Shein's $100 Billion Value Would Top H&M and Zara Combined
Comment of the Day

April 12 2022

Commentary by Eoin Treacy

Shein's $100 Billion Value Would Top H&M and Zara Combined

This article from Bloomberg may be of interest to subscribers. Here is a section:

A Chinese fast-fashion company without a global network of physical stores of its own is seeking a valuation that could be more than the combined worth of high-street staples Hennes & Mauritz AB and Inditex SA’s Zara.

Shein, an online-only retailer of inexpensive clothes, beauty and lifestyle products that pumps out over 6,000 new items daily, is in talks with potential investors including General Atlantic for a funding round that could value the company at about $100 billion, Bloomberg News reported Sunday.

Should Shein succeed with the round, it would make the decade-old brand about twice as valuable as Tokyo-based Fast Retailing Co. -- the owner of Uniqlo -- which last year had more than 2,300 outlets in 25 countries and regions. It would also make Shein the world’s most-valuable startup after ByteDance Ltd. and SpaceX, according to data provider CB Insights.

Eoin Treacy's view

I wrote about the success of direct-to-consumer Chinese fashion brands in my 2015 China trip report. Back then I was impressed by the speed with which new SKUs were churned out. The injection of capital and internet marketing savvy has grown that business model to the point where every other fast fashion brand is struggling to compete.

Fast Retailing was among Japan’s largest companies but is now trending lower in a consistent manner.

Inditex peaked in 2017 and collapsed in Q1. It is now testing the 2020 low. While short-term oversold, it’s hard to make a viable case for recovery.

H&M pulled back sharply from the December peak and is now testing the region of the 200-day MA. It will need to sustain a move above that level to signal more than a short covering rally is underway.

The same kind of transition is occurring among Amazon sellers. Until the last couple of years it was still possible to buy in China and sell in the USA. Now, Chinese middlemen send inventory directly to Amazon warehouses. It is only a matter of time before factories cut out the middleman and go direct to consumers.

Amazon’s advertising business has grown to exceed its web services (AWS) revenue. They already take over 50% in seller fees. The creation of the ad model means it is essential if products are to place highly in search algorithms. That cost is being passed on to consumers. A decade ago, Amazon was cost competitive. That has been substituted for convenience. Meanwhile Wal-Mart’s portal offers the same next day shipping and prices tend to be cheaper.

Amazon steadied today from the $3000 level but will need to sustain a move above $3500 to confirm a return to demand dominance beyond short-term steadying.
Wal-Mart rallied impressively throughout March to hit a new all-time high. Some consolidation is underway but a sustained move below the 200-day MA will be required to question medium-term scope for continued upside.

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