Shein searches for growth after cut-price IPO

{"text":[[{"start":9.48,"text":"On the same day that Shein’s shares finally began trading in Hong Kong after an IPO that was years in the making, an announcement in France underscored the changed world in which the Chinese-founded online retailer must now operate."}],[{"start":21.84,"text":"French authorities are imposing penalties on ultra-fast-fashion products such as those sold by Shein, under new rules that relate to production volumes and repair costs."}],[{"start":31.72,"text":"They are just one part of a regulatory avalanche that has challenged Shein’s cut-price model in Europe and North America, including the removal of tax exemptions on the small packages that helped propel its rise in western markets."}],[{"start":44.12,"text":"“They have to live with a much more level playing field at this stage,” said Lorraine Tan, director of equity research for Asia at Morningstar. “They don’t have the advantages any more than they had previously.”"}],[{"start":55.56,"text":"Shein has adopted a model that combines highly responsive mainland Chinese supply chains with swift deliveries of its cheap apparel. The company had about 273mn active customers in some 160 markets as of last year, according to its prospectus. They could choose from more than 2mn apparel styles, with about 4,700 new designs added every day in the first three months of 2026."}],[{"start":null,"text":"

"}],[{"start":79.24,"text":"However, the US has clamped down on the de minimis exemption for online retailers, while Brussels has introduced a customs duty of €3 per item on ecommerce parcels."}],[{"start":89.76,"text":"The moves reflect a deterioration in the geopolitical climate, from a full-scale tariff war between the US and China last year to trade tensions between Brussels and Beijing."}],[{"start":99.52,"text":"Shein’s listing this week came after a drawn-out saga in which it explored and ultimately abandoned options in New York and London, as well as swinging to a loss of $99mn in the first quarter this year."}],[{"start":111.8,"text":"Shares fell sharply at the open on Tuesday, but neared their offer price by close of trading before dipping close to 3 per cent on Wednesday."}],[{"start":119.56,"text":"Valued in the IPO at just over $26bn — about a quarter of previous heady levels — Shein is now under pressure to find new growth levers."}],[{"start":127.86,"text":"One option could be through further opening up its supply chain to outside brands. The company late last year expanded its Shein Xcelerator scheme, which allows outside designers and brands to use its production, fulfilment and sales infrastructure and earn a commission when their product is sold."}],[{"start":null,"text":""}],[{"start":144.56,"text":"The company has also been purchasing high street labels, striking deals for the Missguided brand in 2023 and sustainability-focused US retailer Everlane this year. Bloomberg last month reported that the Everlane deal is under review by the Committee on Foreign Investment in the United States."}],[{"start":161.56,"text":"Analysts say investing more in local brands could help to mitigate consumer pushback against the perception that Shein’s ecommerce model unfairly damages local businesses. It could also help to expand the company’s sales in bricks-and-mortar retail, rather than the direct-to-consumer model that benefited more heavily from de minimis exemptions."}],[{"start":180.56,"text":"Shein’s plans to open its first permanent physical store in Paris in November last year triggered a backlash in France, which has led the European opposition to the company."}],[{"start":190.96,"text":"Closer scrutiny of the platform in the lead-up to the opening revealed that its third-party marketplace was selling illegal objects including childlike sex dolls and weapons such as knuckle-dusters, leading to widespread criticism by politicians and retail associations as well as some public protests."}],[{"start":207.4,"text":"The government suspended access to the marketplace, though attempts to shut down the Shein site for longer were blocked by a Paris court. Shein said at the time that it was co-operating with authorities and that the offending vendors had been removed."}],[{"start":null,"text":""}],[{"start":221.12,"text":"Shein is also under investigation by the European Commission under its Digital Services Act to determine whether the company is doing enough to block illegal products and if it complies with the bloc’s overall requirements for online platforms. The EU has already fined Chinese-owned Temu €200mn and AliExpress €550mn in similar investigations under the DSA."}],[{"start":243.64,"text":"In this environment Shein’s revenues were likely to be negative this year in Europe, said analyst Clément Genelot at investment bank Bryan Garnier, reflecting similar trends for the company in the US. Some of that effect may be temporary, however, as Shein gears up to build warehouses in Europe and as it retools its supply chain on the continent."}],[{"start":262.52,"text":"Shein opened a logistics hub in Wrocław, Poland, in December and another in the UK earlier this year. Chris Lo, professor of operations management at Hong Kong Polytechnic University, said Shein was “bringing the ecosystem that works very well in China to have a mini ecosystem somewhere else”."}],[{"start":null,"text":""}],[{"start":279.08,"text":"“It will take money and time to rearrange the supply chain, and Shein will also lose some customers because some cheap items will become less cheap,” said Genelot. He expected Shein to “double down” on its third-party marketplace business in Europe so it was less dependent on fashion and Chinese producers."}],[{"start":296.36,"text":"The marketplace is “really key to driving the margin”, which is very slim, Genelot said, while taking advantage of the fact that rival “Amazon is not as strong in fashion”."}],[{"start":306.68,"text":"According to its Hong Kong prospectus, the US and Europe made up $25bn of Shein’s net revenues last year, compared with $17bn elsewhere."}],[{"start":315.8,"text":"Morningstar’s Tan said Shein could expand outside the US and Europe, as well as become more of an “internet ecommerce platform”."}],[{"start":323.4,"text":"“The margins have come down,” she said. “They probably need to figure out how to evolve their product line to try to capture some of that margin.”"}],[{"start":331.96,"text":"Additional reporting by Barbara Moens in Brussels"}],[{"start":338.46,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788329910_2225.mp3"}