Consumer Staples , Consumer Discretionary Author：Yunfeng Zhang Editor：Yiru Qian Mar 12, 2023 10:53 AM (GMT+8)

On the one hand, the rapid rise of competitors has led to such a result, but on the other hand, it has also revealed a lot of problems for SHEIN itself.

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On March 8, Reuters broke the news that cross-border e-commerce unicorn SHEIN will close a new USD 2 billion funding round this month and go public this year at the earliest.

After 2023, the keywords funding and IPO are often associated with SHEIN. On March 9, SHEIN told the media that it was indeed in the process of raising a new round of financing, but that it had no plans to go public for the time being. It is believed that the decline in valuation and missing the best time to go public are the main reasons why SHEIN canceled its IPO plan. SHEIN's current funding round is reportedly valued at about USD 64 billion, down by more than a third from its peak of USD 100 billion.

Valuation shrunk by a third, why has SHEIN lost the confidence of capital?

The decline in SHEIN's valuation is perhaps not surprising: after all, the pace of its funding and valuation growth over the past few years has been so impressive that it was already a bubble.

The first time SHEIN attracted attention for its high valuation was at the beginning of the outbreak. In 2020, SHEIN's valuation reached $15 billion in the primary market after it closed its Series E funding round, a model of deficit growth after the outbreak. In 2021, its valuation tripled to USD 47 billion, according to Forbes in June. Then later, it was the USD 100 billion valuation that exploded last April as it prepared for a new USD 1 billion round of funding.

This growth rate is quite amazing in the golden decade of mobile Internet, not to mention the turbulent years after the epidemic broke out. Therefore, some media and netizens also believe that after cutting off a third of the bubble, SHEIN's valuation is considered to return to rationality.

Temu - a strong competitor

Thanks to PDD Holdings' strong funding, Temu's expansion in the global market has been much faster than SHEIN's in its early days: it entered Canada in mid-February, and announced its entry into Australia and New Zealand in early March.

The same low price, high SKU thin profit route, the same for low-income, young consumers of Generation Z, SHEIN and Temu from every angle are a pair of mortal enemies, the capital will naturally also compare them. In other words, the strong rise of Temu would make every step SHEIN takes from here on out more stressful than ever.

Of course, SHEIN's market valuation is not only a reference to the general environment and competitors - SHEIN's own development model, business growth rate can not keep up with expectations, or the competitive advantage is weakened, which will also undermine the confidence of the capital market.

How can SHEIN achieve better results in the midst of multiple challenges?

For the past few years, SHEIN has played a pioneering role against Amazon and Shopify, until Temu joined the fray last year. Data shows that Shopify added only 71,000 merchants in the first half of last year, much less than the results of the same period in 2020 and 2021. Now Amazon and Shopify, two giants were driven by the pressure to move from confrontation to cooperation, the spearhead naturally pointed directly at the spelling SHEIN, as well as foreign challengers such as Jindo and Tik Tok.

SHEIN is growing rapidly and poses a threat to the giants. But from another perspective, the joint siege by Amazon and Shopify also puts more pressure on SHEIN's every move going forward.

For SHEIN at this stage, listing or not listing may not be the most important thing. After saying goodbye to the stage of rapid growth and wild valuation, how to rebuild the moat and seek sustainable development is the priority.