Given the startup funding crunch that’s currently underway, Shein’s down round – which valued the company at $64 billion less than a month ago – is likely to cause concern for many in the startup community.
Although Shein denies the accuracy of some of the information, there are a number of indications that their practices may have been unethical and potentially illegal. First, it is unclear if Shein obtained consent from consumers before collecting data about their online activity. Second, Shein’s policy of automatically enrolling users in its email and chat services raises questions about whether they informed users about this activity or allowed them to opt out. Finally, allegations that Shein mislead consumers about how their data would be used appear to be plausible; for
Whether it’s Pinduoduo’s fall from grace or Alibaba Group Holding Ltd.’s continuing dominance in the sector, investing in e-commerce is no easy feat. While Her has seen its value plummet, other companies like Pinduoduo have had theirs Compared to its predecessors, the valuation of most digital businesses today relies on dubious assumptions about future growth rates and user engagement levels. Although there are definitely some excellent opportunities to be found in this emerging sector, it’s important to do your research before making a commitment.
Pinduoduo has been pinning its hope on its sister platform, Temu, for overseas shoppers in the U.S. though progress is being made. At present, Temu is gaining some ground in the American market and is expected to overtake Pinduoduo as China’s leading online marketplace for overseas shopping by 2021.
Shopee’s recent losses and layoffs may have been a sign that the Chinese e-commerce giant is hitting some financial turbulence. Shopee has been facing stiff competition from giants like Amazon and Alibaba, which both offer deeper product selections and lower prices. As a result, Shopee’s market cap has plummeted over the past year.
While Shein’s drawdown doesn’t look too terrible by comparison to some of their e-commerce counterparts, it still leaves much to be desired. This could be due in part to their reliance on third party sellers and a lack of direct control over inventory.
Shein is banking on its story of success in China’s export-oriented ecommerce ecosystem to propel it forward as a public company. The company has made some key changes in order to make its Singapore office the de facto holding company, as regulations around overseas listings and cross-border data transfers become more stringent in China.
The increasing awareness of ethical and sustainable practices in business is something that many companies are trying to capitalize on, but Shein has proven to be one of the most committed. The company has significantly stepped up its ESG — environmental, social and governance — efforts, but it’s unclear how the firm can remake itself to be “socially responsible” without disrupting its business model, namely, fast fashion. Multiple investors TechGround previously talked to also pointed to potential “accounting compliance” issues as China’s clothing manufacturing industry is notorious for murky invoicing practices and tax evasion.
