Date of Report

30 September 2024

Broker

UOB Kay Hian

Overview

Shopee, part of Sea Ltd, has developed an integrated platform that includes digital entertainment, e-commerce, and digital financial services. The platform is localized to meet the unique characteristics of its markets, showcasing its adaptability and strategic focus.

Strategic Developments

• Partnership with YouTube: Shopee has entered into a partnership with YouTube to enhance site traffic. This collaboration involves launching YouTube Shopping in Indonesia, Thailand, and Vietnam, allowing users to purchase products directly via links on YouTube. With Indonesia boasting a significant user base of 139 million, this initiative is expected to boost visibility for Shopee sellers significantly.

• Take Rate Hikes: In the last quarter, Shopee implemented a second round of take rate hikes across seven operating markets. Despite these increases, Shopee has maintained impressive growth in gross merchandise volume (GMV), indicating a strong competitive moat in the e-commerce landscape. Shopee reported a 29% year-over-year growth in 2Q24 GMV, showcasing its resilience against competitive pressures.

Competitive Position

Shopee’s competitive take rates are notably higher than those of its main competitors, Lazada and TikTok Shop, in most markets. This indicates Shopee’s strong market position and its ability to command higher fees without adversely affecting seller participation or consumer interest.

Sales Performance

Shopee has successfully leveraged various promotional strategies, such as free shipping, flash sales, and themed promotions. Notably, the Shopee Live 9.9 campaign in Thailand resulted in an eightfold increase in sales, highlighting the platform’s effectiveness in driving consumer engagement, even amid lower purchasing power.

Future Prospects

• Expansion of SeaMoney: Shopee is also looking to expand its digital financial services through a consortium aiming to apply for a virtual banking license in Thailand. This strategic move is expected to tap into a large unbanked market, enhancing Shopee’s ecosystem and service offerings.

• Profitability Outlook: Management has guided towards profitability for the e-commerce segment in 3Q24, which could lead to improved margins and EBITDA in the coming quarters.

Conclusion

Shopee continues to build a robust competitive position within the e-commerce landscape through strategic partnerships, pricing power, and innovative marketing initiatives. As it moves forward, the expansion into financial services represents a significant opportunity for growth.