LONDON – Fast fashion giant Shein, known for its China-made US$5 (S$6.75) tops and US$10 dresses, has hiked prices by more than a third on some core products, in a move likely to boost revenues ahead of its planned initial public offering, according to an analysis of its pricing strategy.
Shein’s average price hikes exceeded those of its rivals H&M and Zara, 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 does not disclose financial data publicly, Coresight Research estimates that Shein’s revenue will reach US$50 billion in 2024, a 55 per cent jump over 2023’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 favourably into its IPO plans,” said Mr Erik Lautier, e-commerce expert at consultancy AlixPartners.
In the United States, Shein’s biggest market by sales, the company hiked the average price for women’s dresses by 28 per cent in the year to June 1, to US$28.51, the Edited data showed.
While still well below the average for an H&M dress (US$40.97) or a Zara dress (US$79.69) in the US, 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 (S$41.49) 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.
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 Mr Alex Romanenko, head of retail at pricing consultancy Pearson Ham Group.
Shein is seeking a valuation of around £50 billion in a London listing, Sky News has reported.
The company declined to comment on its IPO plans or valuation.
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 US$40.70, up from US$25.30 a year ago.
That partly reflects Shein bringing other brands onto the platform, like sneaker brand Skechers, which sells shoes ranging from US$32 to US$174 on shein.com.
Overall, Shein’s growth is bound to slow in its more established markets such as the US and Britain, said Ms 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 US accounted for 28 per cent of Shein’s sales in 2023, GlobalData estimates, with Germany and Britain 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’ Mr 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. REUTERS