Helen Reid
LONDON (Reuters) – Fast fashion retailer Shein, known for its $5 Chinese tops and $10 dresses, has raised prices by more than a third on some key products, likely boosting earnings ahead of its planned IPO, according to Reuters data . analysis of pricing strategy.
Shane’s average price increase exceeded that of rivals H&M (ST:) and Zara, according to London-based research firm EDITED, which compared prices on June 1 with those a year earlier.
Shein declined to comment.
The company operates an online marketplace selling a variety of products, although its main business is producing and selling Shein’s own brands, primarily women’s clothing.
Shane uses a network of suppliers, mostly based in China, that disrupt traditional manufacturing processes by taking small initial orders and scaling up based on demand. Most of the clothing Shein sells is made in Guangzhou, China, by approximately 5,400 suppliers.
Although Shane does not publicly disclose financial data, Coresight Research estimates that Shane’s revenue will reach $50 billion this year, up 55% from last year.
Increasing the value of its core women’s clothing lines and bringing in more third-party brands to sell on its site could help Shane reach that sales target and increase profits.
“Shein has seen very strong momentum lately, which could have a positive impact on its IPO plans,” said Eric Lautier, an e-commerce expert at consultancy AlixPartners.
As Shein prepares for an initial public offering (IPO), it faces higher costs associated with being a public company. The company must also comply with new EU rules on online platforms, which could increase its costs and reduce its profit margins.
In the United States, Shane’s biggest market, the company raised the average price of women’s dresses by 28% in the year to June 1, to $28.51, EDITED data showed.
According to the data, while Shane is still well below the average for an H&M dress ($40.97) or a Zara dress ($79.69) in the US, he has raised prices by a larger percentage than his competitors over the same period.
On Shane’s UK site, a dress cost an average of £24.12 ($30.97), up 15% from a year ago, while the average dress in France, Germany, Italy and Spain was 36% more expensive.
Shein wants to show it can maintain its recent growth and sell more higher-priced items ahead of a stock exchange listing, retail experts say.
“If they can demonstrate that these prices will continue, then the valuation will increase significantly,” said Alex Romanenko, head of retail at pricing consultancy Pearson Ham Group.
According to Sky News, Shane is bidding for a London listing worth around £50 billion. The company declined to comment on its IPO plans or valuation.
According to Romanenko, since Shein has gained market share through rock-bottom prices, price increases are also aimed at boosting profits ahead of the listing.
In the US, Shein’s biggest market, shoes saw the biggest price increases, with the average pair of shoes on the site selling for $40.7, up from $25.3 a year ago.
This is partly due to Shein bringing other brands to the platform, such as sneaker brand Skechers, which sells shoes ranging from $32 to $174 on shein.com. Skechers declined to comment on how Shein sales are going.
Overall, Shein’s growth will inevitably slow in more established markets such as the US and UK, said Louise Deglise-Favre, apparel market analyst at GlobalData.
“Globally, Shein may be able to maintain a similar level of growth by continuing to enter and develop new markets, strategically raising some prices or through acquisitions,” she added.
GlobalData estimates that the US accounted for 28% of Shein’s sales in 2023, with Germany and the UK being the second and third largest markets. Shein also generates significant revenues in Brazil and Mexico and is growing rapidly in other emerging markets.
However, according to AlixPartners’ Lautier, raising prices may only increase Shein’s revenue, since higher prices typically affect the percentage of site visits that turn into purchases. To drive sales growth, Shein will have to attract more people to its platform and get them to visit it more often.
($1 = 0.7789 pounds)