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Reclusive Shein founder Sky Xu prepares to enter the spotlight with IPO

Sky Xu, the intensely private Chinese billionaire founder of fast-fashion group Shein, will be thrust into the spotlight when the ecommerce group, once valued at $100bn, launches its planned listing next year.

There is scant information available online about the man whose company’s explosive growth was made possible by the social media age. Shein’s website bears no photograph of Xu, who has never given a media interview nor posted online for eight years. He flies so under the radar that employees joke that they do not recognise him at the office, according to several people who have worked with him in recent years.

In the past couple of years, the billionaire has changed his English name from Chris to Sky, leaving staff and investors confused about what they should call him. One person who has worked with him described him as a bespectacled and “shy” person while another says he is a little “rough around the edges”.

For Xu, however, the strategy of remaining silent has been vindicated by the recent scrutiny of Chinese tycoons from Beijing and Washington, someone familiar with his thinking said. Beijing’s public chastisement of Jack Ma, the charismatic founder of Alibaba, whose entrepreneurial vision Xu once sought to replicate, has sent a chill through Chinese business circles.

Shein was founded in 2008 but it took a decade for sales at the company, which uses a disruptive model of shipping goods directly from factories in China to shoppers in the west, to take off.

Gen Z shoppers have flocked to the online fashion group looking for cheap clothes and accessories to constantly update their wardrobe for a world where it is taboo to be pictured online in the same outfit twice.

The pandemic accelerated Shein’s growth with revenue soaring from $1.3bn in 2018 to $22.7bn in 2022, according to an investor presentation seen by the Financial Times. In the first half of this year, it generated $14.7bn in revenue, surpassing Zara, according to investors briefed on the matter. The company declined to comment.

Its rapid rise has generated criticism about its supply chain practices and the environmental impact of its cheap and disposable clothes. Most worryingly for investors, Washington politicians have considered closing a tax loophole that allows it to sell most of its products without incurring import duties.

However the greater scrutiny has not halted its ambitions to go public. Against a sluggish IPO market, investment banks starved of deals have been clamouring to get a slice of the Shein listing. Its investors include Abu Dhabi sovereign wealth fund Mubadala, venture capital group Sequoia China and private equity group General Atlantic.

The company has filed confidential paperwork with the US securities regulator. Valued at $100bn during a fundraising round in April 2022, investors briefed on its listing plans said it was targeting a slightly more modest $90bn valuation — but one, if successful, that would still make it one of the biggest US listings of the past decade. It is also significantly higher than the $66bn they were valued at following a fundraising in May.

Shein has hired former Bear Stearns investment banker Donald Tang and former SoftBank Group International chief executive Marcelo Claure to be the external faces of the company.

Xu does not speak English and little is publicly known about him. Now based in Singapore, his office in Marina Bay Financial Centre overlooks the Singapore Strait, where hundreds of cargo ships await unloading. Between work, Xu squeezes in rounds of golf with other Chinese entrepreneurs who have decamped to Singapore in recent years, according to a person close to him.

It is a far cry from his birthplace of Zibo, a manufacturing city in China’s Shandong province, where his parents were workers in state-owned factories. Xu, whose Chinese name is Xu Yangtian, comes from “an extremely poor background”, the person added. His mother was a garment worker, a fact that would later help him when he was teaming up with clothing factory workers to establish Shein’s supply chains.

While studying international trade at Qingdao University of Science and Technology in the mid-2000s — shortly after China became a member of the World Trade Organization — Xu witnessed his country turn into the world’s factory thanks to its vast skilled labour force and strong infrastructure.

He was quick to recognise the potential of the internet to disrupt commerce, observing Alibaba’s success in earning the trust of shoppers through its diverse product ranges and customer reviews. But while Alibaba sold discounted China-made goods to Chinese shoppers, Xu sought to replicate that model to the outside world.

He cut his teeth setting up websites selling everything from spark plugs to gaskets, first finding a foreign buyer and then a manufacturer in Qingdao to fulfil the order, according to someone close to Shein. It was the start of an asset-light, low-batch ordering method that the company would later adapt.

After graduation Xu moved to Nanjing and tapped into the southern manufacturing base of Guangzhou, shifting his focus from industrial to consumer products. He started with eyeglasses and teapots but eventually set up Sheinside, selling cheap wedding dresses to brides in the US. This company would eventually morph into Shein.

Shein courted high-profile investors with a pitch that it has a magic recipe combining Chinese manufacturing prowess with sophisticated algorithms that can anticipate shifting consumer tastes.

Its algorithms trawl social media and online shopping sites, spitting out new design ideas based on trending items. Those ideas are then fed to designers, who pass the styles to contract manufacturers in Guangzhou that initially make small orders before ramping up production if the product sells well.

This model poses a disadvantage to manufacturers that prefer large orders of the same product, with small batches meaning they typically lose money. Shein however argues that its factories are willing to gamble because a product may go viral and because it pays on time.

But in recent months, the company’s allure has begun to fade. Shein’s growth in the US is slowing as a result of a new, well-funded Chinese competitor replicating its model of shipping from the factory to the shopper.

After launching in 2022, the Pinduoduo-owned marketplace Temu has aggressively pushed into the US through heavy subsidies and a huge social media budget.

Bernstein analysts estimate that Temu generated $1.8bn in revenue during the third quarter this year, forecasting that by 2025 annual gross merchandise revenue — the total value of goods sold on its platform — could grow to $50bn.

“In just over a year, Temu has grown its user base to rival Shein’s. It has twice the number of monthly active users of Shein in the US. We expect Temu to offer stiff competition for Shein across global markets,” said Bernstein analyst Robin Zhu.

Meanwhile, company employees have privately grumbled that Shein is taking an increasingly scattergun approach to keep growing at all costs. In recent months, Shein has joined forces with fellow fast-fashion group Forever 21 and snapped up the British Missguided brand. It is rapidly expanding in Turkey and Brazil and is diversifying its supply chain away from China.

But for Xu, there is no limit to his global ambitions. “He has just got started. To him, the world is all ahead of him. A vast market is yet to be conquered,” the person close to him said.

Additional reporting by Mercedes Ruehl in Singapore and Andrew Edgecliffe-Johnson in New York

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