The 3 reasons Shein is trading at a quarter of its previous valuation

0:04Hello and welcome back to the Glossy Podcast. I'm your host, senior fashion reporter Danny Parisi, and I'm here with our international reporter Zofia Zwieglisnka. Hello, Zofia. How are you? Yeah, great. Thank you for having me on. I know that this is an interesting episode that we've both done a lot of reporting on. Yes, we have. And actually, I feel like you are more of the expert here, but we have both studied up. We are going to be talking about Shein, who their long-awaited IPO finally happened this week. And what a strange journey it's been for them. They went from being one of the biggest apparel brands in the world to an IPO that is now trading at a fraction of their initial valuation when they first started trying to go public a couple of years ago.

0:45They faced a lot of political pushback and hurdles to get to this point. And we thought we would have a discussion about what has happened to Sheehan over the last couple of years, specifically how did they end up in the situation they're in now. When they initially tried to go public, they were valued at around$100 billion. And as of the IPO this week, they were valued at$26 or$27 billion, which is still a lot of money, obviously. That's still huge. But it is far less than a few years ago. So we've sort of identified three big categories, big reasons of why we think Shein has kind of lost some of its valuation over the years.

1:25But I thought we could maybe start with a very quick timeline of, yeah, their attempt to go public. Zofia, do you want to give us like a little overview of how many years this has taken? Yeah. So, I mean, the first kind of IPO considerations came about in 2020. And I think originally that was supposed to be the US. Obviously, there was a lot of kind of market volatility and, you know, tensions between the US and China. Xi 'an obviously was caught in the middle of that. And they had to move like their headquarters and where they were based just to actually consider that. And then obviously that moved to two years later, January 2022, to where it revived, you know, this plan to list in the US on the stock market.

2:13I think at that point, it was almost like the kind of cultural and commercial peak for Xi 'an. It was doing really well. Obviously, it had been doing really well because of COVID as well. I don't know if you want to take it from there. Yeah, so I think from there, they kind of got caught up, like you said, and these tensions between the U.S. and China, which obviously played out also with the TikTok situation and the TikTok ban. There was a strong, I think, bipartisan push in the U.S. to limit the influence of large Chinese companies. And so they moved to trying to go public in London and I think faced some of the same issues there.

2:53They also, we'll get into this, they had a bunch of other controversies around like opening this store in Paris that faced protests and lots of political pushback there. So I think a lot of the different markets where they have a lot of customers, but they were facing just a lot of pushback on any attempts to gain a further foothold there. Eventually, we get to 2026, where they got approval from the Chinese government to go for an IPO in Hong Kong. I think the approval came in July, and now it is September 1st, and they're public in the Hong Kong stock market. So it's been a real up and down kind of journey.

3:31And like we said, I think they were trying to capitalize on that super high valuation they had in the early 2020s. And now a couple of years later, they do not have that same level of valuation. The three reasons that we sort of landed on, and there's lots of smaller ones that are kind of contained within this. And I put them kind of, in my opinion, the order of importance, like least to most. But tell me if you disagree, Zofia. Bad press. Like, I think they have a bad reputation and a lot of like kind of PR issues. losing hold on the Gen Z audience as the second one, which was a big part of their success.

4:06And then third and biggest is tariffs and the end of the de minimis exemption, which I think had a immediate and large impact on their kind of core business model. And we'll go into each of these three reasons in more detail. But do you agree, Zofia, with my order of those three and importance, or would you do a different order? Yeah, I mean, I actually think that last one is probably the the biggest for me like I think the de minimis aspect and it's not just stateside but also in some European markets like having that has really changed the way that I guess like those companies operating from China are thinking about you know those super low cost parcels and kind of how to ship those out that whole model basically like changed how companies operated and I think was the starting point for that.

4:55But obviously, because so much was being lost in tax, a lot of places just ended up cutting down on it. And I think that that's why it's definitely the biggest, I think, nail, like hammer nail, to kind of keel Sheehan's progress. Yeah, no, I agree. There was a lot of companies that benefited from De Minimis, but I think Sheehan was definitely the poster child. I don't know if they were the biggest, but I think they were the company that a lot of people thought of. in regards to the de minimis exemption. But let's pause there because we'll get to that. Let's do them in order. I want to start with the bad press because Sheehan, I think, became the poster child for fast fashion.

5:38Like they became the definitive, like ultra low cost, ultra cheap, and like terrible working conditions and terrible environmental issues. Like they just became the image of all of those issues. And I think as more people want to move away from fast fashion or like become more aware of the harmful effects of fast fashion, it's like Shein became like their name became the byword for that. I don't know if they're the worst offender and they certainly are not the only offender. There's plenty of other companies before Shein, during and in the future that all kind of have similar business practices.

