Shein, the cross-border e-commerce giant, is facing mounting challenges that could significantly impact its business, profitability, and valuation. The company has become one of the world’s most valuable startups, with a reported revenue of USD 22.7 billion in 2022. However, it is now confronting multiple obstacles, including tariffs, competition, declining user data, and a shrinking valuation.
Shein has been accused of avoiding tariffs on goods worth billions of dollars by placing orders generally below USD 800. This has put the company at risk of being shut down in the US, and adjustments in tariffs in many countries could further harm its business. Shein’s focus on cost performance means that any changes in tariff policies could have a significant impact on its operations.
Moreover, the company is facing stiff competition from other cross-border e-commerce platforms such as Temu, AliExpress, and TikTok. These platforms have been poaching Shein’s factories and personnel, which could affect the company’s growth rate and profitability. Additionally, some factories have started to withdraw from Shein or reduce their order volume due to the company’s strict “price verification” mechanism, which has affected their profits.
As a result of these challenges, Shein’s revenue growth is expected to decline from 57% to 52.8% in 2022, with its valuation shrinking by over a third from USD 100 billion to USD 64 billion. The company’s user data is also developing downward, with the number of daily active users showing single-digit growth month-on-month. These factors could make it challenging for Shein to maintain investor confidence, particularly as the company plans to go public this year.
In response to these challenges, Shein is planning to launch a stricter quality control mechanism for suppliers to address ESG disputes in Europe and the US. However, this move has caused dissatisfaction among many suppliers, leading to a decline in orders and profits. The company is also focusing on stringent quality control for suppliers to control costs, but this has triggered a collective walkout of a group of clothing suppliers in Guangzhou.
Despite these challenges, Shein remains focused on going public this year. However, it is unclear whether the company will be able to maintain its growth rate and profitability, given the various obstacles it is facing. The company’s reputation has also been affected by reports of poor working conditions and labor violations in its supply chain, which could further damage its brand image and public perception.
In conclusion, Shein is facing significant challenges that could impact its business, profitability, and valuation. The company must address these issues effectively to maintain its position in the highly competitive cross-border e-commerce market.