Commentary: Shein’s IPO has only one winner

For years, Shein had attempted to portray itself as a global entity, but it soon realized its most significant asset was still its Chinese roots, according to Juliana Liu of Bloomberg Opinion. Amidst the company's efforts to distance itself from China, it became evident that its supply chain was its most vital component. As a result, the Hong Kong initial public offering (IPO) of Shein, priced at HK$48.56 (US$6.19) per share, valued the company at slightly over US$26 billion—a mere quarter of its private-market valuation of US$100 billion four years ago.

While existing shareholders receive some relief from the decline in value, they do not emerge as the sole winners. The company had committed to compensate pre-IPO investors up to US$3.5 billion, which could potentially double the US$1.7 billion raised through the IPO. However, one group stands to benefit the most from the IPO: the extensive network of suppliers in southern China responsible for powering Shein's retail success.

This tightly integrated supply chain, located in Guangzhou, facilitates Shein's ability to swiftly respond to trends, place small initial orders, and prepare products for delivery within two weeks. Despite Shein's earlier attempts to downplay its Chinese origins by relocating to Singapore and marketing itself as a global company, fierce opposition from the US and the company's inability to replicate its success in other countries like Brazil and Turkey have underscored the importance of its Chinese manufacturing base.

The IPO is expected to further strengthen the bond between Shein and its suppliers by allocating 40% of the proceeds to technology investments, aimed at enhancing the manufacturing network. Looking ahead, Shein aims to leverage its manufacturing prowess to expand growth beyond its US and European markets by offering its supplier network to other brands.

While the acquisition of existing brands, such as the recently announced deal for American millennial clothing brand Everlane, poses challenges due to differing values and production methods, Shein must now prove that its manufacturing system can drive future growth amidst increasing competition and protectionist measures.