To The Moon

Recently, rumors of the listing of fashion retailer SHEIN have resurfaced. According to its recent data to investors, the company expects revenue to more than double to $58.5 billion by 2025, while its valuation will also reach $64 billion and IPO financing is expected to reach $3 billion.

SHEIN is also the top five unicorn enterprises in the world, following to ByteDance, SpaceX(Elon Musk$Tesla Motors(TSLA)$ ), Ant Group($Alibaba(BABA)$ , Stripe, and of course OpenAI$Microsoft(MSFT)$ , whose valuation is growing rapidly again. At its peak in early 2022, the valuation reached $100 billion, ranking third.

Founded in 2008 and headquartered in Nanjing, SHEIN is an international B2C fast fashion e-commerce company, which directly serves consumers in over 150 countries around the world and has operation centers in Guangzhou, Singapore, Los Angeles and other major markets. The company produces ready-made garments in China and then sells them online in the United States, Europe and Asia.

The most successful part of SHEIN is that it grasps the "cost performance", provides consumers with many kinds of choices (even special categories for obese groups and minorities), and the sales price is extremely low. In the absence of a "cost-effective platform", European and American household electrical products have risen rapidly..

What is the difference between SHEIN and other e-commerce platforms?

For companies going out to sea, most of them copy the successful experience of cmnet in recent years overseas. For example, AliExpress is an all-inclusive website that continues Taobao, and Temu, an overseas e-commodity station that $Pinduoduo Inc.(PDD)$ has tried since the end of 2022, has also undertaken the legacy of domestic competition, while TikTok, subsidiary of Bytedance, carries out live streaming through the advantages of short video and live broadcast, beat Meta's Instagram.

However, SHEIN aims at the European and American markets and adopts a way that is very consistent with the habits of Chinese users.That is, independent shopping site. Since its establishment, it has always adhered to the form of independent site, and at the same time integrated more social media games.

SHEIN signs up for online celebrities through social accounts, and can measure popular styles on social media such as Instagram, Facebook and Snapchat, and then update them in large quantities every day. This accurate sales forecast can react to production, which makes it creatively apply the on-demand production mode of "small order, test and return order".

Therefore, the company could expect

In 2025, GMV will increase to US $80.6 billion, an increase of 174% over 2022, with a compound annual growth rate of 40%. It is estimated that the revenue will reach US $58.5 billion in 2025, higher than US $22.7 billion in 2022, with a compound annual growth rate of 37%.

Will Temu slow down SHEIN?

The important reason for SHEIN to speed up IPO may be the launch of Temu in Pinduoduo. Since its launch in September 2022, the average daily GMV of Temu has exceeded 1.5 million US dollars, and the SKU is 300,000-400,000, covering 24 first-class categories. By December, the single-day turnover was stable at more than 7 million US dollars, and in January 2023, the turnover was about 200 million US dollars

At the same time, in November, price per order has reached 20-25 dollars, and in January 2023, it has exceeded 35 dollars. In February, Temu went online in Canada and is preparing to enter more new markets. Temu ran TV commercials during the Super Bowl in February.

Many market forecasters believe that Pinduoduo's model may directly replicate a SHEIN in the US market.

However, Temu's self-operation should only be in the early stage to better control the quality of products and services, and give consumers a good shopping experience, accumulate users' reputation, and realize traffic and user accumulation. In the later period, whether it is to improve the operating profit rate or reduce the inventory cost, more tripartite businesses will be introduced.

On the other hand, Temu is still burning money for quantity, but the "10 billion subsidy" similar to the main station of Pinduoduo in China will not last long. The reason is:

1. The company as a whole has entered profit and cannot sacrifice profit margin for a long time;

2. The anti-monopoly supervision could prevent it doing so (Amazon has the lesson);

3. The accumulated users of the company are not completely price sensitive, but the ultimate goal is to increase the unit price of customers by adjusting the category structure and realize long-term profits.

If Temu's GMV in the first year reaches 3 billion US dollars and its daily activity accumulates to 5 million US dollars, at the current rate, it will lose about 1 billion US dollars in the first year, which will have a controllable impact on Pinduoduo's financial report.

PDD 22Q3 Earnings

Why is it unlikely that live-broad e-commerce in North America will become a competitor?

Earlier, Meta announced that its social application instagram would close the live e-commerce, following Facebook earlier.

Seizing the user market through video content does not seem to be the mainstream of the North American market.

On the one hand, Amazon, the largest e-commerce platform abroad, has been shortening the stay time of users. Users are affected by the consumption of fast decision-making, and live e-commerce is inefficient;

On the other hand, the offline shopping habits of foreign users are far greater than those of domestic users. Of course, one of the important factors is logistics, especially the "last mile" logistics.

Therefore, in North America, although Tik Tok occupies the absolute position of short video platform and a lot of users' time, live broadcast e-commerce has been unable to get up because of its market size, so there are few clustered supply chains and it is difficult to produce head anchors.

All these provide considerable opportunities for cost-effective platforms such as SHEIN and Temu.