Fast fashion retailer Shein hikes prices ahead of IPO
Average price of a dress on Shein jumps by 28% in U.S.
Price hikes aimed at boosting revenue and profit
Higher prices also driven by external brands like Skechers
Adds embedded graphics within text
By Helen Reid
LONDON, June 13 (Reuters) -Fast fashion retailer Shein, known for its China-made $5 tops and $10 dresses, has hiked prices by over a third on some core products, in a move likely to boost revenues ahead of its planned IPO, according to an analysis of its pricing strategy.
Shein's average price hikes exceeded those of its rivals H&M HMb.ST and Zara ITX.MC, according to data from London-based research firm EDITED, which compared prices on June 1 with a year earlier.
Shein declined to comment.
The company operates an online marketplace selling an array of merchandise, though its main business is making and selling Shein's own brands, primarily women's clothing.
Shein taps a network of largely China-based suppliers, which buck 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 its roughly 5,400 suppliers.
Though Shein doesn't disclose financial data publicly, Coresight Research estimates that Shein's revenue will reach $50 billion this year, a 55% jump over last year's figure.
Making its core women's clothing lines more expensive and getting more outside brands to sell on its site can help Shein to hit that sales figure and boost profits.
"Shein has seen very strong momentum recently, which could play favorably into its IPO plans," said Erik Lautier, ecommerce expert at consultancy AlixPartners.
As Shein prepares for its initial public offering (IPO), it faces the higher costs of being a publicly listed company. It must also comply with new EU regulations on online platforms that could add to its expenses, pressuring profit margins.
In the United States, Shein's biggest market by sales, the company hiked the average price for women's dresses by 28% in the year to June 1, to $28.51, the EDITED data showed.
While still well below the average for an H&M dress ($40.97) or a Zara dress ($79.69) in the U.S., Shein upped prices by a bigger percentage than its rivals over the same period, according to the data.
On Shein's UK site, a dress cost 24.12 pounds ($30.97) on average, 15% more than a year ago, while the average dress across France, Germany, Italy, and Spain was 36% more expensive.
Shein wants to show that it can sustain its recent growth and sell more higher-priced products ahead of its stock market listing, retail experts say.
"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 company declined to comment 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 U.S., 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 SKX.N, which sells shoes ranging from $32 to $174 on shein.com. Skechers declined to comment on how its sales on Shein have been performing.
Overall, Shein's growth is bound to slow in its more established markets such as the U.S. and the UK, said Louise Deglise-Favre, apparel market analyst at GlobalData.
"On a global level Shein may be able to sustain similar levels of growth as it continues to enter and develop into new markets, strategically increase some of its prices or through acquisitions," she added.
The U.S. accounted for 28% of Shein's sales in 2023, GlobalData estimates, with Germany and the UK the second and third biggest markets. Shein also makes significant revenues in Brazil and Mexico, and is growing rapidly 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. To drive sales growth further Shein will have to bring more people to its platform, and get them to visit more frequently.
($1 = 0.7789 pounds)
Shein prices rise across all categories in the U.S. https://reut.rs/3VgcyVM
Shein raises prices on its dresses and tops https://reut.rs/3VkxvyP
Shein revenues expected to hit $50 billion this year https://reut.rs/3VxYQ1L
U.S., Germany and UK are Shein's biggest markets https://reut.rs/4aYNHLN
Reporting by Helen Reid; Editing by Matt Scuffham and Mark Potter
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
