Original link: https://www.latepost.com/news/dj_detail?id=1659
China’s cross-border fast fashion e-commerce company SHEIN is in the latest round of financing. The first batch of financing of nearly US$2 billion has been completed and two Middle Eastern sovereign funds have been introduced. “LatePost” exclusively learned that this round of financing will also join the second batch of investors, and the delivery is expected to be completed in the next few weeks, when new strategic shareholders will enter the game.
SHEIN has no urgent funding needs and has been profitable for four consecutive years, with a net profit of nearly US$1 billion last year. It also has healthier revenue growth. Last year, SHEIN’s sales increased by 46%, breaking through 29 billion US dollars, surpassing ZARA’s single-brand annual sales for the first time.
This round of financing is mainly used to build the infrastructure for the global market and to deal with the next competition. The new financing also allows SHEIN to introduce capital from several of the world’s most important markets, including the United States, South America, and the Middle East.
According to sources close to the transaction, the first batch of delivery shareholders include Sequoia China, General Atlantic Investment, the UAE sovereign wealth fund Mubadala Investment Company as the lead investor, and Marcelo Claure, chairman of SHEIN’s Latin American business, who followed the investment (Marcelo Claure), US hedge fund D1 Capital and Saudi sovereign wealth fund. Two of the Middle Eastern sovereign funds are new shareholders. The second batch of delivery shareholders may include influential investment institutions in other regions.
In an interview with LatePost, Chairman of SHEIN’s Latin American business, Claure said that the special feature of SHEIN is that “there is a global strategy, but the execution is completely local.” This investor with rich experience in Brazil and Mexico joined SHEIN at the beginning of the year, and immediately participated in the communication with the local government. The newly joined strategic investors in this round are also quite influential in their respective regions.
Financing in the primary market is not easy this year. SHEIN’s round of financing is currently the third largest in the world, second only to Silicon Valley artificial intelligence giant OpenAI and Silicon Valley payment company Stripe.
The post-investment valuation of this round of SHEIN is US$66 billion, which is lower than the previous round. SHEIN’s last round of public financing was US$2 billion completed in April last year, with a post-investment valuation of US$100 billion.
A person familiar with the transaction said that the change in valuation reflects the adjustment of expectations or sentiment. “For the company level, investors have seen that the scale of SHEIN has expanded rapidly and its profitability has also improved.” Another person close to the transaction told “LatePost”, SHEIN will go to the US market in the second half of the year.
SHEIN said it would not comment and has no plans to go public.
New problems, and new investors
SHEIN was founded by Xu Yangtian in Nanjing. At the beginning, it sold low-priced wedding dresses overseas. In 2012, it made full efforts to transform into cross-border fashion women’s clothing . The biggest feature is that it can still achieve low-cost and efficient cross-border clothing while adding more than a thousand new clothes every day. transportation.
This company entered the market early to seize the dividends during the low traffic periods of platforms such as Facebook, Instagram, Pinterest, and TikTok. Since 2020, SHEIN has controlled the market expense ratio of each order within 10%.
In today’s transnational business, what needs to be considered is not just the efficiency of making money. As SHEIN surpassed ZARA, retail competitors and regulators in more regions began to pay attention to the company’s cross-border logistics. Entering the Latin American market, SHEIN also needs to face a clothing tariff rate of more than 30%. About three years ago, SHEIN was taken down in India along with the mobile apps of dozens of other Chinese Internet companies.
Brazil is one of the most important new markets for SHEIN. According to a report by “LatePost” in November last year, about 3% of SHEIN’s annual sales come from the new market Brazil, and the local customer unit price is about 30 US dollars. A person close to SHEIN told us that Xu Yangtian personally flew to Brazil for investigation when the local epidemic was at its worst.
Brazil not only has high tariffs, but also complex tariff calculations. In recent years, the Brazilian government has upgraded the trade protection policy of taxation on foreign import and export goods. The threshold of 100 US dollars has been reduced to 50 US dollars. After customs clearance through the Brazilian Post, goods with a value between 50 US dollars and 3,000 US dollars have to be paid uniformly. export tax. For the logistics involved in the e-commerce chain, there are different turnover taxes in each state of Brazil.
At the end of January this year, SHEIN announced that former Softbank COO Marcelo Claure will serve as the chairman of SHEIN Latin America, responsible for the company’s Latin American strategy and shareholder affairs. Marcelo Claure was Sun Zhengyi’s deputy, mainly focusing on the Brazilian and Mexican markets. His family office invested about US$100 million in SHEIN in his own name.
Brazil is a federal country with state governments having greater power. Claure told “LatePost” that after taking office, he spent a long time negotiating with the governors of different states to obtain favorable incentives. When he worked in mobile phone distributor Bright Star and Softbank, he involved complex supply chains, participated in the management of more than 170 companies, and worked in global teams. These are all experiences that can be reused in SHEIN.
