By Shein, the e-commerce giant for fast and affordable fashion, shows no signs of slowing down in the US market, according to recent surveys conducted by UBS. Jay Sole, a UBS analyst, notes that this is reason enough to remain wary of investing in apparel stocks.
For instance, UBS has found that even just a few years ago, Shein was an uncommon choice for the 4,000 women surveyed each month by the company. Sole stated that only 0.6% of the survey respondents named Shein as their primary retailer for women’s clothes.
However, in June 2021, that trend reached a new record, with survey respondents signaling that Shein was their top choice for around 4% of shopping occasions – a dramatic increase.
This development may indicate that not only does Shein continue to gain favor with shoppers, but also that the pandemic’s reopening has not slowed its expansion, which is essential when compared to other online retailers struggling with growth. According to Sole, given Shein’s staying power, it could significantly take over the US softlines market share.
In conclusion, Shein’s rise in popularity over the past four years has lead to a bearish view on softline stocks. The privately-owned company, formerly based in China and now headquartered in Singapore, has become a Gen-Z favorite, with many young women choosing its site and app to search for fashionable clothing at low-cost prices (often less than $10).
SHEIN’s Rise: More Than Just Low Prices
According to a recent expert call by UBS, SHEIN’s massive success is not solely attributed to its lower prices. Although competitive pricing is important, SHEIN shoppers prioritize other factors such as the latest trends and styles, product offerings, and quality.
However, an underestimated aspect of SHEIN’s rise is its ability to create a personal connection with consumers through in-person marketing events and its strong social media presence. With the most followers on TikTok and the third-most followers on Instagram, SHEIN has established a significant online following. In fact, in May 2022, SHEIN was the most searched for apparel retailer in the U.S., with searches for the brand growing by 29% from the previous year according to UBS’s analysis of Google data.
The Significant Loyalty of Shein Shoppers
Shein shoppers have shown notable brand loyalty. According to a report by UBS, customers who shop at Shein spend about 60% more each month on clothing than the average female consumer in the US. Surprisingly, this trend persists even though the typical Shein customer is younger and earns slightly less than the standard US shopper. The average income of a Shein shopper is $65,300, while the average shopper’s income is $66,200.
Although many Shein shoppers also purchase clothing from other brands as well as bricks-and-mortar stores, experts believe this will change over time. With online shopping becoming more ingrained in consumers’ daily habits and technology such as generative AI improving, Shein could eventually become a force to be reckoned with in the retail industry.
In fact, some believe that Shein’s success could negatively impact other competitors, including department stores, specialty retailers, and off-price retailers. Neil Saunders, managing director and retail analyst at GlobalData, has previously weighed in on Shein’s appeal among middle-class teenagers and young adults, predicting that it could lead to a battle with mid-tier legacy apparel retailers.
Unfortunately, UBS is mostly pessimistic about the overall apparel sector, having rated only 32% of the softlines stocks that the bank covers at Buy. Less than half of these stocks—45%—are rated Neutral, with 22% receiving Sell ratings. As a privately owned company, Shein lacks a rating.
Overall, Shein’s devoted following is impressive and shows no signs of slowing down.
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