Not far from the chi-chi boutiques along Omotesando, Tokyo’s Rodeo Drive, sits a new emblem of international fashion.
Down Cat Street, beyond outposts of venerable names such as Ralph Lauren, Gucci and Louis Vuitton, are the first permanent premises of China’s fast-fashion phenom Shein.
Its rise and the controversies that have accompanied it have grabbed the fashion world by the lapels. But the two-story boutique here is more than a monument to fast-moving styles: It's a monument to the vast fortune Shein's four founders have amassed with startling speed.
It took Ralph Lauren, who launched the Polo brand in 1967, three decades to become a billionaire.
It’s taken Xu Yangtian, Shein’s chief executive officer, less than 10 years to build one of the world’s great fortunes. He’s worth at least $23.5 billion, according to the Bloomberg Billionaires Index, which estimates his stake in Shein at about one-third.
The combined net worth of its founders—Xu, Miao Miao, Gu Xiaoqing and Ren Xiaoqing—is almost $40 billion, while one of its earliest and most prominent backers, Tiger Global, has made more than 20 times its investment.
Unlikely Origins
Speed is the Chinese company’s defining characteristic, anticipating the tastes of Western teenagers and catering to shifting preferences almost instantaneously using artificial intelligence and ultra-quick supply chains.
At the heart of it is Xu, an unlikely figure to ascend to the peak of global fashion.
Born in China’s eastern Shandong province in 1983, Xu, who also goes by Chris, studied international trade in college and briefly worked in an online marketing company to help boost search traffic for websites and promote sales. He later set up his first e-commerce venture with two partners in 2008 to sell women’s clothes and accessories.
The project didn’t take off, but he met the people who would soon become his most trusted executives: Miao, Gu and Ren were among the handful of staff who joined him to start Shein (pronounced “she-in”) in Nanjing a decade ago. They now run its operations, merchandise development and supply-chain management.
Each is worth more than $5 billion, based on their estimated 7.6% stakes. All have remained out of the public eye and don’t appear on the retailer’s official website.
A Shein representative said the company doesn’t disclose financial details as it’s privately owned and disputed the accuracy of the founders’ fortunes, declining to elaborate.
Pandemic Boost
The founders’ roots in online marketing are key to the company’s success. Through real-time data and algorithms, Shein identifies hot items and adjusts production to keep inventory rotation and delivery speedy.
It was the pandemic that turbocharged growth as teens and 20-somethings stuck at home and often on limited budgets turned to the company’s ultra-cheap online offerings. More than half of its customers are from Gen Z, those born between the late 1990s and early 2010s.
The retailer offers a wide range of products under $10, and suppliers need to deliver new designs in around 10 days, even faster than Zara’s famous three-week turnarounds.
Shein has drawn audiences across Europe and the U.S.—its dominant markets—with its viral “clothing haul” videos, featuring influencers modeling “dream wardrobes” with pieces starting at $3. The videos ricocheted across TikTok and YouTube during every major shopping season, with Shein releasing thousands of items weekly. The company sprinkles its marketing with starpower through virtual concerts hosted by major celebrities.
In 2018, Shein’s value was $2.5 billion. A year later it had doubled. An April 2022 funding round pegged it at $100 billion—more than Hennes & Mauritz AB and the firm behind Zara combined.
While concerns over slowing growth and turmoil in China’s tech sector have recently dimmed its prospects, secondary trades in July indicated the company was still worth $70 billion.
Shein’s success has rewarded early backers including Sequoia China and IDG Capital.
But few have benefited as much as Chase Coleman and Scott Shleifer’s Tiger Global. The New York-based firm invested $72 million in early funding rounds in 2018 for a 2.7% stake, according to a document seen by Bloomberg. The bet is up more than 20 times.
Tiger Global injected even more money this year, and Shein remains one of the firm’s biggest successes amid a currently dire environment for private tech companies. A Tiger Global representative declined to comment.
Overseas Focus
Shein has a major advantage over another Tiger Global investment in China—ByteDance Ltd., operator of TikTok, which has also soared in value but is struggling to go public partly because of political concerns in Washington. Shein has told investors it hopes to have an initial public offering in the U.S. as soon as 2024.
Virtually none of Shein’s sales are in China. In the U.S., it’s amassed a 40% share of the fast-fashion industry. Sales hit $16 billion last year, up from $10 billion in 2020.
“Investors are more comfortable with Shein knowing that it depends on foreign consumer demand and not Chinese,” said Allison Malmsten, public research director at Daxue Consulting. “It means Shein can dodge the impact of China’s slowing economy.”
The focus on overseas consumers has also kept Xu—who’s not given an interview since he founded the company—clear of any potential trouble with the authorities at a time when many Chinese tycoons have suffered from Xi Jinping’s “common prosperity” push and a crackdown on tech and property companies.
Meanwhile, Xu has been increasing his presence in Singapore. A local filing lists an address in the city-state as his personal residence and shows the Chinese citizen is also a permanent resident there.
There are growing threats to Shein’s business.
New rivals have cropped up and gains in sales have tapered off as the pandemic has receded. Scrutiny over its business practices has also increased, including concerns over operating in an industry that promotes waste and copyright theft. A Bloomberg investigation found that clothes shipped to the U.S. were made with cotton from China’s Xinjiang region, where U.S. officials say Xi’s government abuses the Uyghur minority.
Shein’s main challenge is to rework its image and become a sustainable player, says Guoli Chen, professor of strategy at INSEAD in Singapore. “The next generation will pay more attention to a company’s social responsibility efforts.”
For now, though, Shein is accelerating its offline presence to connect with customers and boost brand awareness. This year, it opened pop-up stores in London, Sydney and New York.
At its first-ever permanent store in Tokyo, all sales are done via the app or website.
“They are not really selling products in-store,” said Jitong Li, analyst at market research provider Euromonitor International.
Instead, the primary aim is to attract potential customers and influencers—music artists, models, travel bloggers—to the stores and make them share their outfits with social-media followers. Shein can then analyze and track consumer behavior with its artificial intelligence technology, Li said, and ultimately get more online customers.
—With assistance from Daniela Wei, David Gillen and Hema Parmar.
This article was provided by Bloomberg News.