Credit: Visual China

BEIJING, November 1 (TMTPost) – SHEIN, the China-founded fast-fashion retailer, has acquired British fast fashion brand Missguided from the Frasers Group, along with all of its intellectual property.

In September, SHEIN had engaged in several weeks of discussions with the Frasers Group, just a month after its acquisition of the fashion brand Forever 21 from SPARC.

At the end of 2022, Tang Wei, who had previously served as the Chairman and CEO of Bear Stearns Companies, became SHEIN’s executive director. After that, the company has accelerated its acquisition process.

Missguided was founded in Britain, a market where SHEIN has not established itself. According to overseas reports, the company accounted for only 0.5% of clothes sales in Britain in 2022. Acquiring Missguided may help SHEIN gain a foothold in the UK market.

Forever 21 and Missguided are both fast fashion brands on a decline. Both have a certain brand appeal and mature offline store experience. From this perspective, SHEIN's acquisition is a win-win situation. SHEIN will expand its online platform transactions through the acquired brands while strengthening its offline presence. The acquired brands will benefit from the company’s online traffic, revitalizing itself.

SHEIN's Aggressive Globalization Strategy

Back in 2021, SHEIN had shown signs of engaging in acquisitions.

At that time, SHEIN and the fast fashion brand ASOS, as rivals, bid to acquire the fashion group Arcadia. In the end, SHEIN withdrew, and ASOS acquired Arcadia for 295 million pounds (approximately $357.97 million).

When acquiring Forever 21, Tang was considered one of the key figures. He said in an interview that with the company's expansion, it is necessary to introduce more third-party brands.

On May 4, it officially announced the promotion of the SHEIN Marketplace platform model in the global market and initiated a pilot project in Brazil, expanding into global markets gradually. The company aims to create a global comprehensive platform that allows local and international third-party sellers to join, alongside its own brand operations.

At present, Forever 21 is already selling on the SHEIN platform, and the agreement for the acquisition of Missguided indicates that Missguided will also start selling on the SHEIN platform.

SHEIN has more than 10 subsidiary brands, including the fast fashion brand ROMWE, high-end clothing brand MOTF, European and American fast fashion brand EMERYROSE, lingerie brand Luvlette, cosmetics brand SHEGLAM, footwear brand Cuccoo, and pet brand PETSIN.

SHEIN has begun supporting local businesses to open stores on its platform. To attract more sellers, it has implemented a range of support policies, including a three-month commission-free period and covering return shipping costs.

The company is no longer limited to selling clothing but is moving into various product categories, recruiting sellers in women's fashion, home goods, beauty and personal care, electronics, automotive accessories, home appliances, and dozens of other niche markets.

Missguided：Three Owners in Three Years

Missguided was founded by Nitin Passi in Britain in 2009. Initially, it focused on online women's fashion retail and was one of the fastest-growing e-commerce platforms in Britain in its early years. As the business expanded, it ventured into men's fashion and opened physical stores in markets such as the United States and Britain. At its peak, Missguided had over 4 million active users in more than 180 countries.

However, in 2018, the company was at crossroads. In that year, it was reported to be operating at a loss, with layoffs, and in the following year it closed some of its offline stores. At this time, the well-known investment company Alteri Investors in the European retail industry stepped in and acquired a 50% stake in the company.

Yet, this funding did not rescue Missguided from its difficulties. In 2022, it was accused of owing several million pounds to suppliers and filed for bankruptcy in May 2022. Just a month after its bankruptcy application, the British sports retail group Frasers Group acquired it for 20 million pounds. However, the Frasers Group sold it to SHEIN just over a year later. That is, Missguided experienced three changes in ownership in just three years.

Part of the reason for Missguided's bankruptcy was its heavy reliance on a supply chain based in China, and a significant increase in sea freight costs in 2020, which led to a tenfold rise in costs of production, as stated by its founder.

Another reason is related to the competition with SHEIN.

