Three euros per parcel has halved Shein’s valuation

Shein’s ambition to secure a valuation of up to $50 billion in its Hong Kong IPO looks likely to face a hard test from investors: new levies on e-commerce parcels in Europe are weighing on both sales growth and profit.

The company is targeting $40–50 billion. That is a long way from the $100 billion it was reportedly valued at in a 2022 funding round, when it first set its sights on a New York listing.

The business itself is large. Shein’s global revenue topped $40 billion last year, with net profit of about $2 billion, according to people familiar with the matter. By comparison, its most recent Singapore filings showed $37 billion of revenue and $1.29 billion of profit in 2024.

The problem lies elsewhere. From this month the European Union has imposed a €3 fee on imports of low-value e-commerce goods, intended, in the EU’s words, to curb unfair competition from China. Parcels worth less than €150 previously entered the EU duty-free; the fee now applies per customs code, so a parcel containing five different items can attract €15 in duties.

“If you were used to buying €3 T-shirts on Shein, they now cost twice as much — that is significant, even if they are still cheaper than local alternatives,” says e-commerce analyst Juozas Kaziukenas. “It kills the conversions they had, which is why they have cut marketing spend.”

Shein had prepared: it expanded warehouse space in Wrocław and shipped fast-moving goods into the EU in bulk. But, like its rival Temu, it has sharply cut advertising budgets in Europe — according to an analysis by Smarter Ecommerce based on Google Ads auction data — while it watches how shoppers respond to the new prices. A year ago the picture was the opposite: both platforms were ramping up marketing in Europe in the hope of offsetting a slowdown in the US after the Trump administration scrapped its own de minimis duty-free regime. Only in the US has Shein been able to pass the costs on to the customer; in Europe, where demand is more price-sensitive, that is far harder.

Chief executive Sky Xu will have to convince investors that this is a temporary dip and that growth returns in 2027. It is no easy task: most of Shein’s goods are made in China, and Europe accounts for a third of the company’s revenue.

“If the valuation comes in at $40 billion, I think that is still on the expensive side. Closer to $30 billion — that might be more attractive,” says Eddie Tam, chief investment officer of Hong Kong-based Central Asset Investments, who expects a strong impact from the European levies. “The problem is that the company is already on a downward trajectory. Competition in e-commerce is extremely fierce, both in China and abroad.”

The contrast with the past is stark. When Temu’s owner PDD Holdings — then Pinduoduo — listed on Nasdaq in 2018, it raised $1.63 billion at a $23.8 billion valuation; the shares jumped 40% on the first day, taking the valuation to $33 billion — and that was with the company lossmaking and revenue a fraction of Shein’s today. Chinese e-commerce has become a far more political subject since: Temu and Shein are seen as undercutting retail, a major employer, in the US and Europe, and they irritate politicians and regulators.

A final hearing before the Hong Kong exchange’s listing committee was scheduled for Thursday. The company is already sounding out investors ahead of a public filing expected by the end of the month, and is targeting a September listing.