The overseas gold panning of the 100-billion-dollar unicorn SheIn

Image source @ Visual China

Text | Pencil road, the author | Han Xiyan, Zhang Xuan, Luo Chongyang, editors | Wu Jinna

The hottest news in the venture capital circle yesterday was undoubtedly that SheIn was seeking a new round of financing of $1 billion. After the funding round, SheIn's valuation will likely be as high as $100 billion.

Although SheIn has long been famous in the circle of cross-border e-commerce, in fact, for many ordinary domestic consumers, SheIn is still a low-key company. Although SheIn has always acted like this, its current strength has increasingly obscured its light. According to media estimates, in 2021, SheIn's revenue scale reached $15.7 billion.

This article attempts to discuss the following issues:

1, 13 years of establishment, why did SheIn really go out of the circle in the past two years?

2. What makes SheIn what makes it today?

3. For consumer entrepreneurs, what enlightenment did SheIn's successful overseas gold panning bring to them?

01 Cross-border e-commerce ran out of a $100 billion giant

After the news of the new financing came out, SheIn's official reply to the media said that it "does not comment on market rumors" and that "the company has no plans to restart the IPO", but it still cannot stop the market's attention to the invisible retail giant.

Chinese users living in Japan and the United States use Weibo to share their favorite products they bought on SheIn

In 2008, SheIn was founded in Nanjing. In the early days of the company's establishment, founder Xu Yangtian captured the business opportunities of cross-border e-commerce and did cross-border e-commerce. In 2012, SheIn gave up the original cross-border e-commerce wedding dress business, and instead acquired a website with a domain name for Sheinside.com, and began to focus on the overseas fashion single product market. In the same year, SheIn entered the Middle East market, and the sales of that year reached 40 million yuan.

It was also at this time that SheIn was first noticed by the capital market. In 2013, SheIn raised $5 million in Series A funding from JAFCO.

With ample funding, SheIn made two important decisions.

First, the supply chain moved to Guangdong and overseas warehouses were built. In 2014, SheIn directly acquired ROMWE, the main competitor at the time, transferred the supply chain to Guangzhou, where China's garment industry chain is the most complete, and established its own overseas warehouse in Europe and the United States.

The second is to build a supply chain center and a tracking system. The strengths of this center and system are explained in detail below.

SheIn, who practiced "internal skills", began to upgrade and fight monsters one step a year. While sales are rising, they are increasingly being noticed by capital.

SheIn financing history source: Tianyancha App

In 2016, SheIn's sales reached 4 billion yuan, and it received a 300 million yuan Series B financing from IDG Capital and Jinglin Investment.

In 2017, SheIn's sales have exceeded 10 billion, and the good results have allowed SheIn to obtain hundreds of millions of dollars in Series C financing from two well-known investors, Shunwei Capital and Sequoia Fund, and disclosed a valuation of 2.5 billion US dollars for the first time.

... ...

The advent of the epidemic in 2020 has impacted many active offline FMCG products, but SheIn, which specializes in online, has ushered in its own highlight moment. In 2020, SheIn's annual revenue was close to $10 billion (about 65.3 billion yuan), the eighth consecutive year that SheIn achieved more than 100% revenue growth. In August of that year, SheIn again announced the completion of a multi-hundred million-dollar Series E funding round, which has been valued at $15 billion.

In 2021, according to media estimates, SheIn's revenue reached $15.7 billion. Also in June 2021, Forbes magazine said shein's latest valuation could reach $47 billion.

Now, less than a year later, SheIn's valuation is once again rising.

02 How does the most mysterious company "make a fortune in a muffled voice"?

Founded 13 years ago, with a valuation of $100 billion, there are probably two reasons behind the rise of SheIn:

On the one hand, real-time fashion, which is faster and cheaper than fast fashion. Many people describe SheIn as the "Chinese version of ZARA", but in terms of fast and cheap, the latter goes further.

Open SheIn's website, there is a huge variety of fashion items, $4 pants, $11.50 a dress, $1.5 pair of sunglasses... Even if you remove the discount and multiply the exchange rate, The price of SheIn is still several times cheaper than fast fashion brands such as Zara and H&M. Such prices have captured a large number of "small town girls" in overseas sinking markets.

In addition to the ultra-low price, fast is also the key to SheIn's ability to meet the needs of overseas consumers. In terms of the fast fashion industry's design, plate, production, and shelf cycle, Uniqlo, which focuses on long-term sales of basic models, is half a year, Zara, which focuses on popular models, is 14 days at the fastest, and SheIn only needs 7 days. Official data shows that Zara has an average annual turnover of about 12,000, and SheIn can update 34,000 products a week.

Such a rapid frequency of new innovation is due to the powerful and mature flexible supply chain system behind it. In the early days of its establishment, SheIn mainly did the channel business model of domestic takeaway from the country, and all the goods were wholesale from Guangzhou Thirteen Lines. Around 2015, SheIn gradually realized that this wholesale model could not meet the growing demand for overseas consumption, so she moved part of its business from Nanjing, where it was founded, to Guangzhou Panyu, where garment factories were all over the place.

