Shein’s Localization Never Arrived, and the IPO Filing Finally Put a Number On It

Shein spent two years telling regulators, journalists and shoppers it was becoming a local business: local marketplaces, local sellers, local warehouses. Its Hong Kong IPO prospectus says something else. More than 90 percent of its 2025 net revenue came from goods held in central warehouses in China before shipping. That line, flagged by Marketplace Pulse on 30 July in an analysis titled “Shein’s Localization Never Arrived”, is the most useful competitive intelligence a European seller has been handed this year. The company you were told to fear on price is not a localized retailer with a cost base you cannot copy. It is a China-direct freight operation, exposed to the same customs and de minimis rules already sitting on your invoices.

A marketing claim and a prospectus line are not the same document

That distinction matters more than the number. For two years the localization story lived in interviews and submissions, where optimistic framing costs nothing. A prospectus is different: it is filed with sponsors attached, in Shein’s case Goldman Sachs, Morgan Stanley and JPMorgan Chase, and every description has to survive investor scrutiny. That is where the freight model is written down plainly. The majority of products made by Shein’s supply chain partners are stored in central warehouses in China before shipping, and in 2025 those centrally warehoused products accounted for more than 90 percent of net revenue.

The listing is being priced accordingly. Shein won approval from the China Securities Regulatory Commission on 10 July, after failed attempts in New York and London, and has not disclosed the size, price or timetable of the share sale. Reuters has reported it is seeking a valuation of 40 to 50 billion dollars, against the 100 billion dollars reported for its 2022 round. Bloomberg reported on 3 August that Shein is weighing cash and extra Class B shares to reset late-stage investors’ cost base to the bottom of that range.

The marketplace was supposed to be the hedge

Shein opened its US marketplace in May 2023 and framed it as localization. Its head of strategy described recruiting “third-party sellers who are interested in coming alongside us and reaching our customer base in these local geographies.” The sellers arrived, but Marketplace Pulse’s reading is that nearly all were based in China rather than in the US, which was the entire point.

The volume was real: Marketplace Pulse estimates the US marketplace reached about 6 billion dollars in GMV, roughly 24 percent of Shein’s US total. GMV share is not revenue origin, though. A marketplace can be enormous and still change nothing about where the parcels physically start.

What that exposure cost in one quarter

Because nothing was localized, there was no domestic buffer when the United States removed the de minimis exemption that had let parcels worth under 800 dollars enter duty free. The filing is blunt: since May 2025 the removal has had an “adverse impact” on US sales and on overall growth, and has contributed to higher expenses. Chinese-origin products sold by Shein or through its marketplace and shipped to the US now face tax rates ranging from 10 percent to 87.5 percent.

The first quarter of 2026 is where the arithmetic lands:

• US revenue fell 14.3 percent to 2.04 billion dollars, from 2.38 billion dollars a year earlier.
• The US accounted for 22.5 percent of quarterly revenue, down from 29.4 percent of annual revenue in 2023.
• Operating margin compressed from 3.9 percent to 2.9 percent.
• Shein swung to a 99 million dollar net loss, against net income of 395 million dollars in the same quarter last year. The loss partly reflects a 328 million dollar fair value charge on convertible redeemable preferred shares, an accounting item rather than a trading one.

Marketplace Pulse makes the point that matters as a demand signal: order volumes held up. Shoppers did not leave. The economics of serving them changed, which is a harder problem than losing customers.

The full year says the same thing more slowly. Shein’s 2025 revenue grew 8 percent to 41.85 billion dollars, down from 20.7 percent growth in 2024, and net income fell 38.7 percent to 2.06 billion dollars. A business that size decelerating that fast is not short of demand. It is paying more to reach the markets it depends on.

Every rival answered the same question differently

This reads as strategy rather than bad luck because the rest of the sector solved it. Marketplace Pulse sets out the comparison. Temu rebuilt its supply chain around local fulfilment, from zero US local sales at the start of 2024 to 20 percent by mid-year and higher since, fast enough that some US orders now arrive in two days. Amazon handled origin years earlier through fulfilment rather than sourcing: its active seller base passed 50 percent China-registered in September 2025, but virtually all use FBA, so the goods ship domestically. TikTok Shop invested in Fulfilled by TikTok to control delivery.

Shein changed its seller roster and its language. It did not change where the goods sit. Now it is asking public investors to underwrite that decision.

Europe is where this lands next, which makes it your problem

Europe accounted for about one third of Shein’s revenues in 2025, and the EU imposed a 3 euro fee on low value e-commerce imports in July 2026, which it frames as curbing unfair competition from China. Marketplace Pulse reads the mechanics as sharper than the headline suggests: the fee took effect on 1 July and applies per customs item classification rather than per parcel, so a single multi-item order shipped direct from China can trigger the charge several times over. On that reading it is a more precise strike at the central warehouse model than the US tariffs were.

Shein is not pretending otherwise. From the prospectus: “Although it remains too early to fully assess, it is possible that trends in the EU could be generally in line with or exceed the impact observed in the U.S. after the removal of the U.S. de minimis exemption.” On costs, the company has already said: “In response to the increased duties and taxes, we are pursuing a wide range of options, including increasing our prices in the U.S. market to offset a portion of the increased costs.”

What a European seller should take from this

Three things follow from what has been disclosed.

The price floor you compete against is a landed cost, not a genius cost structure. Shein’s advantage was never a magic factory. It was central warehousing in China plus a duty regime that treated small parcels as invisible. Both halves are now taxed, and a price set by freight and customs treatment rather than operating efficiency is a price that policy can move.

Expect the pressure to arrive as prices, not as absence. Shein has told investors it is considering raising US prices to offset part of the increased costs, and has warned the EU impact could match or exceed the US one. If that runs through in Europe, the gap between a China-direct price and your local stock price narrows without you touching your own costs. Being ready to compete at that new price point, with stock in market, is the position worth holding.

Domestic stock is a measurable asset, not a convenience. The platforms that moved goods closer to the customer bought insulation from the exact rule changes now compressing Shein’s margin. If you hold stock in the market you sell into, you own that insulation, and it is worth pricing rather than discounting away to match a cost structure that customs policy is dismantling.

One number for your next pricing meeting: more than 90 percent, the share of Shein’s 2025 net revenue that shipped from central warehouses in China. Everything else here is a consequence of it.

Sources

• Marketplace Pulse, “Shein’s Localization Never Arrived”, 30 July 2026: https://www.marketplacepulse.com/articles/sheins-localization-never-arrived
• CNBC, “Shein flags tariff hits after posting quarterly loss ahead of Hong Kong IPO”, 26 July 2026: https://www.cnbc.com/2026/07/26/shein-reveals-key-financials-ahead-of-hong-kong-ipo.html
• Retail Gazette, “Shein weighs investor payouts ahead of Hong Kong IPO”, 3 August 2026: https://www.retailgazette.co.uk/blog/2026/08/shein-weighs-investor-payouts-ahead-of-hong-kong-ipo/