items a day, most of which will have a relatively short lifespan.

A New York listing at some point over the next couple of years is considered a strong possibility and Shein is reportedly working with three major Wall Street banks to prepare the ground for an IPO when market conditions are right. A recent crackdown by Chinese authorities on local tech companies with foreign listings may delay the process but there have also been recent signs that government policy will ease back after the approach hurt economic growth and domestic financial markets.