Here, SheIn has organized a vast network of suppliers. According to "Delay", SheIn has developed more than 300 core garment factory suppliers in the area of two hours' drive from Panyu headquarters, with more than 2,000 suppliers. SheIn cooperates with the factories are mostly small and medium-sized factories, the small single fast reaction model can make each product start to produce only about 100 pieces, and then put on the market for testing, according to the sales volume of the product to adjust the design until polished into a blockbuster.

In addition, SheIn has built a powerful supply chain information system since 2014, which can be connected to major browsers to detect current trends in any region, and the information collected through the system will be provided to SheIn's suppliers to guide them in designing products and responding to consumer preferences instantly.

It is understood that SheIn's explosive rate has increased from the initial 20% to nearly 50% at present, and now there are more than 4,000 factories in cooperation, factory assets account for 75%, the average account period only needs 7-10 days, and the inventory is stable within 10%.

At the beginning of this year, SheIn invested 15 billion yuan to build a new supply chain headquarters in Guangzhou. This move will once again strengthen SheIn's control of the supply chain, and will once again enhance SheIn's ability to integrate small and medium-sized garment factories with a "flexible supply chain". Some insiders have said, "In fact, SheIn has not yet given full play to the maximum advantages of its supply chain, and there is still room for progress." ”

On the other hand, the rise of SheIn is also because it accurately grasps the dividend period of each marketing environment change. In its infancy, SHEIN placed a large number of ads on Google and Facebook, relying on the traffic dividends of these two platforms to quickly complete the early capital accumulation.

In addition, SheIn also laid out social media marketing earlier and enjoyed dividends for a long time. As early as 2013, it was already stationed at Pinterest, becoming the first user of the platform. A cross-border marketing service provider once told Pencil: "At the time of the rise of SheIn, overseas influencer marketing was still in a blue ocean, and marketing costs were very low. Sometimes the brand side only needs to send some samples to kols, and it can do a free marketing promotion. ”

To this day, SheIn still attaches great importance to cooperation with local KOLs and KOCs, using the influence of influencers to spread marketing channels on platforms such as Ins, Facebook and TikTok. According to the data, as of the first half of last year, SheIn's Instagram-related posts reached 3.05 million, and the number of interactive posts was as high as 62.67 million; the number of interactive posts on Facebook also exceeded 2.45 million in the same period.

03 How do consumer entrepreneurs pan for gold overseas?

Two years ago, Pencil Road asked many entrepreneurs how to deal with the epidemic, and their answer was "going to sea".

To this day, going to sea is still one of the main strategies of entrepreneurs, but now the meaning of going to sea is not only "risk aversion". With the landing of Anker, which mainly attacks the overseas market, on the science and technology innovation board, and the increasing valuation of unicorn SheIn, domestic entrepreneurs, mainly in the new retail and consumer industries, see another future of going overseas: overseas gold panning, and selling Made in China at a high premium.

And that's true. The founder of a sweeping robot brand told Pencil That their team has long regarded going to sea as a core strategy, and even expects that the future dividend point will be in overseas markets, accounting for more than half of the overall sales. "Overseas competition is actually not so fierce, and there is a strong lag in the launch of new products, so that overseas will be easier to play than the domestic market." If you can run the product mature in China, you will have a stronger competitive advantage abroad. ”

However, under the influence of the business environment, consumer preferences, cultural customs and other influences of overseas markets, the road to "going to sea" is not a smooth road.

Whether going to sea or not, the importance of products is always at the forefront. For entrepreneurs who are directly facing overseas markets, the first question in front of them is: How to find a vertical category opportunity for consumer goods overseas?

SheIn chose clothing, and Pencil Road has previously interviewed cross-border e-commerce company Suntisfy, and founder Sun Jiye and the team are entangled in a number of options such as clothing, home, electronics, mother and baby. Big data algorithms provide them with direction, they use crawlers and data modeling to analyze the search terms of Google and Amazon, and finally focus on the toy category, selling hundreds of millions of dollars a year.

An investor believes that from the perspective of products, it is still difficult for overseas enterprises to innovate in the underlying logic, but brand differentiation can be achieved, which is also an important indicator to measure the competitiveness of overseas enterprises. Reverse customization based on big data makes it easier for brands to create differentiated products while bringing more brand premium. For example, SheIn has realized a direct link between producers and consumers, quickly covering low-line consumers through the online platform, and improving the efficiency of market sinking.

Outside of the product, the key is to build the brand. Na Xin, the founder of the intelligent cross-border content marketing platform PONGO, previously told Pencil Road in an interview that after market research, he found that the content construction of most domestic brands on overseas social platforms is still very weak.

In Na Xin's view, after more than ten years of development of domestic cross-border e-commerce, the brand has changed from simple selling to brand building. Global consumers' demand for brands is not only about products and services, but also for the deeper pursuit and recognition of brand culture. The transformation from simple selling to brand building has become an irreversible trend of the current brand going overseas.

In addition to branding, in the eyes of practitioners, the supply chain is also the top priority of going overseas. Half of sheIn's success lies in the success of the supply chain behind it.

Everyone knows that taking advantage of the location advantages and research and development advantages of China's supply chain can better serve consumers, but the key is how to make better use of supply chain resources. Whoever can do better in this regard in the future will be able to have stronger competitiveness.

For overseas enterprises, everyone wants to become the next SheIn, but even if they master these successful formulas, it is not enough, refined operation, localization transmutation, every step has a lot of pits to step on.