Shein and Sparc Group Strike a Partnership: Strange Bedfellows?
WSJ reported yesterday that online (ultra) fast-fashion retailer Shein has signed a partnership agreement with Sparc Group.
Who is Sparc Group? It's a little complex to understand; let me try and break it down.
Sparc Group is a global full-service retail firm that manufactures, distributes, and operates retail and eCommerce properties for major brands like Forever 21, Lucky Brand, and Eddie Bauer. Sparc Group has historically been a 50/50 partnership between two major firms:
* 50% Authentic Brands Group - IP licensing firm that owns the brand and collects royalties from owning the intellectual property of the brand from its partners.
* 50% Simon Properties - Real estate investment trust owning major malls globally.
So what happened with Shein? A partnership that looks like a two-way investment.
* Shein now owns one-third of Sparc Group. (Does this mean it's an equal 3-way partnership? That's how it reads to me.)
* Sparc Group invested a minority share in Shein.
What they say it means:
* Shein can sell products it doesn't manufacture - presumably the brands managed by Sparc Group and perhaps even the broader Authentic Brands Group portfolio.
* Could allow customers to return clothes purchased at Shein at Forever21 and perhaps other Sparc Group-owned stores.
* Forever21 will have access to Shein's customer base (?) and be able to market clothes there - not clear if this is through Shein's marketing channels or its own. Jamie Salter, the owner of ABG, says that additional Sparc Group brands will likely funnel through this partnership.
* Sparc Group and Forever21 are also looking to learn from Shein and its real-time, small-batch manufacturing processes, which have been disrupting the industry over the past few years -- significantly outgrowing the rest of the fast fashion industry.
What I think it means:
* This is part of the legitimizing and de-risking of Shein.
* Shein has been making all manner of moves to shake the "slave labor" and other claims.
* Plus, there is a lot of potential political risk in being a Chinese online retailer in the US market. Giving US companies a stake in Shein, Shein acquires a greater sense of legitimacy.
* Sparc Group may also see Shein as a way to create the world's largest global fashion marketplace, which would be an interesting proposition.
* Authentic Brands Group, which owns part of Sparc Group, makes money each time a sale happens or a new licensee signs up. This is about giving all the brands in the portfolio a multiplier effect: How can we turbocharge sales, encourage others to sign up, and take a piece of that too?
* I'll give Jamie Salter this: he is a smart one. This deal blunts a huge threat to his portfolio and creates a new business opportunity and potential revenue engine simultaneously.