Making sense of Shopee’s layoffs

Even with the current economic downturn, it is perhaps shocking to see an ecommerce giant like Shopee resort to layoffs.

In other words, if things are bad for a regional powerhouse with multiple business lines, a money-making sister company, and a cash-rich parent, how bad would it be for the rest?

Photo credit: Tech in Asia

The context and data, however, raise a more complex question: Is Shopee merely searching for efficiency in view of the global slowdown, or are there choppy waters ahead?

The former may explain why the layoffs affected new business lines (ShopeePay and ShopeeFood, which were only launched in the past couple of years) as well as the more experimental expansions into Europe and Latin America. Meanwhile, Shopee’s main ecommerce business was spared (at least for now).

See also: What could go wrong for Shopee?

At the same time, the impending economic winter could deepen Shopee’s woes. As we previously observed, a slowing Garena and questions on Shopee’s long-term sustainability might complicate things.

ShopeePay and ShopeeFood: underperforming?

When ShopeePay first launched in Indonesia in 2020, the e-wallet quietly gained market share until it dethroned rivals Ovo and GoPay to lead the market by the end of the year with 32% of total processing value. That was also true in Malaysia, where ShopeePay is one of the top four e-wallets by market share, Tech in Asia understands.

But the layoffs are not necessarily a reflection of ShopeePay’s performance. Instead, it is ShopeeFood – which shares numerous executives with the fintech arm – that appears to have more issues.

Momentum Works has found that ShopeeFood lags significantly behind incumbents GrabFood and GoFood in Indonesia with an estimated 8% market share in 2021. In Malaysia and Thailand, ShopeeFood is estimated to hold just 3% market share.

See also: Will ShopeeFood bulldoze its way into Indonesia’s food delivery scene?

Vietnam is the lone bright spot for ShopeeFood. It’s where ShopeeFood’s journey as a standalone vertical began after Sea Group acquired local player Foody in 2017.

ShopeeFood was seen as such an effective project in Vietnam that Shopee replicated the service in other markets. Indeed, Momentum Works research estimates that ShopeeFood holds about 41% of food delivery market share in Vietnam – tied for first place with GrabFood.

Alarm bells ringing?