Singapore’s Shopee changes the game in the e-commerce sector in Brazil

August 30 (Reuters) – Shopee of Sea Ltd (SE.N) took just two years to become Brazil’s most downloaded shopping app, gaining users in its low-cost market with its focus on Game Changing Ecommerce: Mini in Apps – Games that offer coupons to winning users.

The Singapore-based company has combined online shopping with new games from its mobile gaming arm Garena, creator of “Free Fire”, Brazil’s most downloaded title for eight consecutive quarters, to generate estimated sales analysts in almost a third of the local champion Revista Luiza SA (MGLU3.SA).

Back home, Shopee only needed five years to become the most visited e-commerce website in Southeast Asia, surpassing Lazada, with the support of Alibaba Group Holding Ltd (9988.HK) and Tokopedia, with the support of the Japanese SoftBank Group Corp. (9984) .T).

“Shopee has a track record in Southeast Asia of having entered the market late, analyzing how others have solved existing problems and then building a system to bypass those problems,” analyst Jianggan Li told Momentum Works consulting firm.

The start of Shopee’s rise highlights the space left for foreign entrants to grow in a sector dominated by regional companies such as Magazine Luiza and MercadoLibre Inc (MELI.O).

Of course, the timing of the launch was fortuitous, as it was launched in Brazil just as the COVID-19 pandemic drove consumers away from physical stores, increasing e-commerce sales from 2020 by 44% to $ 42 billion, showed data from Brazilian payment company EBANX.

Shopee, similar to Alibaba’s aliexpress, which wears Chinese-made shoes, emerged as Brazil’s leading app for downloads and usage time, showcasing data from the App Annie analytics platform.

Still, in the pursuit of growth, Shopee continues to lose money, favored by Sea’s profitable gaming division. In the second quarter of this year, Garena posted a pre-interest, tax, depreciation and amortization (EBITDA) adjusted profit of $ 740.9 million, although the e-commerce sector lost $ 579.8 million. of dollars.

“The money generated by part of the business, which is a cash cow, is being aggressively reinvested in Brazilian e-commerce, successfully,” Itau BBA analyst Thiago Macruz said.

GLOBAL AMBITION

Sea’s foray into Brazil is just one element of its global ambition. The Sea Capital investment group is also considering putting money into emerging companies in Latin America and beyond, said a person with knowledge of the issue, who was not allowed to speak to the media and who was no longer identified. .

The firm has also brought Shopee to Chile, Colombia and Mexico, where, unlike Brazil, it has no local staff and has therefore partnered with influencers on social media to increase brand awareness, according to van say two people familiar with the subject.

Sea, among whose shareholders is Chinese gaming leader Tencent Holdings Ltd (0700.HK), declined to comment.

The firm has released little data on Shopee Brazil, but Itau BBA analysts estimated that the value of goods and services sold on the platform last year reached 12 billion reais ($ 2.272 billion).

According to other estimates, the average market price is 40 reais, less than a third of that of the e-commerce leader MercadoLibre, which often carries the most valuable branded products.

Sea’s biggest challenge for Shopee Brazil is delivery in such a vast country. This year it reduced its reliance on the local postal system in favor of private carriers, but it still competes against rivals with private delivery services.

Shopee intends to have a major logistics partner by country in the region, a company source told Reuters.

The same company expects e-commerce growth in the region to generate more delivery alliances, as happened in Southeast Asia, Sea executives told analysts in a call this month.

In the same call, the group’s corporate director, Yanjun Wang, said in Brazil “a good market for continued investment.”

LOCAL SELLERS

Competition in Latin America’s largest economy intensified this month when Shopee’s closest rival in terms of product offering, AliExpress, opened its market to domestic sellers who charged single-digit commissions. . AliExpress had been in Brazil for 11 years; Shopee did the same after her freshman year.

Small business owner Luciana Carvalho began selling plastic packaging products to Shopee in February, attracted by the free shipping and 6% commission, compared to MercadoLibre’s 17%.

“It’s easy to register, calculate the commission, get the delivery tags and receipts. It makes us invest more in the platform,” he said.

In a move toward profitability, Shopee has since raised the commission to 18%, to double what markets can charge in some Southeast Asian countries, indicating possible Latin American profit margins. . Carvalho continues to use Shopee, although he prefers MercadoLibre for its “unbeatable” delivery.

To further improve profitability, Goldman Sachs analysts said Shopee could start selling items with higher notes, just as it has done in Southeast Asia. Le of Momentum Works expects Shopee to add financial services to its Brazil app, just as it has done in Indonesia.

“I wouldn’t be surprised,” if they reached number one, Li said, “considering what they’ve done in Singapore, Indonesia and Malaysia, Thailand.”

(1 $ = 5,2948 reals)

Jimin Kang Reports; Additional reports from Fanny Potkin; Edited by Christian Plumb and Christopher Cushing

Our standards: the principles of trust of Thomson Reuters.