6:12But I really think the word like the name Shein became so heavily associated with that that style of business. And I think that turned off a good number of people, not everybody. What do you think about the PR situation for Shein over the last couple of years? Yeah, I mean, I think that it's been pretty terrible because even pre-AI boom, Shein has been kind of really in there for copying independent artists. Like there was copyright infringement issues, manufacturer exclusivity issues. There was like all of the kind of problems that were happening right at the beginning were because they were copying other people's work and also other people's like fashion goods.

6:53Then, you know, there was the whole kind of dark pattern situations where they were basically using like gambling style methods to encourage people to shop more. You know, there was times when they would introduce like discounts where you would have to kind of enter the app multiple times a day just to get that. and then get things at rock bottom prices. And then obviously, you know, the kind of wider regulatory problems that they were having over the last couple of years too. So multiple investigations into the supply chain, there's been investigations in China in terms of how those clothes get produced, like what people were getting paid, but also kind of material impacts as well, where, you know, there was items that were causing chemical burns that were being sent from Shein like that's something that you know is a completely different thing um to the labor conditions but also something that was happening because of the way it was um conducting or kind of managing its supply chain um and then yeah obviously like the amount of like kids or kind of young people that were shopping on the platform and the the kind of over consumption that that caused if you know like kids were getting 20 items of clothing from Shein at rock bottom prices like that meant that there was a lot of overconsumption and kind of splurging on huge amounts of clothes that were essentially being chucked after one use.

8:21So again, kind of furthering that concept of fashion as this like disposable thing that comes in for really cheap, kind of not taking into account all of those like labor things too. So yeah, there's been a lot of issues with that. I mean, we're not even touching the brand trip, like I mentioned the brand trip. I was going to mention the brand trip because I think that shows that they were aware of the bad reputation and wanting to try to rehabilitate it. And some of those efforts, I think, backfired pretty spectacularly. The infamous Sheehan brand trip where they got a bunch of influencers to come tour the factory and, like, showed all this, you know, happy workers and everything's good.

8:57And, like, just people mercilessly mocked all the influencers who went on this trip because it just seemed, I think we talked about it on this podcast, a very clear bit of reputation laundering that did not work. There's also this whole thing, like the Merriam-Webster word of the year in 2025 was slop. And I think not just related to clothes, but people are very aware of the flood of low quality content. That's one of the big criticisms that I see and have of generative AI is that it just allows this tidal wave of garbage. garbage information and garbage, you know, content that you see on social media, garbage articles that you garbage overviews of Google results that tell you wrong information, like all this stuff.

9:47And I think Shein is obviously it's not AI, but super cheap, super low quality clothing, I think kind of fits into that. It's just like mountains and mountains of disposable stuff. And And so the backlash to one kind of also is a backlash to the other, I think. Those concepts are linked in my mind. And then last thing is the Paris store that Shein opened, which got huge backlash. I mean, do you want to talk a little bit about that? Because that was, I think, a really concrete indication of how poor the reception often was, you know? Yeah. So with obviously the fact that France is one of the biggest countries against fast fashion, it's actually quite funny that Shein decided to open its first major store in the Paris department store, BHV Marais.

10:38and I think that was the like first permanent kind of in-store shop that it had opened anywhere it'd done a lot of like kind of small pop-up shop openings in London and in other places and obviously with France being so against fast fashion it came with an absolute deluge of people against them opening the store so the the fact that a hundred fashion and lifestyle brands actually pulled out of BHV Marais in protest because of the fact that Sheehan was on the shop floor. There was intense backlash from customers, politicians, unions, a lot kind of around environmental degradation, labor practices.

11:19So all of those things that we kind of talked about. And obviously the store itself wasn't a success like at all. There was very low footfall. And I think that it only lasted seven months before they decided to close it. ultimately Karl-Stefan Cotter Dan who's the the kind of main guy there said that the partnership was a strategic error and it damaged the store's reputation I think there's a lot of people now who are very keen on not shopping there because of the fact that they made that mistake so I'm very interested kind of to see how that has also affected the bottom line for Shein because I think the problem with being so online the whole time, and I think this is also part of the reason why they were testing pop-ups so kind of extensively, was because they knew that this model wasn't going to last forever.