The recipe of the success of the fast fashion industry lies in "fast." Early on, Missguided's operations were also based on speed. Compared to the first batch of fast fashion brands like ZARA and H&M, which had a production cycle of 5 weeks, Missguided was able to produce goods within 2-4 weeks, releasing 1,000 new products each month and updating its inventory daily.

However, the brand known for its speed was overtaken by SHEIN, which introduced a pioneering production model. This model involved quickly testing small quantities of items and increasing production based on the test results. Reportedly, SHEIN's clothing production cycle has been reduced to 7-8 days, with 1,000 new SKUs introduced daily.

Reducing the industry production cycle from weeks to just one week is one of the main secrets behind SHEIN's rapid growth and will likely prove to be a significant advantage for the brand after acquiring new ones.

SHEIN’s Plans to Revive Missguided and Others

Acquisition is just the first step, and the key challenge for SHEIN is how to leverage its own capabilities to revive these gradually fading brands.

In the case of SHEIN's acquisition of Forever 21, the partnership details revealed that SHEIN would gain access to Forever 21's online distribution and utilize Forever 21's retail network to open shop-in-shops in physical stores, allowing customers to make offline returns and exchanges.

Since the acquisition, SHEIN has listed Forever 21's products on its website and mobile app, providing substantial online traffic to Forever 21.

ABG Group has signed a long-term agreement with SHEIN for Forever 21. Under this agreement, SHEIN will design, manufacture, and sell a range of clothing and accessories under the Forever 21 brand, including casual sportswear, swimwear, and more. The two companies will introduce a joint brand, "Forever 21 x SHEIN."

The operation following the acquisition of Missguided has a similar logic. As per the collaboration agreement, after acquiring Missguided, SHEIN will use its flexible supply chain system to handle the brand's manufacturing. Design and operation of the brand will be entrusted to a joint venture company established by SHEIN with the founder of Missguided. Missguided will be sold as an independent brand through SHEIN's online channels and Missguided.com.

This operation suggests that SHEIN's supply chain capabilities can not only sustain its own operations but also provide support for other brands.

This year, SHEIN is heavily investing in the Latin American region and building a supply chain in Brazil. According to SHEIN, it will invest 7.5 billion Brazilian reais (approximately $148.9 million) in Brazil, connecting with around 2,000 local textile manufacturers. Currently, the supply chain the company built in Brazil has already begun mass production and products have entered the market.

Apart from Brazil, SHEIN is also integrating its supply chain into other regions like Turkey. By the end of 2023, 20% of SHEIN's sales in the European Union will come from Turkish factories. By extending the supply chain into core markets, the company further shortens its logistics time.

This means that with SHEIN's strong supply chain support, the design and manufacturing cycle of Missguided, previously 2-4 weeks, can be reduced to one week. The sea freight costs will also be spread thinner based on SHEIN's scale. The Frasers Group has also said that besides Missguided, they are discussing more with SHEIN.

Empowering acquired brands through their own traffic and supply chain is SHEIN's strategy. These brands will also help the company in achieving its offline expansion and platform strategy.

From an offline perspective, within the hundreds of Forever 21 physical stores, SHEIN has introduced a "shop-in-shop" model. Leveraging SHEIN's brand influence, this has brought offline foot traffic to Forever 21. Similarly, the hundreds of physical stores have also boosted SHEIN's entry into the offline space.

For instance, in Forever 21 stores in Canada, SHEIN set up a pop-up store occupying 20% of the total store area. During a four-day event, it attracted over 7,000 visitors and resulted in a 62% increase in comparable sales compared to the same period last year. As reported by foreign media, Forever 21 estimated that its deal with SHEIN could bring in billions of dollars in sales.

Although SHEIN has never opened traditional physical stores, pop-up stores and shop-in-shop have been its main strategies for exploring offline scenarios. This year, the company plans to open around 30 pop-up stores in the EMEA region in 2023, covering areas such as Europe, America, Asia, and more.

ABG Group, Forever 21’s former owner, said that it has over 50 brands, and Forever 21 was just the beginning of its collaboration with SHEIN.

Both the offline stores and the online platform enable SHEIN to boost its valuation. According to news reports, the company has engaged an investment bank for its first public offering.