Summary of Key Points
SHEIN went public in Hong Kong in September 2026, but its stock price fell below the issue price on the first day of trading. Its market value plummeted from $98.2 billion during its Series D financing in 2022 to $26.5 billion (a decrease of over 70%). The apparent reasons for this are the tightening of tariff policies and competition from rivals like Temu. However, the deeper issue is that the factors that once fueled its rapid growth—such as tax exemptions, cost-saving through design outsourcing, and squeezing of supply chain profits—have disappeared. Now, SHEIN must pay for the "old debts" related to design rights, compliance, and supply chain profits. The capital market is no longer willing to pay for efficiency achieved through aggressive competition; instead, it focuses on the company's true value after these debts are settled. Currently, SHEIN is attempting to transform into a platform service provider by opening up its supply chain, but it still needs to address shortcomings in design, branding, and compliance.
I. Valuation Plunge: The Capital Market Does Not Buy into a "Stagnant Future"
The core reason for SHEIN's plummeting market value is the loss of future growth prospects:
- Revenue Growth Slump: Growth rates dropped from 41% in 2023 to 20% in 2024, 8% in 2025, and just 1.1% in the first quarter of 2026—almost coming to a halt. Revenue in the U.S. market (once its largest) even decreased by 14%, and Europe has become the new largest market, but it also faces tariff pressures.
- Profit Halving: Net profit in 2023 was $2.789 billion (net profit margin of 8.7%), which dropped to $2.064 billion in 2025 (net profit margin of 4.9%). There was a reported loss in the first quarter of 2026 (although this may be due to accounting adjustments), and the market does not trust these figures.
- Increasing User Volume with Declining Quality: The number of active users increased from 186 million to 273 million, but the average spending per user per year decreased from $173 to $153, with only 4 purchases per year (no increase in three years). While more users are coming, they are spending less and less frequently.
The capital market invests in the slope of future growth; when that slope becomes zero, the valuation is naturally halved.
II. Two Clear Challenges: Tariffs and Intense Competition
These are obvious pressures that everyone can see:
- Tariff Issues: The U.S. eliminated tax exemptions for small packages under $800 in 2025, and the EU did the same for packages under €150 in 2026. SHEIN used to break large orders into smaller ones to avoid taxes, but now logistics costs have increased (delivery fees as a percentage of revenue have risen from 42% to 47.7%).
- Competition: Temu spent $3 billion on advertising to attract users, and TikTok Shop and AliExpress are also competing for market share. SHEIN's marketing expenses increased by 80% in three years, reaching $6.19 billion in 2025 (14.8% of revenue). With the overall fast-fashion industry slowing down (ZARA grew by 0.8% and H&M by 1%), SHEIN, being the most price-sensitive player, has been hit the hardest.
III. Hidden Debts That Have Come Due
The money SHEIN saved in the past now needs to be repaid, along with interest:
- Design Fees: Most of SHEIN's products are designed by suppliers (ODM model), and the company did not invest in its own designers. A court in London ruled against SHEIN's claim that Temu had stolen images, as the image rights belong to the suppliers or photographers, and SHEIN's standard contracts were not valid. Uniqlo has also accused SHEIN of plagiarism, and there have been over 50 intellectual property lawsuits in the U.S. France fined SHEIN €40 million for "false discounts" and €22.5 million for data compliance issues—totaling nearly 500 million yuan in penalties in two years.
- Supply Chain Profits: SHEIN used digital systems to evaluate factories (on-time delivery, defect rates, etc.), but raw material and labor costs have risen, and SHEIN has refused to pass on these increases. Factory owners in the Pearl River Delta say they are more concerned about not getting orders than not making a profit. SHEIN's high gross margin (67.9% in 2025) was partly achieved by squeezing factory profits.
These "free lunches" (cost-saving measures) are no longer possible: copyright issues have exposed flaws in its business model, and supply chain profits are now limited by ESG (Environmental, Social, and Governance) compliance requirements.
IV. Identity Dilemma: The "Nationality Drift" on the Road to Publicity
SHEIN tried to please both sides, but neither recognizes it fully:
- Geopolitical Restrictions: The U.S. Congress is reviewing Chinese-owned e-commerce companies, making a listing in New York impossible. A listing in London raised concerns about supply chain labor practices. Finally, it chose Hong Kong—after changing cities three times in four years, the longest process for a Chinese internet company to go public.
- Old Shareholders Want to Exit: $17.294 billion in preferred shares will expire by the end of 2026, and the funds raised from the listing (HK$13.2 billion) will be used to repay debts (in areas like cloud computing and AI). Key investors (BowYue, Tencent, Tiger Global) subscribed for $3 billion, seeking an exit strategy.
Xu Yangtian, wearing a SHEIN T-shirt in the corner, remains silent and uninvolved—reflecting the company's dilemma: it wants to remain low-profile but must step forward.
V. The Path Forward: Moving from "Selling Clothes" to "Providing Services"
SHEIN aims to upgrade from being a "damn retailer" (as Charlie Munger described Alibaba) by focusing on providing platform services:
- Rapid Platform Revenue Growth: Revenue from third-party merchants using its supply chain, logistics, and traffic has increased from $868 million in 2023 to $4.74 billion in 2025 (a 500% increase, with a share of revenue rising from 2.7% to 11.3%). The profit margin from these services is twice that of its core clothing business—similar to Amazon's AWS or Alibaba's cloud services, where profits come from expertise.
- Supply Chain Relocation: Domestic factories are focusing on sample production and small orders, while larger orders are moved to Vietnam, Turkey, and Brazil to avoid tariffs. Domestic factories that grew with SHEIN need to transform (e.g., by investing in fabric research and development) to switch from making processing fees to generating technology-based profits.
However, this transformation requires investment in areas such as designing its own team, resolving copyright issues, and building a brand premium—costs that were not incurred in the past.
In conclusion: SHEIN's shrinking market value is not just a problem for the company; it reflects the market's revaluation of the efficiency-driven growth model. Speed does not equate to strength, and cheapness does not create a competitive advantage. Models that overdraw on supply chain profits will eventually have to pay the price. The fact that SHEIN is now investing in these areas indicates that it is beginning to recognize the need to support its own brand.