Interpretation of IPOs | Is the slowdown in growth compounded by the impact of tariffs. Did Xiyin SHEIN face a real test after listing?

On July 26, the Hong Kong Stock Exchange finally revealed Xiyin (“SHEIN”)'s post-hearing data collection. This giant cross-border e-commerce ship, once valued at 100 billion US dollars, has finally sailed into the “deep-water zone” of Hong Kong stock IPOs after experiencing many setbacks in going public in the US and the UK.

As a company reshaping the global fashion landscape with a “large-scale automated small order quick return” (LATR) flexible supply chain, SHEIN achieved net revenue of US$41.8 billion in 2025, with 273 million active customers, making it one of the world's largest online fashion destinations.

However, on the other side of rapid growth, the prospectus also revealed a number of risk signals worth watching. From falling back into losses in the latest quarter, to continued rise in marketing investment, to changes in international trade policies, tariffs, and the tightening of the global regulatory environment, SHEIN is entering the most complicated stage of development since its establishment.

For SHEIN, the question that this IPO really needs to be answered is not why SHEIN was successful in the past, but whether it still has the ability to continue to replicate growth myths in the future.

From “quick return of small orders” to global supply chains

If you were to sum up SHEIN's biggest competitive advantage in one sentence, the answer was not low price, but rather its supply chain system based on digitalization.

The Zhitong Finance App learned that the company defines its own business model as a LATR (large-scale automated small order quick return) operation model. Its core logic is to use a digital system to continuously test market demand, verify consumer feedback through small-batch production, and quickly add orders to achieve dynamic matching between supply and demand.

According to the prospectus, the company usually produces only about 100 to 200 new products for the first time. When the system identifies good sales performance, it can automatically trigger the replenishment process, and some popular products can be replenished in as fast as five days.

This model is in stark contrast to the traditional clothing industry. Traditional brands often need to design, forecast sales, and complete large-scale preparation several months in advance. Once market judgment is wrong, it is easy to form high inventory and large-scale discounts.

SHEIN, on the other hand, transfers inventory risk to data verification through the “small order trial sale+quick refund” method, thereby significantly reducing inventory backlog. According to the prospectus, by the end of 2025, the company had more than 2 million clothing styles, and the unsold inventory ratio remained low in single digits for a long time. The inventory turnover period in 2025 was only 36 days, which is superior to most traditional clothing retail companies.

What supports this model is the digital supply chain that the company continues to invest in. According to the prospectus, the company has achieved digital integration of all aspects of the supply chain, connecting systems from trend identification, product development, order distribution, production management, logistics fulfillment to customer feedback, and continuously optimizing demand forecasting and order scheduling through AI algorithms.

At the same time, the company provides suppliers with a free cloud-based production management system, which enables suppliers to digitize production and link with SHEIN's back-office in real time to achieve automatic order distribution, capacity optimization, and inventory management, so that the supply chain gradually evolves from a traditional manufacturing system to a data-driven system.

In the past, it was design ability that determined the competitiveness of clothing companies, but now it is increasingly dependent on data acquisition ability, algorithm ability, and supply chain response efficiency. By accumulating behavioral data such as user browsing, clicks, favorites, and purchases over a long period of time, SHEIN can continuously optimize the direction of product development, and also reduce losses caused by failed sales.

At the same time, in terms of logistics, SHEIN's global logistics system is centered on the Chinese supply chain, cooperates with distributed overseas warehouses and fulfillment nodes, covers various markets such as North America, Europe, the Middle East, Southeast Asia and Oceania, and optimizes transportation efficiency through dynamic route planning. This network has achieved a good balance between timeliness and cost, and has also become an important support for SHEIN to rapidly expand the global market.

Ultimately, it is reflected in financial performance. From 2023 to 2025, the company's revenue reached US$32.1 billion, US$38.7 billion and US$41.8 billion respectively, with a cumulative increase of more than 30% over three years. Among them, although the revenue growth rate has clearly slowed compared to the early days of entrepreneurship, it has maintained strong growth resilience against the backdrop of weak overall global consumption and pressure on the growth of the apparel industry.

At the same time, the company's operating profit from 2023 to 2025 reached US$1,376 million, US$966 million and US$1,707 million respectively, indicating that the main business still has some profitability.

However, if the profit structure is further disassembled, it can be found that the quality of the company's profits has begun to change. In 2025, although operating profit improved, net profit fell from US$3.365 billion in 2024 to US$2,064 billion. The latest first quarter of 2026 even recorded a net loss of 99 million US dollars. The prospectus explained that it was mainly affected by changes in the fair value of convertible preferred shares, not a sudden deterioration in the main business.

