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.

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