The Middle East is another growth market that SHEIN is looking at. Last year, local sales accounted for 13% of SHEIN’s total sales, and the unit price per customer exceeded that of the United States. As the sovereign wealth fund of the UAE, Mubadala has a close relationship with the UAE royal family. The chairman of the board of directors is the deputy prime minister of the UAE, and the board members include government officials such as the Minister of Energy and Infrastructure.
Build a platform model in Brazil and build a self-operated business in Türkiye
In addition to the inflationary pressure, high inventory and geopolitical pressure in the post-epidemic era, another important challenge SHEIN faced last year was the launch of TEMU by Pinduoduo, a cross-border e-commerce platform that focuses on low-priced commodities and all categories.
TEMU conducted in-depth research on SHEIN’s model in the early stage, and established the platform’s strong control over commodities in the way it is used to. And gradually evolve into a form that is more suitable for you in practice. Although it has not copied SHEIN, TEMU has learned from SHEIN and mastered how to take the first step in a completely unfamiliar market, that is, the platform’s strong control over products.
In less than 10 months since its launch, TEMU has entered the United States, Canada, Australia, New Zealand, the United Kingdom, France, Germany, Spain and other countries. In the U.S., tens of millions of people open TEMU every day, and this scale has caught up with SHEIN, which has been operating in the U.S. for more than ten years. An industry person close to TEMU told us, “TEMU is accelerating into new markets.”
Both companies have their own strengths. SHEIN promotes the extremely efficient “small order quick return” in the garment industry, and cooperates closely with Chinese garment factories to place orders for production ; The parts have full price advantage. A person close to the two companies said that the overlap between users of the two companies is currently in the low single digits.
As far as we know, SHEIN has piloted the platform model in Brazil in March last year, allowing merchants to open stores for sales. Thirteen months later, SHEIN launched the e-commerce platform under the name of Marketplace in Brazil, and now it is also launched in the United States. Mexico is the next site, and more markets will follow.
In a video interview with us this week, Claure, chairman of SHEIN Latin America, refused to disclose any specific operating figures, but said that the number of local sellers in Brazil exceeded expectations, and the team was very satisfied with the initial results. He said his priority now is to make sure the supply chain works because it involves Chinese factories, Brazilian buyers, Brazilian sellers.
SHEIN plans to invest 750 million reais (about 149 million U.S. dollars) in Brazil in the next few years, cooperate with 2,000 manufacturers in Brazil, create 100,000 jobs in the next three years, and by the end of 2026, 85% of Brazil’s sales will be From local manufacturers and merchants. At the same time, SHEIN’s supply chain layout in Guangzhou is also further expanding. This year, it also announced an investment of 3.5 billion to build an intelligent logistics park.
“Bringing manufacturing to the local area, I think every government is very happy about that.” Claure told LatePost. He said that his job at SHEIN is to constantly interact with the management teams in China and Singapore as well as the local market management teams to ensure efficient implementation of strategies.
While piloting the third-party platform model, SHEIN is also trying to move its own offices, production sites and distribution centers closer to consumers, so as to further understand consumer needs, improve performance efficiency, and enable consumers in different markets to more Receive the package from the nearest warehouse soon.
A person close to SHEIN said that SHEIN has been out to sea for a long time, and has suffered enough losses when it was not known to the public. It never believes that “one trick is popular all over the world”, and is willing to try different methods in different regions. Quickly adjust.
In 2022, SHEIN has accelerated the progress of finding local manufacturers in Turkey to reproduce the “small order and quick response” supply chain network in South China. Some domestic suppliers of SHEIN have also set up factories in Istanbul, and the factories are currently in operation. H&M and Zara both have factories in Turkey, one of the world’s largest cotton consumers. “LatePost” learned that it is expected that by the end of 2023, 20% of SHEIN’s sales in the European Union will come from Turkish factories.
SHEIN has also opened three distribution centers respectively in Poland, Italy and the United Arab Emirates. After the first distribution center is fully launched, the time for customers to receive goods will be shortened from two weeks to three or four days.
In May this year, SHEIN launched its Europe, Middle East and Africa (EMEA) headquarters in the heart of Dublin, Ireland. The Dublin office is not only SHEIN’s EMEA strategic IT center, but also the core of SHEIN’s operations in the region. At the same time, SHEIN plans to hold about 30 pop-up stores in EMEA in 2023, including the ongoing pop-up stores in Paris, Madrid, and Barcelona.
In this increasingly complex environment, SHEIN has connected investors with different backgrounds in different regions, and has also begun to try different business models and supply chain systems from the past.
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