Shein seeks a valuation that’s more than H&M and Zara combined

The news: Chinese fast-fashion retailer Shein is in talks with potential investors for a funding round that could value the online-only retailer at about $100 billion, per Bloomberg.

• That valuation would be more than the combined value of notable fast-fashion retailers H&M and Zara, which operate thousands of stores.
• It would also make Shein the world’s most valuable startup, per CB Insights.

More on this: Shein’s sales have soared throughout the pandemic thanks to consumers’ evolving behaviors, its partnerships with creators and celebrities, and its unique business model by which it steadily pumps out small batches of items every day, then ramps up production based on their popularity.

• The retailer’s sales more than tripled in 2020 to $10 billion, making it the biggest online-only fashion brand in the world.
• Its holiday sales soared 103% during the 2021 holiday season and were up 477% compared to the same period in 2019.
• The new funding round reflects that rapid growth. Its two previous funding rounds, in January 2019 and August 2020, valued the retailer at $5 billion and $15 billion, respectively, per Forbes.

Growth opportunities: Shein has benefited from leveraging low-cost suppliers in southern China to sell on-trend items for as little as $3—a significantly low price point even compared toother popular fast-fashion brands, including Zara, H&M, and Forever 21.

• The retailer last month announced plans to open a distribution center in Indiana that will serve as its main Midwest hub.

The sustainability issue: The potential massive funding round is a sign that there are limits to consumers’—and investors’—growing interest in sustainability.

• Shein’s 2021 “Sustainability and Social Impact Report” acknowledges fashion’s “undeniable impact on the health of the environment,” while noting that it is focused on lowering emissions and reducing waste by using sustainable materials and leveraging efficient production techniques.
• The retailer argues that its integrated digital supply chain limits excess inventory and production waste.
• The fashion industry accounts for between 2% and 8% of global carbon emissions, making it one of the largest contributors to the climate crisis, per the United Nations Environment Programme.

Why it matters: While many lower-priced retailers are turning to stores to boost sales and attract new customers, Shein’s success demonstrates the value of effective marketing and an efficient supply chain.

• It also demonstrates the need for retailers to acknowledge—and seek to address—sustainability issues in clear, tangible ways.