Strong clothing store Shein, known for its China- made $5 heads and $10 dresses, has hiked prices by over a third on some key products, in a move likely to increase revenues ahead of its planned IPO, according to an examination of its sales approach.
Comparable to H&M and Zara, Shein’s regular price increases are higher. ( Photo: Bloomberg )
According to statistics from London-based research agency EDITED, which compared prices on June 1 with a month earlier, Shein’s regular price increases were higher than those of its competitors H&M and Zara.
Shein declined to comment.
The organization operates an online market selling an array of products, though its primary business is making and selling Shein’s individual brands, generally women’s clothing.
Shein taps a network of suppliers, mostly from China, who revers traditional manufacturing practices by placing small initial orders on demand and expanding their operations accordingly. Most of the clothes Shein sells is made in Guangzhou, China, by its almost 5, 400 providers.
Though Shein doesn’t disclose financial data publicly, Coresight Research estimates that Shein’s revenue will reach $50 billion this year, a 55 per cent jump over last year’s figure.
Making its main female attire lines more costly and adding more independent companies to its website can help Shein reach that sales goal and increase profits.
“Shein has seen very strong speed recently, which was play strongly into its IPO programs”, said Erik Lautier, retail analyst at firm AlixPartners.
Shein is facing the higher costs of being a publicly traded company as it prepares for its initial public offering ( IPO ). Additionally, it must adhere to new EU rules governing website websites that could increase its costs and hurt its profit margins.
In the United States, Shein’s biggest sector by revenue, the company hiked the average cost for women’s clothes by 28 per share in the year to June 1, to$ 28.51, the EDITED data showed.
According to the data, Shein’s prices increased by a larger percentage than its competitors over the same time period, which is still significantly below the average for an H&M dress ($40.97) or a Zara dress ($79.69) in the US.
On Shein’s UK site, a dress cost 24.12 pounds ($30.97) on average, 15 per cent more than a year ago, while the average dress across France, Germany, Italy, and Spain was 36 per cent more expensive.
Retail experts claim that Shein wants to demonstrate that it can maintain its recent growth and sell more higher-priced goods before listing on the stock market.
“If they can demonstrate that these prices stick then the valuation increases significantly”, said Alex Romanenko, head of retail at pricing consultancy Pearson Ham Group.
Shein is seeking a valuation of around 50 billion pounds in a London listing, Sky News has reported. The business did not offer any comments on its IPO plans or valuation.
Having gained market share with rock- bottom prices, Shein’s price increases are also aimed at boosting profit margins prior to listing, Romanenko said.
In the US, Shein’s biggest market, the biggest price increase was in footwear, with the average pair of shoes on its site selling for $40.7, up from $25.3 a year ago.
That partly reflects Shein bringing other brands onto the platform, like sneaker brand Skechers, which sells shoes ranging from $32 to $174 on shein.com. Skechers declined to comment on the performance of its Shein sales.
Overall, Shein’s growth is bound to slow in its more established markets such as the US and the UK, said Louise Deglise- Favre, apparel market analyst at GlobalData.
Shein may be able to maintain comparable growth rates as it moves into and expands new markets, strategically raises some of its prices, or makes acquisitions, she added.
The US accounted for 28 per cent of Shein’s sales in 2023, GlobalData estimates, with Germany and the UK the second and third biggest markets. Shein also generates significant profits in Brazil and Mexico, and its business is expanding quickly in other emerging markets.
However, price hikes can only go so far to boost Shein’s revenues, AlixPartners’ Lautier said, as higher prices typically impact the share of visits to the site that turn into purchases.