Shein’s $100 Billion Value Would Top H&M and Zara Combined

(Bloomberg) -- A Chinese fast-fashion company without a global network of physical stores of its own is seeking a valuation that could be more than the combined worth of high-street staples Hennes & Mauritz AB and Inditex SA’s Zara.

Shein, an online-only retailer of inexpensive clothes, beauty and lifestyle products that pumps out over 6,000 new items daily, is in talks with potential investors including General Atlantic for a funding round that could value the company at about $100 billion, Bloomberg News reported Sunday.

Should Shein succeed with the round, it would make the decade-old brand about twice as valuable as Tokyo-based Fast Retailing Co. -- the owner of Uniqlo -- which last year had more than 2,300 outlets in 25 countries and regions. It would also make Shein the world’s most-valuable startup after ByteDance Ltd. and SpaceX, according to data provider CB Insights.

While funding rounds indicate the value of a business broadly, initial public offerings offer a sharper peek into whether a wider base of investors shares the same enthusiasm, especially after the books are thrown open to the public for scrutiny. Most manage to get the valuation they seek, if not better, but some fail. Shein hasn’t unveiled any plans for an IPO.

Since its launch in 2012, Shein has developed an extensive network of low-cost suppliers in southern China. During the pandemic, it worked with celebrities like Lil Nas X and Katy Perry to boost its profile among Gen Z shoppers outside China.

Early in the pandemic, Shein benefited from changes in consumer behavior, as shoppers made even more of their purchases on phones or computers. Sales more than tripled in 2020 to $10 billion, making Shein the biggest web-only fashion brand in the world.

The new investment round would reflect the impact of a surge in sales for Shein. At the time of a funding round in August 2020, Shein had a valuation of $15 billion, according to PitchBook.

Shein’s potentially astonishing valuation also masks some of the adverse impact the fast-fashion industry has on the environment. Though the closely held company hasn’t commented on its carbon footprint, the sector is often blamed for its heavy reliance on petrochemicals derived from oil. Fashion accounts for up to 10% of global carbon dioxide output, according to the United Nations Environment Programme. It also accounts for a fifth of the 300 million tons of plastic produced globally each year -- a product that is the backbone of polyester, which has overtaken cotton as the primary material in textile production.

In its 2021 “Sustainability and Social Impact Report,” Shein said fashion has an undeniable impact on the planet’s health and said it’s striving for zero waste and would announce its goal by the end of this year. In December, it announced a $10 million fund to support global non-profit organizations focused on empowering entrepreneurs, supporting underserved communities, ensuring animal health and welfare, and promoting recycling. 

The Chinese brand is also facing headwinds in the U.S., with lawmakers in Washington considering legislation that could hinder its sales in the world’s No. 1 economy. The House of Representatives in February approved the America Competes Act, which includes language that would prevent Chinese companies from using a current exemption that allows tariff-free imports of packages worth less than $800.

The Senate passed a bill without that change, though, and lawmakers have yet to reveal the terms of the final version.

In a sign that Shein expects to enjoy continued growth in the U.S., the company recently announced plans to open a distribution center in Indiana that will employ 850 workers. Last month, Shein also agreed to a new program with Indiana University to offer fellowships to students in the university’s business school. 

©2022 Bloomberg L.P.