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Putra Muskita · · 6 min readShopee rights the ship – for now
After a few months of rough sailing, things seem to be getting smoother for Sea Group, and Shopee is playing a big role in this steadier course.
Sea’s ecommerce arm posted a 51% growth in service revenue this third quarter compared to the same period in 2021. That outpaced Shopee’s 28% increase in cost of revenue and improved gross profit margin while sales and marketing expenses went down by 16%.
Photo credit: Shopee
“These initiatives have accelerated Shopee’s path towards profitability,” CEO Forrest Li said during Sea’s latest earnings call. He added that the company is working towards adjusted EBITDA breakeven for Shopee by the end of 2023.
It’s clearly an encouraging development for Sea after Shopee’s multiple layoffs and market exits this year, especially in light of gaming unit Garena’s continued slump.
What’s next for the ecommerce giant?
Rivals old and new
In the earnings call, Sea said that most of its Asian markets including Indonesia have achieved positive contribution margin. Malaysia and Taiwan have even taken it a step further by achieving positive adjusted EBITDA for the quarter.
Together, the company’s Asian markets accounted for US$217 million in adjusted EBITDA loss, or 44% of the overall number.
A major part of this appears to be from a “meaningful” scaling back of marketing expenses, “especially around shipping subsidies,” said Li in his remarks. But these subsidies have also been a significant contributor to Shopee’s growth all these years.
There are limits to how much Shopee can reduce sales and marketing expenses before it risks losing ground to competitors. Could it still keep rivals at bay without more attractive delivery fees?
The good news for Shopee is that according to third-party estimates, it remains the dominant platform in terms of active users in markets like Indonesia, the Philippines, and Vietnam – Southeast Asia’s three biggest populations. In Indonesia, for instance, Shopee has more than 1.5x as many monthly active users as runner-up Tokopedia.
Photo credit: Tech in Asia
But fellow ecommerce player Lazada may be gearing up for a fresh round of competition. The Alibaba-backed marketplace is neck and neck with Shopee in Singapore and Thailand.
All in on logistics?
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The ecommerce giant has come through the first phase of the storm. Can it stay on track for 2023?
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