Even if relevant non-operating factors are removed, the pressure on the company's management level cannot be ignored. Looking at the cost structure, the share of fulfillment expenses in revenue remained above 40% for a long time, rising further to 47.7% in the first quarter of 2026; marketing expenses increased from 10.8% in 2023 to 14.8% in 2025, and continued to rise to 15.8% in the latest quarter, which means that as the number of global users continues to expand, the company's cost of acquiring new users and maintaining traffic continues to rise.

This is also a common problem faced by internet retail companies at a certain stage of development. Early on, they relied on social media and algorithm recommendations to obtain large amounts of organic traffic at a lower cost; however, as the market matured and competition intensified, companies had to continue to increase advertising investment to maintain the rate of user growth. As marketing expenses continue to grow faster than revenue, profit margins are naturally squeezed.

For SHEIN, this means that the model that relied on traffic dividends to drive growth in the past is gradually entering a new stage that relies more on operational efficiency and brand building.

After the dividends subsided, SHEIN ushered in a real big test

If the slowdown in revenue growth is a sign of the fatigue of SHEIN's internal growth engine, then the drastic change in the global trade regulatory environment is the sword of Damocles hanging over the company's head.

According to the Zhitong Finance App, in its prospectus, SHEIN repeatedly emphasized the potential significant adverse effects of changes in international trade policies, especially tariff policies, on its business. For a long time, SHEIN's business model has largely relied on customs exemption policies for small-value packages in countries such as Europe and the United States to achieve extremely low cost cross-border direct mail.

However, this policy dividend is being rapidly dissipated, and the US has lifted the small amount exemption since May 2025. Despite subsequent signs of normalization of purchasing behavior, it has substantially interfered with SHEIN's sales and net revenue growth. More seriously, the European Union officially approved the cancellation of the 150 euro tariff exemption for small-value packages in February 2026, and the new regulations will take effect on July 1, 2026.

According to the new framework, a fixed tariff of 3 euros will be initially levied on each type of package worth 150 euros and less, and a nationwide administrative processing fee is planned to be levied in the second half of 2026. SHEIN clearly stated in the data collection that this policy change, combined with factors such as the geographical situation in the Middle East, may have a significant adverse impact on net revenue, operating profit, and net profit in 2026. The negative impact is directly reflected in various aspects such as increased tariffs and taxes, potential pricing pressure, weakening regional demand, and rising logistics and freight rates.

This means that SHEIN's cost advantage in Europe's core market will be greatly weakened. If tariff costs are passed on to consumers, it will inevitably weaken its competitiveness at low prices; if it is digested on its own, profit margins that are already under pressure will be further compressed.

While the external environment is getting tougher, the valuation logic of the capital market has also undergone profound changes, causing SHEIN's valuation to shrink drastically. In Series D financing in 2022, SHEIN's pre-investment valuation was US$98.2 billion (close to US$100 billion after investment). Since then, in the D+ round of financing carried out by the company in 2023, the pre-investment valuation was adjusted to US$64 billion.

Today, due to macro-capital flows and the market's reassessment of the growth potential of traditional e-commerce, the capital market's expectations for its IPO valuation have shrunk from its peak. Behind this valuation gap, there is a reason why traditional e-commerce valuations are under pressure due to macro-level capital flows to high-tech circuits such as artificial intelligence. More importantly, the market is reevaluating the characterization of SHEIN's business model and future growth potential.

Furthermore, in the face of intense competition from competitors such as Temu and TikTok Shop in overseas markets, SHEIN's revenue share in the European and American markets has declined markedly. Among them, the share of the US market has dropped 7 percentage points compared to three years ago.

In order to cope with competitive and regulatory pressure, SHEIN is striving to transform from a single proprietary brand to a “ownership+platform” dual-engine model. However, the platform-based transformation meant that SHEIN needed to move from a pure supply chain manager to a complex ecosystem governor, which placed higher demands on its quality control, merchant management, and compliance capabilities.

Taken together, SHEIN's current listing in Hong Kong is not only a realistic choice to ease financial pressure and meet institutional withdrawal needs, but also a key part of its role in reshaping supply chain infrastructure and addressing compliance challenges after globalization enters the deep-water zone. Despite the haze of tariff barriers and internal competition, SHEIN is still expected to open up a more resilient global path for China's overseas e-commerce if it successfully enters the capital market and completes strategic transformation.