Southeast Asian e-commerce giant Shopee sets its sights on Latin America

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As part of the recent TV commercial blitz in Brazil, Southeast Asian e-commerce app Shopee replaced the text with the contagious “Baby Shark” tune Have own name.

The company is owned by Singapore-based Sea, and hopes that this daunting earworm will make the platform the first choice for customers as it seeks to expand in the US$105 billion online shopping market in Latin America.

Sea’s largest shareholder is the Chinese technology group Tencent, which has strong financial support. Despite losses, its New York-listed shares have soared 680% since the beginning of 2020, making Sea’s market value close to US$170 billion, close to that of Shopify, as Covid-19 has promoted the e-commerce boom in Southeast Asia.

However, Sea’s attempts to replicate the dominance that it enjoys in its home region in Latin America will face strong opposition free market, Nasdaq listed group and market leader.

The potential bonuses for Sea, founded by the Chinese-born Singaporean billionaire Forrest Li, are huge. Before the pandemic, online shopping was in the early stages of adoption in Latin America. But according to eMarketer data from Insider Intelligence, e-commerce sales have soared by 63% in 2020, making it the fastest-growing region.

Li Jianggan, CEO of Momentum Works in Singapore, said: “If Sea can pull Latin America and prove itself in front of MercadoLibre, this will have a much greater impact on their market value and share price than anything else they are studying.” consult.

Shopee was launched in 2015 and has been at a disadvantage before.As a latecomer to online shopping in Southeast Asia, it Surpassing Alibaba’s Lazada In 2019, it became the top e-commerce platform in the region, defeating local champions all the way.

Sea entered Latin America in 2017 Free fire, Its battle royale video game is now the highest-paid mobile game in Latin America and Southeast Asia. The company’s profitable gaming department is used to subsidize the unprofitable e-commerce department.

It launched Shopee Brazil in 2019, initially only allowing people to buy goods from foreign merchants. It now provides access to local sellers and launched services in Mexico, Chile and Colombia this year.

There are already signs that it is succeeding in its march into the region. According to Sensor Tower data, Shopee is the most downloaded e-commerce application in Brazil this year, and its download volume is more than twice that of MercadoLibre.

Sea declined to comment on its Latin American strategy, but in its quarterly update last week, Chief Corporate Officer Wang Yanjun said that the company’s expansion in Brazil is still in its infancy.

“[Latin America] As we continue to adapt to local market practices and… focus on growth,” she said. “We are not focusing on the competition itself, because these markets [still have] E-commerce penetration rate is very low. “

Shopee’s strategy is centered on low-priced products on the platform, which analysts describe as a “gamified” shopping experience. Simple games can be played in the app, and users can win discounts and other rewards through these games.

Lower fees are another temptation. According to a recent report by Goldman Sachs, despite the recent increase in interest rates, compared with other leading platforms in Brazil, Shopee charges the lowest commissions for sellers of certain goods.

Chart comparing Shopee and MercadoLibre price points

Luiz Claudio Dias de Melo of consulting firm 360 Varejo believes that importing some features that make Shopee popular in Asia, such as live sales, can help it in Brazil and other countries.

“live streaming [in ecommerce] It has just started in Brazil. If you manage to replicate it here, it may be a road to success. ”

In addition to rewards, Shopee’s platform also promotes participation through video reviews and interactive chat functions between buyers and sellers.

But according to Morgan Stanley, all of this may not be enough to conquer Latin America and overthrow MercadoLibre, which has a market value of $92 billion and controls 26% of the region’s e-commerce market by the end of 2020.

MercadoLibre was founded in Argentina in 1999, and its share price has almost tripled since the beginning of 2020. Its net income increased by nearly three-quarters last year, just under US$4 billion.

“Brazil is the most competitive e-commerce market in the world,” said Fernando Yunes, head of MercadoLibre’s Brazilian e-commerce business. “It is difficult for international companies to win in this market.”

Walmart sold most of its Brazilian business in 2018, while Spanish company Glovo exited after a year.

Shopee must also deal with the specific challenges of doing business in Brazil. The country faces heavy bureaucracy, a highly complex tax system and poor transportation infrastructure.

Patrick said: “In a country with a vast territory, heavy traffic, and infrastructure improvements (including upgrading basic mailing services that no longer meet the needs of the fast-paced e-commerce market), handling the logistics of delivering goods is a major obstacle.” Bi is the CEO of Movile, the technology group behind the Brazilian food delivery app iFood.

MercadoLibre has established a logistics network that includes warehouses and covers approximately 90% of its deliveries in Brazil.

According to a person familiar with the business, Shopee had shipped 300,000 to 400,000 packages per day as of May, but did not have delivery capabilities. The app relies on Brazil’s postal service, which has suffered multiple strikes in the past decade, and its service speed may be slow.

But Sea’s Wang said that the low e-commerce penetration rate in Latin America means that the group sees the market as a “blue ocean.” “We see huge opportunities and long runways in these markets,” she said.

Additional report by Carolina Pulice in Sao Paulo

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