With a passionate online following already under its belt, Shein is now setting its sights on expanding its influence in the U.S. In pursuit of this goal, the fast-fashion eTailer is launching a venture that involves the introduction of pop-up stores and the establishment of a third-party marketplace.
Both moves aim to solidify its fan base and enhance its presence in the U.S. market and follow a successful launch of its third-party marketplace in Brazil last month.
Recently, Shein communicated with its customers about the official launch of the marketplace in the U.S. Additionally, the company demonstrated its dedication to expanding its presence in the U.S. by advertising job openings in Los Angeles and California.
Shein’s platform is collaborating with smaller-scale U.S. vendors such as fashion footwear brand Cape Robbin, based in Los Angeles, to encourage customers to purchase more than just clothing from Shein. This approach, coupled with a sequence of temporary stores, highlights the company’s commitment to broadening its customer base in the U.S.
“The marketplace platform makes available a range of additional merchandise and shipping options, and we expect it to result in increased customer engagement and satisfaction,” the company said in December 2022.
The news came weeks after the company had hired Jessica Liu, former co-president of Southeast Asian eCommerce giant Lazada, as its vice president of global brand operations.
Liu’s appointment had been widely regarded as a potential transition toward a marketplace model, given her previous experience at Amazon China almost two decades ago. Additionally, she recently led the luxury division of Tmall, an Alibaba-owned platform.
As part of its offerings, Shein’s U.S. platform features products from Chinese electronics manufacturer Lenovo, among others. Shein’s homepage presents an 80% discount sale on fashion items and a 70% discount on home goods, in celebration of Memorial Day.
But is the third-party marketplace juice worth the squeeze?
While the introduction of the marketplace brings the potential for an additional revenue stream, it does slightly reduce the consumer proposition as it includes items that are already available through other channels.
Nevertheless, Shein has a advantage in the form of a vast audience of Gen Z consumers and a consistent amount of traffic.
Shein has witnessed a slowdown in growth within its core segment of affordable and rapidly produced fashion. This trend aligns with the overall deceleration observed in the fast-fashion industry, where budget-conscious consumers have reduced their spending and encountered increased competition.
As an instance, Temu, an online retailer based in Boston and owned by the same parent company as Chinese social commerce giant Pinduoduo, has been undergoing rapid expansion by making investments in marketing and providing discounts. As a result, Temu, which entered the U.S. market in September, reportedly surpassed Shein in mobile app downloads in November.
Additionally, according to unnamed sources cited by The Wall Street Journal on May 17, Shein’s most recent funding round resulted in a reduction of its valuation by a third from $100 billion to $66 billion. In this round, the retailer raised $2 billion, coinciding with a decline in share prices for technology companies.
As highlighted by PYMNTS at that time, the top 10 tech stocks collectively experienced a market capitalization decline of $4.6 trillion in the previous year. This decline was attributed to factors such as consumer spending delays, supply chain disruptions, China’s challenges with COVID-19, job reductions, and a continuous stream of negative news.
According to sources familiar with the matter as reported by The Wall Street Journal, Shein achieved $23 billion in revenue in 2022, closing in on competitors like H&M and Inditex. Furthermore, Shein’s net profit was $800 million. The sources indicate that Shein has set a target to increase its revenues by 40% this year.
Nevertheless, the report said Shein, which is headquartered in Singapore but was founded in China, is encountering pressure from the U.S. government regarding its labor and environmental practices.
In a recent analysis, PYMNTS examined Shein’s foray into the realm of “quiet luxury,” a term for understated yet costly clothing.
“While Shein may not seem like an obvious fit for the understated look of quiet luxury, it’s not uncommon for fast-fashion retailers to try their hand at different styles and trends to appeal to a wide range of customers,” the report said.
“In this case, Shein can offer refined pieces — think blazers and high-quality denim — into its collections at a lower price point to help consumers create the old money look they’re after.”
Last year, Shein organized over 40 pop-up events globally, with around a dozen taking place in the U.S.
In order to enhance brand recognition, Shein is also expanding its presence offline. In the U.S., the company is organizing pop-up events in various cities, enabling customers to physically experience its products. The upcoming pop-up location will be in Las Vegas this week. According to Shein, the company remains primarily focused on its digital platform and has no intentions of establishing permanent brick-and-mortar stores.
By using the pop-up approach, Shein aims to solidify its brand presence, and capitalize on the consumer desire to discover products in physical retail environments.
For instance, a Shein pop-up in Dallas witnessed customers lining up for hours before the official opening.
Additionally, comments on Shein’s Instagram post suggest that the company is offering reservation access via email to select VIP customers, further enhancing the exclusivity and engagement surrounding its pop-up experiences.