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Shopee Sea Ltd Singapore Southeast Asia E-commerce

Southeast Asia's Sea aims to be the next Amazon

Rebbeca Ren

posted on September 22, 2021 6:18 pmEditor : Wang Boyuan

As a winner of the digital transformation trend stimulated by COVID-19, Sea Limited, the Singapore-headquartered tech giant, consolidated its leading position in Southeast Asia's e-commerce and video game sectors. 

However, instead of indulging in its dominance in the region, the upstart cautiously expands its business scope and pushes into broader overseas markets.

Last week, the company raised $6.3 billion in an equity and convertible bond sale to fuel its global expansion. It's Sea's second financing in less than a year after raising $2.6 billion last December.

Citing sources with knowledge of the matter, Reuters reported on September 6 that Shopee, the e-commerce arm of Sea, is preparing to launch in Poland and is currently recruiting sellers.

Online sales in Poland, the central European country, account for 14% of all retail sales, which is significantly lower than the EU average. Since most online shopping is still done locally, local e-tailer Allegro is more prevalent, with over 36% market share in 2020.

Although compared with other developed markets, the country's e-commerce is relatively nascent, but its geographic location is extremely important. As the main logistics hub of the European Union, Poland transports more than a quarter of cross-border freight in the region and accounts for about 30% of the cabotage market. Therefore, enrolling in this market may bring Shopee the opportunity to extend its tentacles to other European markets in the future.

In order to woo more sellers to board, Shopee will offer them commission-free trading for the first six months and no subscription fee. As for the customers' end will also offer free delivery with no minimum order value right after its debut in Poland.

By taking a similar aggressive marketing approach, Shopee overtook Argentina-based MercadoLibre in just two years, becoming Brazil's most downloaded shopping app.

Except for Poland, Shopee is planning the launch in India and Argentina in the coming months and is reportedly set to roll out a TikTok-like short-video product in Southeast Asia. Besides, the company has been growing its food delivery service, which is also a cash-burning business, to challenge rivals in Vietnam, Thailand, Indonesia, and Malaysia.

However, as some countries have become increasingly cautious about globalization, Shopee's expansion may encounter quite a few resistance. 

As a member of the European Union, Poland abides by the EU's strict personal data protection and taxation regulations, which will curb the expansion of cross-border e-commerce in the country to a certain extent. A new value-added tax that aims to limit the dumping of low-priced goods into the country by cross-border e-commerce firms came into effect in July. 

On September 16, India's trade body wrote to Prime Minister Narendra Modi, seeking his intervention in curbing the entry of Shopee into the Indian market. "Tencent owns nearly 25% of Shopee's parent company Sea...Sea uses Tencent cloud to store data. Also, its gaming subsidiary, Garena, licenses most games from Tencent leading to huge royalties and the investment ensures that there is significant control and access to data," Chairman of The Confederation of All India Traders wrote in the letter.

Game of the e-commerce is ever-changing, and there is no guarantee that Shopee's base camp will always be indestructible. Local competitors such as Thegioididong in Vietnam and Tokopedia in Indonesia are also on the rise. The Korean e-commerce jumbo Coupang set up an office in Singapore in July, targeting Southeast Asia. 

Investors always favor companies with scrappy spirits. Sea has shown incredible business growth since IPO, with its market value growing from $4.5 billion to $190 billion within four years, even though it's not profitable by any means.

The only segment that generated positive operating income in the second quarter was its video game segment, whose $600 million in operating income got offset by more than $900 million in operating losses from the rest of the business.

Original Photo by Bernard Hermant on Unsplash