by Helen Reid
LONDON, June 13 (Reuters) – Chinese online fashion giant Shein, known for its cheap clothes, has raised prices by more than a third on some of its products, in a likely bid to increase its turnover before its listing on the London Stock Exchange, according to an analysis of its strategy.
Shein’s average price increases exceeded those of rivals H&M and Zara, Inditex’s flagship brand, show data from London-based firm EDITED, which compared prices as of June 1 with those of the previous year.
Shein declined to comment.
The Chinese company runs an online platform where it sells a range of products, but its main business is manufacturing and selling its own brands, mainly women’s clothing.
Shein has a network of 5,400 suppliers based primarily in China’s Guangzhou region, who take small orders and then scale them up based on demand.
Although Shein does not publicly disclose its accounts, Coresight Research has estimated that its revenue will reach $50 billion in 2024, a jump of 55% from 2023.
Raising prices on its main women’s clothing lines and encouraging more external brands to sell on its website could prove to be an effective strategy for driving sales and profit growth.
“Shein has seen very strong momentum recently, which could play in favor of its IPO plans,” said Erik Lautier, e-commerce expert at AlixPartners.
Shein will face the higher costs of a publicly traded company and comply with new European Union (EU) regulations on online platforms, which could increase its expenses and reduce its margins.
MORE EXPENSIVE DRESSES AND SHOES
In the United States, Shein’s largest market by revenue, the group increased the average price of dresses by 28% over the past year through June 1, to $28.51 , according to EDITED data.
Although the average price of an H&M dress ($40.97) or a Zara dress ($79.69) in the United States is significantly lower, data shows that Shein has increased its prices by a higher percentage higher than its rivals during the same period.
On Shein’s UK site, a dress costs an average of 24.12 pounds ($30.97), 15 percent more than a year ago, while a dress in France, Germany, Italy and in Spain is 36% more expensive.
According to industry experts, the group wants to show that it can maintain its growth and sell more products at higher prices before its stock market debut.
“If the company can demonstrate that these prices hold up, the valuation increases significantly,” said Alex Romanenko, head of retail at Pearson Ham Group.
According to Sky News, Shein is seeking a valuation of around £50 billion in its IPO.
In the United States, the biggest price increase was in shoes, with the average pair on the site selling for $40.7, up from $25.3 a year ago.
This increase is partly explained by the fact that Shein has integrated other brands into its marketplace, such as Skechers sneakers.
Skechers declined to comment on its sales results on Shein.
However, price increases alone are not enough to boost Shein’s sales, with higher prices tending to affect the proportion of visits that convert into purchases, warns Erik Lautier.
To continue to drive sales growth, Shein will need to attract more people to its platform and encourage them to visit it more frequently, he says.
(Reporting Helen Reid; French version Diana Mandiá)