12:09And that's why, you know, having a retail presence would have validated that somewhat. But of all places, like, why choose France when there's such, like, complete kind of backlash against it? It just doesn't make sense to me. Yeah, I mean, I guess it's probably, again more reputation laundering like wanting to position Sheehan as an equivalent to the storied luxury you know fashion retail experiences of Paris I think that's a little bit of an overreach and probably they could have gone for something a little more modest and maybe wouldn't have gotten as big a backlash and that store is now closing but by the end of the year it was only only open last year I think all of this is kind of related to our second topic so we don't have to spend as much time on this one.

12:54But it's very clear that Shein has lost a lot of their hold on Gen Z. I mean, there's been data from a lot of different consumer analysis companies that have said the biggest drop that Shein has seen in market share in the US has been with 18 to 34 year olds, which is obviously a key part of their audience beforehand. I think for me, there's like two interesting kind of contradictory things here with how young people are shopping. I think there's the aforementioned bad press and people like not wanting slop and they want things that are good for the environment and et cetera. But then it's also kind of the contradictory thing is that they are just buying from other cheap fast fashion places like Timu or Amazon.

13:35So not sure how to square that, but I think there's a lot of contradictions in how people shop for clothing. And they, I think it's very common for people to be like, Shein has a bad reputation. I'm not going to buy there. However, I am going to buy a bunch of stuff on Amazon. And I really, I don't I don't think it's a huge difference ethically and in practice from those different companies. Or Timu is the same thing. But certainly, I think the Shein has a little bit of a stink on it for young people in America, at least compared to what it used to be. Yeah, absolutely. And I think a lot of that's also changed the way that other brands have kind of started to retarget Gen Z.

14:13I mean, the main thing is that coming out of the pandemic, like people around each other more. So Gen Z are also looking for things that are more original. Obviously, resale was a massive thing during COVID anyway, because of the fact that people were selling things, you know, from their closets, kind of clearing things out. But that kind of lasted even after the pandemic was over. And to be honest, I think it's even grown. Resale now is like one of the main channels that Gen Z look for. And they give, you know, originality, like vintage, all of those are things that they're looking for right now and then anything that's basics you know they they end up going to amazon or timo or kind of other places um at the same time you know other what i would still call kind of fast fashion brands like zara or maybe urban outfitters they ended up kind of repositioning a lot of their products so they came at a higher price point and potentially higher quality obviously that's very debatable um but it does mean that it was a very different kind of proposition to what they had previously, which was we have market share over the lowest kind of price segment.

15:21And that's kind of what we're going to focus on. And then obviously Shein and Timu came in and that changed so dramatically. So I think that that is very different now. And I think the way that Gen Z sees those brands has also changed. They can shop on TikTok shop, they can shop on Amazon Hall, they have other options apart from Shein. And I think that regardless of how they think about, you know, polyester fashion, if it's something that they can get maybe a little bit faster, because obviously Amazon Hall, you have Prime, whereas Shein, you still have to wait mostly weeks for delivery. Like that kind of stuff really matters to them.

15:59And I think that that's changed how they see like Shein as a company and as a brand. Yeah, no, I fully agree. And I think you make a good point about companies wanting to move away from the super bottom of the barrel price point as a point of distinguishment. but still wanting to be cheap enough to attract young people who don't have a lot of money. I just think, like I said, there's a lot of contradictions. I remember talking to a luxury analyst about Gen Z fashion, and she was like, it's very contradictory. They want to stand out, but they want to fit in. Which, I mean, we were talking about Gen Z, but I think that applies to everybody.

16:34They want stuff that's ethical and aligns with their values, but they also don't want to pay too much, and they want it to be cheap. It's like a lot of that stuff, you can't kind of have it both ways. Yeah. So that's a big, big factor there. Let's talk about our last reason here, which I think, as we said, is the biggest one. And we kind of already touched on it a little bit, but tariffs and the end of the de minimis exemption. I mean, the first three quarters after the permanent end of de minimis in the US, Xi 'an swung from a profit to a loss of, like you said, like$99 million. It was a huge impact on their business.

17:08And the kind of core model of the business is very cheap imports and scale. And the de minimis exemption facilitated that. And now with it gone, that model became a lot more expensive. So to me, it's the less psychological reason, but it is kind of the most, just most clear. It's like they were doing this type of business and then the law changed to make that business more expensive. And I think that's had a very clear impact. What do you think? Yeah. And obviously, like the financial implications are huge. So back then, I think, let's say, you know, she in 2020 or 22, like the products were on average, like$11.

