Shopee doubles down on in-house logistics following Q1 growth

Image credit: Timmy Loen

In the first quarter of 2024, Shopee had increased both revenue and gross merchandise value. For the ecommerce giant to maintain the growth, however, building a long-term “competitive moat” appears to be key.

Here, logistics appears to be playing an increasingly big role. Tony Hou, CFO of Shopee’s parent Sea Group, said during the latest earnings call that more than half of Shopee’s orders in Asia are fulfilled by SPX Express, Shopee’s in-house logistics arm.

The number is even higher in Brazil, where more than 70% of orders are served by SPX Express.

When asked how SPX Express contributes to better unit economics, Hou said that one fundamental reason is that third-party logistics (3PLs) charge a profit margin to their customers, whereas doing it in-house means “we retain that margin.”

This means that SPX Express’ cost per order is lower than 3PLs in the market. In addition, the cost per order also decreased by 15% year on year for Asia in Q1.

Doing logistics in-house also lets Shopee provide a “differentiating factor” in terms of service quality. Sea Group chairman and CEO Forrest Li noted that “in the first quarter, about 70% of SPX Express orders in Asia were delivered within three days of order placement.”

Logistics aside, the company also reported a 23% drop in spending on sales and marketing. This is partly because of better performance from the marketplace in general, said Hou, but also because of better unit economics from livestreaming.

The company touted its substantial investments in its livestreaming business in the Q3 and Q4 2023, which it said have started to bear fruit. Li said that based on the average daily orders made during livestreams, Shopee became Indonesia’s largest livestreaming ecommerce platform in Q1.

“I think we do see our livestream volumes still growing in most of our markets, but the unit economics actually improved significantly for various other markets,” Hou said.

Earlier this month, Tech in Asia reported about Shopee’s efforts to compete with TikTok Shop in its social commerce capabilities. Through incentives, Shopee has actively pursued creators in Indonesia, its biggest market, to jump ship and do its livestreaming on Shopee instead.

See also: Sea Group’s financial health in 7 charts