Fast fashion retailer Shein hikes prices ahead of IPO

Fast fashion retailer Shein, known for its affordable China-made clothing, has hiked prices by over a third on some core products, in a move likely to boost revenues ahead of its planned IPO, according to an analysis of its pricing strategy.

Shein's average price hikes exceeded those of its rivals H&M and Zara, according to data from London-based research firm EDITED, which compared prices on June 1 with a year earlier.

The company operates an online marketplace selling an array of merchandise, though its main business is making and selling Shein's own brands, primarily women's clothing.

Shein taps a network of largely China-based suppliers, which buck traditional manufacturing processes by taking small initial orders and scaling up based on demand. Most of the clothing Shein sells is made in Guangzhou, China, by its roughly 5,400 suppliers.

Though Shein doesn't disclose financial data publicly, Coresight Research estimates that Shein's revenue will reach $50 billion this year, a 55 per cent jump over last year's figure.

Making its core women's clothing lines more expensive and getting more outside brands to sell on its site can help Shein to hit that sales figure and boost profits.

"Shein has seen very strong momentum recently, which could play favorably into its IPO plans," said Erik Lautier, ecommerce expert at consultancy AlixPartners.

As Shein prepares for its initial public offering (IPO), it faces the higher costs of being a publicly listed company. It must also comply with new EU regulations on online platforms that could add to its expenses, pressuring profit margins.

In the United States, Shein's biggest market by sales, the company hiked the average price for women's dresses by 28 per cent in the year to June 1, to $28.51, the EDITED data showed.

While still well below the average for an H&M dress ($40.97) or a Zara dress ($79.69) in the US, Shein upped prices by a bigger percentage than its rivals over the same period, according to the data.

Shein wants to show that it can sustain its recent growth and sell more higher-priced products ahead of its stock market listing, retail experts say.

"If they can demonstrate that these prices stick then the valuation increases significantly," said Alex Romanenko, head of retail at pricing consultancy Pearson Ham Group.

Shein is seeking a valuation of around £50 billion (AED 234b) in a London listing, Sky News has reported. The company declined to comment on its IPO plans or valuation.

Having gained market share with rock-bottom prices, Shein's price increases are also aimed at boosting profit margins prior to listing, Romanenko said.

In the US, Shein's biggest market, the biggest price increase was in footwear, with the average pair of shoes on its site selling for $40.7, up from $25.3 a year ago.