Fast-fashion retailer Shein, known for its $5 Made-in-China T-shirts and $10 dresses, has raised prices by more than a third on some core products, in a move likely to boost revenues ahead of its scheduled IPO, according to an analysis of its pricing. strategy.
Shein’s average price hike exceeded those of rivals H&M and Zara, according to data from London-based research firm EDITED, which compared prices on June 1 with a year earlier.
Shen declined to comment.
The company operates an online marketplace selling a range of goods, although its main activity is the manufacture and sale of Shein’s own brands, especially women’s clothing.
Shein leverages a network of suppliers based largely in China, who break with traditional manufacturing processes by taking small initial orders and scaling them up based on demand. Most of the clothing Sheen sells is made in Guangzhou, China, by its approximately 5,400 suppliers.
Although Shein does not disclose financial data publicly, Coresight Research estimates that Shein’s revenue will reach $50 billion this year, an increase of 55% from last year’s figure.
Making core women’s clothing lines more affordable and having more third-party brands to sell on its site could help Shein reach that sales number and increase profits.
“Shein has seen very strong momentum recently, which could play positively into its IPO plans,” said Eric Lautier, an e-commerce expert at consultancy AlixPartners.
As Shein prepares for its initial public offering (IPO), it faces the high costs of being a publicly listed company. It must also comply with new EU regulations on online platforms that could increase its expenses and squeeze profit margins.
In the United States, Shein’s largest market by sales, the company raised the average price of women’s dresses by 28% in the year ended June 1, to $28.51, the revised data showed.
While still well below the average H&M dress ($40.97) or Zara dress ($79.69) in the U.S., Shein raised prices by a greater percentage than its competitors during the same period, according to the data.
On Shein’s UK website, the price of a dress was £24.12 ($30.97) on average, 15% more than a year ago, while the average cost of a dress in France, Germany, Italy and Spain was 36% higher.
Retail experts say Shein wants to show it can maintain its recent growth and sell more higher-priced products before listing on the stock market.
“If they can prove that these prices stick, the valuation will go up significantly,” said Alex Romanenko, head of retail at pricing consultancy Pearson Hamm Group.
Sky News reported that Shen is seeking a valuation of around £50bn in the London listing. The company declined to comment on its IPO plans or valuation.
Having gained market share at rock-bottom prices, Shin’s price increases are also aimed at boosting profit margins ahead of the listing, Romanenko said.
In the United States, Shein’s largest market, the biggest price increase was in shoes, with the average pair of shoes selling on its site for $40.7, compared to $25.3 a year ago.
This partly reflects Shein bringing other brands to the platform, such as sneaker brand Skechers, which sells shoes priced between $32 and $174 on shein.com. Skechers declined to comment on its sales performance on Shein.
Overall, Shein’s growth is bound to slow in its more established markets such as the US and the UK, said Louise Deglis Favre, apparel market analyst at GlobalData.
“Globally, Shein may be able to maintain similar levels of growth as it continues to enter and develop into new markets, increasing some of its prices strategically or through acquisitions,” she added.
The United States accounted for 28% of Shein’s sales in 2023, according to GlobalData estimates, while Germany and the United Kingdom were the second and third largest markets. Shein also generates significant revenues in Brazil and Mexico, and is growing rapidly in other emerging markets.
However, higher prices can only go so far as to boost Shein’s revenue, AlixPartners’ Lautier said, as higher prices typically impact the share of site visits that convert to purchases. To further drive sales growth, Shein will have to attract more people to its platform, and get them to visit it frequently.
($1 = 0.7789 pounds)
—Helen Reid, Reuters
Source link
