Shein Increases Prices Significantly Ahead of Anticipated IPO

Fast fashion giant Shein, renowned for its low-cost, China-made $5 tops and $10 dresses, has significantly increased prices on many of its core products. This move is seen as a strategic effort to boost revenues ahead of its much-anticipated initial public offering (IPO), according to an analysis of the company’s pricing strategy.

Data from London-based research firm EDITED shows that Shein's average price hikes have outpaced those of rivals H&M and Zara. The study compared prices as of June 1 with those from a year earlier, revealing that Shein's price increases were more substantial than those of its competitors.

When approached for comment, Shein declined to provide a statement.

The company operates an online marketplace that sells a wide variety of merchandise, though its primary business model focuses on producing and selling Shein's own branded women's clothing. Shein utilizes a network of largely China-based suppliers, which eschew traditional manufacturing processes by taking small initial orders and scaling up based on demand. Most of the clothing sold by Shein is manufactured in Guangzhou, China, by its approximately 5,400 suppliers.

While Shein does not publicly disclose its financial data, estimates from Coresight Research suggest that the company’s revenue will reach $50 billion this year, marking a 55% increase over the previous year’s figures. By making its core women’s clothing lines more expensive and incorporating more outside brands into its platform, Shein aims to achieve this revenue target and enhance its profit margins.

Erik Lautier, an e-commerce expert at consultancy AlixPartners, noted, "Shein has seen very strong momentum recently, which could play favorably into its IPO plans."

As Shein prepares for its IPO, it will face the additional costs associated with being a publicly listed company. Moreover, compliance with new EU regulations on online platforms could increase its expenses, further pressuring its profit margins.

In the United States, Shein's largest market by sales, the company raised the average price for women's dresses by 28% over the year leading up to June 1, bringing the average price to $28.51, according to EDITED's data. While this is still significantly lower than the average prices for dresses from H&M ($40.97) and Zara ($79.69) in the U.S., Shein's price increases were larger in percentage terms compared to its rivals.

On Shein's UK site, the average price of a dress rose to 24.12 pounds ($30.97), a 15% increase from a year earlier. Across France, Germany, Italy, and Spain, the average dress price increased by 36%.

Retail experts believe that Shein is attempting to demonstrate its ability to sustain recent growth and sell higher-priced products ahead of its stock market listing. Alex Romanenko, head of retail at pricing consultancy Pearson Ham Group, stated, "If they can demonstrate that these prices stick, then the valuation increases significantly."

According to Sky News, Shein is seeking a valuation of around 50 billion pounds in a London listing. The company declined to comment on its IPO plans or potential valuation.

Having gained market share with its rock-bottom prices, Shein's price increases are also aimed at boosting profit margins before the listing, noted Romanenko. In the U.S., Shein's biggest market, the most significant price increase was in footwear, with the average pair of shoes on its site rising from $25.3 to $40.7.

This price hike partially reflects Shein's strategy of bringing other brands onto its platform. For instance, Skechers now sells shoes ranging from $32 to $174 on shein.com. Skechers declined to comment on the performance of its sales on Shein.

Despite its significant growth, Shein's expansion is expected to slow in more established markets like the U.S. and the UK, according to Louise Deglise-Favre, an apparel market analyst at GlobalData. She added that "on a global level, Shein may be able to sustain similar levels of growth as it continues to enter and develop new markets, strategically increase some of its prices, or through acquisitions."

The U.S. accounted for 28% of Shein's sales in 2023, with Germany and the UK being the second and third largest markets. Shein also generates significant revenue in Brazil and Mexico, and is rapidly growing in other emerging markets.

However, AlixPartners' Lautier warned that price hikes alone may not be sufficient to boost Shein's revenues. Higher prices typically affect the conversion rate of site visits to purchases. To drive further sales growth, Shein will need to attract more visitors to its platform and increase their visit frequency.