‘As Shein ponders IPO, is the “next Shein” already coming up the inside track?’

Last month Shein raised $2bn (£1.6bn) in new funding and is preparing for an IPO in the second half this year, Reuters reported. On the face of it, the online fashion colossus would seem like a compelling story for investors.

While its valuation in the funding round was down from historic highs, it still amounted to $64bn (£51bn). The etailer has ambitions to generate revenue of $60bn (£48bn) by 2025, according to the Financial Times. That’s double the $22.7bn (£18bn) at present and Shein made a profit in 2022 of $700m (£560m) – impressive totals for a business only founded in 2008. 

When IPOs are planned, historic success and growth rates are the foundations on which the flotation story is built. But, as the small print always says, past performance may not be indicative of future results. Right now, there must be some big questions.

A Shein IPO would come in the wake of challenges for online retailers and tech companies more widely.

In the UK, online stars such as Made.com have crashed and burned soon after floating. That of course would be highly unlikely in Shein’s case, but in the US, the tech megastars are also under unaccustomed pressure.

Just a few weeks ago, Facebook owner Meta axed 10,000 jobs – on top of 11,000 late last year. Amazon also cut 9,000 roles globally last month on top of 18,000 revealed in January.

That is the context in which Shein is pondering an IPO, so investors will need to hear a convincing case on a stellar future to buy into.

Additionally, Shein – which has faced controversy over supplier factory conditions and questions about its fast-fashion model – will be a litmus test of investor attitudes as the ESG agenda grows in importance while its connections to China will also come under scrutiny during a period of rocky relations between that country and the US.

“As Shein ponders an IPO, perhaps the biggest question is whether there is a ‘next Shein’ poised to roar out of nowhere and overtake it on the inside”

But as Shein ponders an IPO, perhaps the biggest question is whether there is a ‘next Shein’ poised to roar out of nowhere and overtake it on the inside.

While the FANGs – Facebook, Amazon, Netflix and Google – look pretty unassailable among the digital aristocracy with scale that dwarfs much longer-established companies, they were all start-up disruptors once. Shein may aspire to join that tech establishment, but new disruptors can emerge ever more rapidly and displace the old.

In Shein’s case, perhaps that might be Temu – an online platform launched in the US last year by PDD Holdings, Nasdaq-listed owner of Chinese social commerce powerhouse Pinduoduo.

Temu is not directly comparable to Shein. It sells clothing among a range of categories such as electricals and “connects consumers with millions of sellers, manufacturers and brands around the world”, but its low-price model is proving popular.

In the fourth quarter of 2022, the Temu app was the most downloaded in the US – greater than for Amazon, Target and Walmart, according to digital intelligence specialist Sensor Tower. By February 2023 the app had been downloaded 24 million times. The etailer is expanding into other countries and the UK is thought to be on its agenda.

There’s always a ‘new, new thing’ in technology and ecommerce – and only a few will ever achieve the heights of success they hope for. Shein has achieved great success, but can it continue at the same pace?