17:52But because the fact that at that point, there was an apparel duty for products that were being imported into the country, that meant that there was an extra 16.5 % that a brand should be paying and an extra 7.5 % for the tariff from China. So that means that essentially Xi 'an was missing out on all of those costs. And with the fact that de minimis ended, that meant that all of those kind of lower price packages, so the ones that cost$11, for example, like they couldn't be brought in under those rules anymore. So essentially, I think if you added that up, and obviously this is very shady maths.

18:31I don't think this is like a way to kind of calculate it. But let's say like 22 % extra in terms of costs for each garment that is brought in, or each package, sorry, that is brought in. I think that that means that you're essentially tacking on a fifth or a quarter of that price every single time. So no wonder that they had such a kind of massive loss. And I think it was shown that the income in 2025 actually fell 39%. So if you're thinking about that, and then obviously the IPO, like that's going to have a massive impact too. And the US is obviously not the only one that inputted like a de minimis charge.

19:11Like Europe also introduced a kind of temporary duty on low value parcels, which were up to 150 euros. And that came in this year from July 1st. So that's almost like a double whammy. If France does it, there's going to be other countries that do it too. So chances are that kind of post-IPO that Shein will be able to kind of maintain that level of growth is essentially zero because of de minimis and because of the tariff effects. Yeah. And like you said, they've already raised their prices. You've already seen, you know, like I said, this swing to a$99 million loss. And we've seen, you know, communication from She in, you know, in press articles I've read or in press releases that they've said, you know, we're looking at every possible way to kind of get around, not get around, but to deal with some of these regulatory changes.

20:02I mean, they've already, I think, committed to their customers that they are not going to charge anybody for tariffs, like they're covering all the expenses themselves. But when you've built your whole model around dirt cheap prices and then you have to raise the prices, it's definitely, I think, a blow. Whereas another brand for whom price is not the only kind of like value proposition, changing them still sucks, but it's not quite as it's not like your core identity is is shifting. So that's one thing I think is going to be tough for them. Yeah. Last thing I want to say, and I think this will be the end of my thoughts on Shein, but for everything we've just said, there's still like a twenty seven billion dollar company.

20:43Like they're still huge. there's still a huge market for super cheap clothes especially i mean in the u.s everything is more expensive than ever and like a ten dollar dress is still has the appeal of being ten dollars despite everything else and i think for for some people for many people that's like the number one thing it's cheaper than everywhere else and so i'm i'm still gonna shop there so for everything we said, I still think that is a pretty powerful tool that they have. What do you think in the long run for Xion? Yeah, I mean, I actually think that this kind of IPO delay is essentially what's going to kill the company.

21:23Like the fact that you have four years of consistent delays, meanwhile, there's regulatory changes, other brands around you're also changing how they're both producing, but also kind of marketing and pricing things. Like that is going to affect how people see you. like obviously there's Amazon Hall which I think just makes way more sense from like a price perspective and there's a ton more products out there both resell and new which have more interesting and kind of better categories in terms of the product itself like I think Shein started out and I'm not sure obviously if anyone still follows the brands but I don't think it has enough kind of brand staying power in terms of its own kind of insider brands because obviously it runs those two to actually make a proper dent on any market.

22:12And especially since the fact that their main retail presence was shut down so soon, maybe they might have more success in the US if they decide to open a retail location. But customers are quick to forget. I think that there's a lot of brands right now which are really contending with the fact that the only reason they're memorable for people is because they've been around for a really long time. Shein, I think, is like the opposite of that. It's kind of a flash in the pan situation. And while it's still cheap, it is getting pushed out by, you know, some of these competitors that have been a little bit faster in terms of how they operate.

22:48Obviously, the main market group, like Gen Z, I just don't know if they're still going to go to Shein when everything's kind of played out. I know that our editors are very keen on saying that, you know, they go to Garage now, they don't go to Shein anymore like i think that that's a very different like consumer group to the one that they had during covid and i'm wondering if maybe it's a little bit you know too little too late um and it might be a little bit of a putter out i think ipos in general in fashion have such a like low chance of succeeding like even with brands like birkenstocks like they're not like doing amazingly on the stock market like maybe something in tech um so i'm interested to see if you know this does change anything for them.

23:34But yeah, I think from like a fashion brand perspective, I don't know where they will go from here. Yeah, no, I think you're right. I mean, so many IPOs we have talked about on this podcast have been like disastrous, at least in the short term. And sometimes they turn around, but I just think having to run a business with everybody peeking over your shoulder sounds very stressful. But the nice thing for us is that now they're going to start reporting quarterly earnings and we can get a better look at how things are going. So I'm sure we will talk about Shein again on the Glossy Podcast. I think that's all the time we have this week.

24:07Thank you, Zofia. Thanks for being here. Thank you. Such a pleasure.

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