The latest valuation of Razor SHEIN has shrunk by nearly 40%
Time： 2023-03-09 09:30
The valuation has fallen seriously. Why does SHEIN still plan to go public this year?
With a reduction of 40%, why is SHEIN willing to reduce the price for financing?
Will it reverse and recover in 2023, or will it continue to fall?
Today, IAN Consulting will talk about SHEIN's helplessness and ambition under internal and external troubles.
1、 SHEIN's latest valuation decreased by $36 billion
In recent years, SHEIN has created a new way overseas by virtue of its advantages of high quality and low price, with traffic, users and GMV all the way up. In the financing in April 2022, SHEIN's valuation was as high as $100 billion, higher than the sum of the market values of H&M and ZARA, and more than the market values of JD and Pinduoduo at that time. The valuation was only like ByteDance ($140 billion) and SpaceX ($100.3 billion), a space exploration company of Musk. This news once shook the entire technology and venture capital industry.
According to public information, SHEIN has disclosed at least six rounds of financing since its establishment in 2008. However, nine months after joining the first unicorn, SHEIN's valuation fell from US $100 billion to US $64 billion in the latest round of financing, down 36%.
2、 Why is SHEIN willing to reduce the price for financing when the valuation is seriously reduced?
1. The international economic environment is not optimistic
Technology companies such as Meta, Twitter and Alphabet have successively made large-scale layoffs. Amazon recently announced 18000 layoffs, Microsoft will cut 10000 jobs in March, and Shopify will cut 10%. The pressure of the general environment has affected a large number of enterprises. The largest unicorn in Europe, Klarna, has also taken the means of price reduction financing. SHEIN can only move forward in the tide of the times.
2. Under internal and external troubles, SHEIN urgently needs to seek breakthroughs, and new businesses need a lot of money
In 2022, Temu landed in North America, which was a great threat to SHEIN. SHEIN originally focused on the low price strategy, but Temu simply carved "no minimum, only lower" into DNA, and also included mail and 90 days of free return. Moreover, the audience of Temu products is more extensive than that of SHEIN. The $1 USB charging head, the $3 sharpener, and the $20 assault suit... Temu just went online a few months ago and reached the top of the shopping APP list at the end of 2022. SHEIN lost its position in the list. The voice of "Temu is more cost-effective than SHEIN" also spread on social media in North America.
TikTok also started a game between live broadcast e-commerce and traditional e-commerce with SHEIN, and there was even a sign of catching up.
In addition to the EU tax reform, the United States is also considering canceling the duty-free preferential treatment for small cross-border packages below $800. SHEIN was able to do so because of this policy of greatly reducing logistics costs. If the policy changes later, SHEIN will be hit hard to predict. In addition to Europe and the United States, in the South American market, the Brazilian government plans to raise the tariff of cross-border e-commerce products to 60%, and also levy 17% - 25% turnover tax.
Therefore, SHEIN is in urgent need of breakthroughs. It needs to innovate and adjust its model. The development of these new businesses needs a lot of money to support. For example, when SHEIN enters Amazon, sellers can directly open stores on SHEIN, expand product categories, and open physical offline stores
3、 From a macro perspective, companies like SHEIN will gradually stabilize in the next 1-2 years, with a high probability of reversal.
In 2022, the overall decline of the shares in China was large, and the market value of many companies decreased by more than 90%. Compared with the peak value, Alibaba's market value per share plummeted by nearly 80%. In 2022, its share price fell by 25%, and the market value of Weilai and Xiaopeng Automobile shrank by more than 100 billion yuan.
For these enterprises, the most important are these three factors: macro market, political and policy risks, and individual performance. From a macro perspective, in the next 1-2 years, inflation in the United States will moderate and market expectations will warm up. The Federal Reserve may begin to cut interest rates in 2023; China's strict epidemic prevention and control also began to move in a new direction at the end of 2022. In terms of policy, China's policy on cross-border and offshore has begun to loosen and turn; The Sino-US frictions have temporarily ended, and the delisting crisis of China-US shares has been temporarily lifted. As for the performance, it depends on the performance of the companies themselves. Ivan is still very confident about this.
Therefore, the overall probability of stabilizing and rising in 2023 is very high.