Asos, Boohoo and Primark could stand to win big if Western governments decide to borrow a page from India and clamp down on Shein’s hugely popular shopping app, Credit Suisse analysts said Thursday.
The Chinese e-commerce upstart has given rivals plenty of reasons to quake in their over-the-knee boots. Despite the lack of public disclosures about its supply chain—a throwback in an era of growing corporate transparency—Shein (pronounced “she-in”) has amassed a formidable following among Gen Z teens and twentysomethings, surpassing even Amazon in app downloads in the United States. As the most buzzed-about brand on TikTok, the ultra-fast-fashion purveyor commands a 28 percent share of the American fast-fashion market. In 2020, it reportedly reaped nearly $10 billion in sales.
“If 2021 sales grew in line with web traffic they could double to $19 billion, close to H&M, and there are signs that Shein is now targeting a wealthier and older customer through sub-brands with higher price points and better-quality materials,” the Swiss finance firm said.
It was Shein’s sudden and explosive dominance, in fact, that contributed to the year-to-date underperformance of Asos, Boohoo and Primark owner Associated British Foods, whose shares fell by 27 percent, 21 percent and 13 percent respectively, analysts said.
While the seller of $10 dresses and $19 shoes doesn’t market its products in China, it’s able to tap into the country’s finely honed manufacturing sector and efficient logistics infrastructure to pump out 6,000 new items a day at prices that far undercut those of its peers.
Shein, they added, also benefits from lower export and import taxes, sales taxes/VAT and subsidized shipping costs, along with fewer restrictions on sustainability and supply-chain compliance. The pure-play has also been accused of skirting copyright laws to knock off designs from emerging and independent designers—claims it has attempted to paper over with its Shein X initiative, which includes a reality show judged by the likes of designer Christian Siriano, celebrity stylist Law Roach and media personality-slash-Good American founder Khloé Kardashian.
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Still, Credit Suisse does not rule out interventions by Western lawmakers to “level up the playing field,” much like India did last year when it outlawed Shein’s app on “national security grounds” amid mounting tensions with China. (The e-tailer has since joined Amazon India as a seller, circumventing the ban.)
“Pressure on China from Western governments looks likely to increase in the second half, with the U.K. potentially focused on data use and the U.S. potentially deploying the Uyghur Forced Labor Prevention Act,” analysts said. “There are practical difficulties in monitoring or halting thousands of small-value packages, but we would not exclude [governments] eventually following the example of India.”
In the wake of its prediction, Credit Suisse upgraded its recommendation for shares of Boohoo from “neutral” to “outperform.” The Manchester brand has faced its own share of reputational headwinds, including allegations last month that its efforts to wipe out worker exploitation in the English city of Leicester have only driven poverty-pay offenses further below the radar. Its stock, which was on the mend from last summer’s sweatshop scandal, has been struggling since.
“We believe Boohoo shares should rally on any signs of Shein’s growth or pricing being constrained by policy intervention,” analysts said, upgrading Boohoo to ‘outperform’ at a price target or 350 pence versus 340 pence, or $4.83 versus $4.70.