This is how Shein works: secrets revealed - Marketing4eCommerce

Category Marketplaces supported by: Home Ecommerce Marketplaces Shein opens its black box: this is how the ultra-low-cost fashion giant works Shein has finally revealed its major figures ahead of its initial public offering: a company with 273 million customers and more than $41.8 billion in revenue. July 29, 2026 By Rafael Sotelo Content manager in Marketing4eCommerce I n just a few years, Shein has become one of the giants of global eCommerce. With a low-price proposition and a massive catalog, its products have reached the world’s leading international markets, penetrating multiple segments of the population in an unexpected way. However, despite the interest generated by its headline figures and business model, the company has always been surrounded by an air of mystery. Now, that mystery has largely disappeared, and we have the official documentation it filed with the Hong Kong Stock Exchange , as a preliminary step ahead of its long-awaited IPO . So the time has come to analyze it in depth and uncover some lesser-known details about how Shein operates. Shein’s big numbers The figures published in that official document show a company that is still growing, but at an increasingly slower pace and with a considerable drop in profitability. As you can see, in terms of revenue, Shein’s performance is solid, although it is true that the 2024/2025 period was marked by slower growth, which came in at 8% compared with 20.7% in the previous period. That is understandable, given that some time has passed since Shein’s expansion into various international markets and considering the impact that different tariff measures from the Trump administration may have had on its business, for example. Its customer base is enormous , with 273 million customers worldwide, while annual orders reached 1.078 billion in 2025, up 17.3% from 2024. However, the problems show up on the strictly financial side. The figures point to a company that is still growing, although at an increasingly slower pace. Its net profit fell sharply in 2025, although that decline was heavily influenced by accounting adjustments related to its convertible preferred shares. In any case, despite the drop in net profit, operating income increased by around $700 million during 2025. The decline is mainly explained by the fact that the positive impact from the revaluation of convertible preferred shares was much smaller than in 2024. Even so, the negative trend appears to be intensifying. Since the documentation includes first-quarter results for this year, we can see that the slowdown became more evident between January and March 2026: Revenue: approximately $9.05 billion, up 1.1%. Net income: a loss of $99 million, compared with a profit of $395 million a year earlier. The company largely attributes this to an accounting adjustment on its convertible preferred shares. Operating profit: $258 million, down 26%. Operating margin: 2.9%, versus the previous 3.9%. At the same time, Shein significantly increased some of its main costs. Its marketing expenses rose 48.9% in 2025, reaching $6.191 billion, while logistics expenses climbed to $19.072 billion and accounted for 45.6% of revenue. Europe generates more revenue than the United States Despite the importance the United States had in Shein’s takeoff, the document shows that since 2023 our continent has carried more weight in the geographic breakdown of the business. As a result, Europe (35.4%) now surpasses the United States (24.1%) in terms of revenue, although the aggregated “rest of the world” category now represents the largest share overall. In fact, the weight of the U.S. market fell from 29.4% in 2023 to 24.1% in 2025, and dropped to 22.5% during the first quarter of 2026. This partially reduces dependence on the United States, which under Trump has significantly tightened tariff policies toward Chinese imports, as we saw in the case of de minimis exemptions. In any case, Shein’s position in Europe is also under question, now that the €3 fee per package valued under €150 arriving from outside the EU has taken effect. In the document itself, the company explains it this way: “Following the removal of the de minimis exemption in the U.S. and the EU customs duty exemption for low-value shipments (up to €150), we adopted formal customs clearance procedures and a framework that includes price increases, localized inventory and logistics, as well as greater trade compliance in the U.S. ; similar measures are expected to be adopted in the EU. Since May 2025, the removal of the de minimis exemption in the U.S. has negatively affected our sales in that country and the overall growth of our net revenue, while also contributing to an increase in logistics expenses as a proportion of net revenue, although we have since observed signs of normalization in consumer purchasing habits and sales trends in the U.S. In the EU, products purchased through us or our online marketplace and shipped to Europe—which previously benefited from the €150 exemption—are subject to higher costs, which could have a significant adverse effect on our business, financial condition, and operating results, given that we generated approximately one-third of our net revenue in Europe during 2025 and the quarter ended March 31, 2026″ . In addition, the document reveals that the U.S. Federal Trade Commission is investigating Shein’s operations in the United States. The company says it is cooperating and acknowledges that reaching a settlement could require significant payments. These regulatory disputes add to others we have previously discussed involving the European Commission, over issues such as the sale of illegal or unsafe products . The role of third-party products on Shein Although direct product sales still dominate the business, services tied to the marketplace and other platform activities are gaining weight. Looking at its revenue: Product sales in 2025: $37.1 billion, nearly 89% of revenue. Services: around $4.7 billion (in 2023, services generated only about $868 million). These services primarily include revenue associated with third-party sellers and other marketplace activities. The catalog is also becoming more diversified, and fashion went from 68.8% of revenue in 2023 to 63.8% in 2025. It is worth remembering that Shein offers footwear, accessories, beauty, home, and lifestyle products in addition to apparel. LATR, Shein’s production model Within that document, Shein highlights the importance of its production system, Large-scale Automated Test and Reorder (LATR) . For Shein, this is one of its major competitive strengths and a “unique” model. In short, it works like this: Initially produce between 100 and 200 units (yes, very, very few) of a new SKU (a new item reference) Measure real demand through its platforms. Quickly reorder successful designs in approximately five days. Reduce inventory and the risk of manufacturing large quantities of products with no demand. Shein explains that “this model allows us to achieve an optimal balance between variety in product selection, speed in refreshing designs, and efficiency in inventory management. We have a global network of partners. By making our supply chain more agile, robust, and resilient, we empower our partners to thrive and grow alongside us.” Dependence on China Although the parent company is domiciled in the Cayman Islands and its international headquarters are in Singapore, most of its manufacturing network remains in China . Shein is expanding production in Turkey and Brazil, but outside China it still lacks comparable capacity. The company is aware that this dependence means greater exposure to threats such as trade conflicts, tariff effects, export restrictions, rising air freight and fuel costs, and geopolitical conflicts. In addition, the document includes negative publicity related to suppliers’ production practices as a risk factor. Let us not forget the recurring controversy surrounding the company (as with other players in the fashion sector) over labor conditions and the possible origin of the cotton used. Shein maintains that it has a zero-tolerance policy toward forced labor and that it audits its suppliers. Next steps The documentation filed in Hong Kong shows a Shein entering a more complex stage, marked by slowing growth, customs and regulatory pressure, and its heavy dependence on Chinese production. The document clears up many unknowns, although the most decisive ones remain unresolved: how much the company aims to raise, at what valuation, and when its IPO will ultimately take place. Image: ChatGPT Related posts Shein chooses France to open its first physical store, despite the country’s rejection of its business model France wants to shut down Shein for 90 days The EU declares war on Temu and Shein with a tariff of 3 euros for low-value shipments Other articles related to Shein Published by Rafael Sotelo Content manager in Marketing4eCommerce Stay up to date! -->