Why China-founded online fast-fashion retailer Shein is looking to go public in London

Online fast-fashion retailer Shein's reported plan to go public in London is a result of mainland China's changing venture capital landscape, rising tensions between Washington and Beijing, and the relative decline of Hong Kong as an international financial centre, according to people familiar with the company's listing discussions.

Shein, founded in 2008 by publicity-shy Chinese entrepreneur Sky Xu Yangtian, is expected to file an application with UK regulators in the coming days for an initial public offering (IPO) in the London Stock Exchange, according to British media reports this week. Shein has not commented publicly on these reports.

The novelty of a Chinese internet company floating its shares in the UK could make Shein a trailblazer for other mainland tech firms, as geopolitical tensions between Beijing and Washington remain high and Hong Kong continues to wrestle with poor liquidity, according to the people who spoke on condition of anonymity for discussing a matter that the company has not yet announced.

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That reported move appears to reflect pressure from Shein's investors, including Abu Dhabi sovereign wealth fund Mubadala, General Atlantic and HongShan.

People shop at online fast-fashion retailer Shein's pop-up store in Ottawa, Ontario, Canada, on May 18, 2024. Photo: Reuters alt=People shop at online fast-fashion retailer Shein's pop-up store in Ottawa, Ontario, Canada, on May 18, 2024. Photo: Reuters>

The pressure comes from these investors' hopes of cashing out, according to a venture capital market veteran who declined to be named and is not involved in the Shein deal.

Competition in cross-border e-commerce activities has also intensified. Shein's primary competition includes PDD Holdings' Temu, Alibaba Group Holding's AliExpress and Amazon.com. E-commerce giant Alibaba owns the South China Morning Post.

"Shein's GMV [gross merchandise value] growth has slowed due to Temu's entry into overseas markets," said Donn Hu, an analyst at research firm Third Bridge. "Additionally, the European and American markets are maturing, limiting further penetration."

Beyond inexpensive fast-fashion garments, Shein has built a vast online marketplace by recruiting third-party merchants. This enabled the platform to expand into other popular goods, including cosmetics, accessories and pet products.

Shein's online marketplace has expanded beyond inexpensive fast-fashion garments, as the platform's vast international supply chain provides a range of popular consumer goods, including cosmetics, accessories and pet products. Photo: Shutterstock alt=Shein's online marketplace has expanded beyond inexpensive fast-fashion garments, as the platform's vast international supply chain provides a range of popular consumer goods, including cosmetics, accessories and pet products. Photo: Shutterstock>

New York City was said to be Shein's first choice for a listing venue, but that plan did not work out because of a deep mutual distrust between mainland Chinese and US regulators, according to the people with knowledge of the matter.

Shein's quest for a listing venue, according to another source, comes at a time when Hong Kong lacks liquidity. As such, this source said the UK remains a global financial hub with a strong currency.

Shein was founded 15 years ago in Nanjing, capital of eastern Jiangsu province, and is now doing business in more than 150 countries. Although the company changed its domicile to Singapore in 2021, most of its supply chain and 10,000 global employees are based on the mainland. Founder Xu also has permanent residency in Singapore. Roadget Business, a firm in the city state that lists Xu as one of its representatives, was established in 2019 and has been the legal entity operating Shein's global website, Reuters reported earlier.

Meanwhile, Chinese regulators have remained quiet over Shein's IPO plan. It remains to be seen whether the company needs to get its proposed listing cleared by mainland regulators, including the China Securities Regulatory Commission (CSRC) and the Cyberspace Administration of China.

One source briefed on these discussions, but who declined to be identified, said Shein still needs the go-ahead from Chinese authorities even with its Singapore domicile. Still, the source said the CSRC could give Shein's planned IPO the green light since the firm does not keep a large amount of Chinese user data.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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