Broker: Maybank Research Pte Ltd
Date of Report: June 13, 2025

Sea Ltd vs. Mercado Libre: The Battle for Brazil’s E-Commerce Dominance and Its Implications for Investors

Executive Summary: Intense Competition Reshapes Brazil’s E-Commerce Landscape

Brazil’s fast-growing e-commerce market is witnessing a fierce battle between regional powerhouses: Sea Ltd’s Shopee and Mercado Libre (MELI). A recent strategic shift by MELI, lowering its free-shipping threshold and seller fees, is a direct attempt to challenge Shopee’s mass-market stronghold. This article provides a comprehensive breakdown of the competitive dynamics, financial implications, and investment outlook for Sea Ltd (NYSE: SE), with a detailed look at company performance, market shares, and scenario analysis.

Mercado Libre Ups the Ante: Free Shipping and Seller Fee Reductions

Mercado Libre, Brazil’s largest e-commerce player, has slashed its free shipping minimum from BRL79 to BRL19 (about USD3.40), making almost all items eligible for free delivery. In parallel, seller shipping fees have been reduced by as much as 40%, with MELI absorbing these costs. The move is a calculated attempt to penetrate the low-to-mid price segment—a segment where Shopee has built a substantial presence, with average order value (AOV) on Shopee roughly three times lower than MELI’s.

• MELI’s new free-shipping promotion targets Shopee’s mass-market niche
• Although MELI has been gaining market share, Shopee is growing even faster
• Shopee’s value proposition remains highly competitive on total product cost and seller take-rate

Shopee’s Enduring Edge: Pricing, Seller Economics, and Logistics

Despite MELI’s aggressive pricing, Shopee retains a distinct edge on several fronts:

• Product Pricing: Shopee’s products are, on average, 11-12% cheaper than MELI’s across a basket of popular goods, even after MELI’s recent discounts.
• Faster Delivery: Median delivery times for Shopee are typically shorter (3.5 days versus MELI’s 7 days under the new free shipping program).
• Lower Seller Take-Rates: Shopee’s sellers face a lower burden, especially on low-ticket items, even post-subsidies.

A comparative analysis of popular products—from electronics and apparel to books—shows that MELI’s pricing remains at a premium to Shopee, with some exceptions in high-value categories. Shopee’s seller fees are especially favorable for low-ticket mass-market items, while MELI’s fee structure is more advantageous for higher-ticket listings.

Brazil’s E-Commerce Market: Sizing Up the Contenders

Brazil’s e-commerce market is estimated at USD50-55 billion in gross merchandise value (GMV), with more than six significant players. Shopee has overtaken Magazine Luiza in GMV terms, with an estimated annualized GMV of USD15 billion as of 1Q25.

Head-to-Head: Detailed Product and Seller Fee Comparisons

A product basket analysis reveals specific price and delivery advantages for Shopee, while MELI’s new fee structure narrows, but does not eliminate, the gap:

Simple average price premium: 12% for MELI vs Shopee; Median days to ship: 7 (MELI) vs 3.5 (Shopee)

Seller Fee Comparison

• MELI sellers pay 30–41% for products below BRL79 (premium listing with shipping), vs. 26–30% for Shopee sellers.
• Above BRL79, MELI’s seller fee is 16.5% vs. 24% for Shopee, but Shopee sellers often do not need to participate in the free shipping program for higher-ticket items.

Shopee’s Response and Strategic Moves

• Shopee has invested in logistics: 11 distribution centers, a new logistics node in Goiás, and a fully managed fulfillment center in Greater São Paulo for same- and next-day delivery.
• The company is expanding upmarket by onboarding over 800 major brands (Disney, Lego, Havaianas, L’Oréal), gradually increasing its AOV and entering higher-value categories like electronics and automotive parts.
• Shopee’s value proposition, especially for price-sensitive consumers and sellers, remains robust even after MELI’s escalation.

Scenario Analysis: What If MELI’s Aggression Escalates?

Although Shopee Brazil is not valued separately, it is estimated at ~USD10 billion, contributing 9% to Sea Ltd’s sum-of-the-parts (SoTP) valuation. In a downside case where MELI’s strategy leads Shopee Brazil into losses and a valuation trough (0.5x EV/sales, as seen in late 2023), the business value could shrink 87% to just USD1.3 billion, reducing Sea Ltd’s SoTP by 8% (USD192 to USD176 per share).

Shopee’s ASEAN Stronghold and Growth Outlook

• Shopee is the dominant e-commerce platform in ASEAN and Taiwan, riding on the under-penetrated regional e-commerce market (2-3x below developed markets).
• ASEAN GMV is expected to grow at a 15% CAGR through 2030.
• Sea Ltd’s robust balance sheet (USD10.3 billion cash as of 1Q25) and in-house logistics remain key competitive advantages.
• Risks from newer entrants like TikTok Shop are easing, while cross-border competitors like Temu face higher taxes and weaker value propositions.

Comprehensive Financial Overview of Sea Ltd

Price Target, Shareholder Structure, and Stock Performance

• Current Share Price: USD153.42
• 12-month Price Target: USD192.00 (+25%)
• 52-week High/Low: 170.90 / 59.82
• Market Capitalization: USD87.4 billion
• Major Shareholders: Tencent (18.6%), Li Xiaodong (17.1%), Gang Ye (6.1%)

Sea Ltd’s share price has delivered a stellar 106% return over the past 12 months, outperforming the NYSE composite index by 83%.

Risks and Upside Drivers

• Upside: Stronger-than-expected user growth, Shopee’s further market share gains, and robust performance in digital financial services.
• Risks: Macroeconomic uncertainties impacting consumer spending, intensified competition (especially from new entrants), and higher-than-expected credit costs in SeaMoney.

The risk of TikTok Shop disruption is easing, while cross-border platforms like Temu face unfavorable unit economics due to tax changes.

ESG and Social Impact Considerations

• Sea Ltd is committed to social good, including education and empowerment of merchants, especially MSMEs across Southeast Asia.
• Data security is a key focus, with robust encryption and monitoring practices in place.
• Diversity: 46% of Sea’s 30,000+ global workforce are women; 46% of middle to senior management roles are held by females.
• Sea provided more than USD35 million in COVID-19 support packages and significant donations to SMEs and communities.

Other Key Players: Amazon and Magazine Luiza

• Amazon (AMZN US): Competing in Brazil but losing share to Shopee and MELI. Not rated in this report.
• Magazine Luiza (MGLU3 BZ): Traditional mass-market player, now overtaken by Shopee in GMV. Not rated in this report.

Conclusion: Investment Implications and Strategic Outlook

Mercado Libre’s recent moves mark a significant escalation in Brazil’s e-commerce price wars, but Shopee’s value proposition—superior pricing, faster delivery, and advantageous seller economics—remains intact. Both MELI and Shopee are gaining share at the expense of global giants like Amazon and local incumbents such as Magazine Luiza. While a worst-case scenario could see an 8% downside to Sea Ltd’s fair value, the company’s competitive position, balance sheet strength, and cross-market expansion provide a robust foundation for continued growth.

Investors should monitor the evolving competitive dynamics, but Sea Ltd remains a compelling play on emerging market e-commerce and digital services, with substantial upside potential and proven resilience in the face of competitive threats.