London’s $66B Shein dilemma ahead of potential IPO

What happened: Shein, the world-leading fast-fashion retailer, is contemplating a pivot towards London for its highly anticipated initial public offering (IPO), because of potential regulatory hurdles in the US and major sustainability concerns. The Chinese giant is known for its aggressive growth and ultra-fast fashion business model that is widely seen as negatively impacting the planet. Shein’s expansion is largely attributed to its capacity to churn out thousands of new designs daily at extremely low prices. An investigation revealed that Shein uploaded between 2,000 and 10,000 new styles daily to its app from July to December 2021. The same year, the typical price per item across its offerings was merely $7.90 according to the Financial Times. The Jing Take: Should Shein, today valued at about $66 billion, proceed with an IPO in London, it could be the largest-ever listing on the London Stock Exchange, surpassing the previous record set by Glencore International, a commodity company, in May 2011. In 2023, Shein aimed for a valuation of around $90 billion, according to Bloomberg. Founded in 2008, Shein rose to become the world’s largest fashion retailer by 2022, with a valuation of $100 billion, and accounting for nearly one fifth of the global fast-fashion market, the Singapore-headquartered etailer surpassed the combined worth of fast-fashion forerunners H&M and Zara. Its dominance is further highlighted by its status as the most-Googled clothing brand in 113 countries, outperforming industry stalwarts like Nike, Adidas and Zara. The company operates a vast online marketplace linking around 6,000 clothing factories in China under the Shein brand. This setup is bolstered by sophisticated internal management software that provides real-time data on sales performance, allowing for the rapid scaling of popular items. However, Shein’s rapid expansion and business practices have not been without controversy. Sustainability advocates and regulatory bodies have raised concerns over the significant environmental and ethical implications of Shein’s operations. Over the past year, initiatives by the US Congress have aimed to closely examine the company’s practices. This includes a bipartisan initiative urging the US Securities and Exchange Commission (SEC) to suspend Shein’s IPO proceedings. The halt was requested until it can be confirmed that the company’s supply chain is free from the use of forced labor. The business scored a mere 7 out of 100 on Fashion Revolution’s Transparency Index, signaling significant room for improvement in terms of corporate responsibility and sustainability efforts. Reuters reported that the impact of Shein’s sustainability initiatives on its environmental footprint remains unclear and that the fashion giant’s 2022 sustainability report offered limited insights into its goals and data. In 2022, a Greenpeace Germany report criticized Shein’s business model for environmental damage and the use of harmful chemicals. Tests on 47 Shein products showed 15 percent of them exceeded EU chemical safety limits, with a third of the items containing hazardous substances. These concerns come against a backdrop of consumers caring more than ever about sustainability. A McKinsey survey in 2020 revealed that 88 percent of participants thought reducing pollution should be a higher priority for businesses. Furthermore, 57 percent have significantly altered their lifestyles to minimize their environmental footprint, with over 60 percent making extra efforts to recycle and buy products with eco-friendly packaging. Shein’s potential listing highlights the tension between business growth and sustainability in ultra-fast fashion. Despite its undeniable position as a behemoth in fashion retail, Shein faces scrutiny over its environmental and ethical practices, and serves as a critical reminder of the broader implications of ultra-fast fashion. The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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London’s $66B Shein dilemma ahead of potential IPO