Shopee online shopping application owned by Sea group (Singapore) took only two years to become the most downloaded shopping application in Brazil. Shopee attracts users to the low-priced goods market by changing its approach to e-commerce, which is creating mini-games in the app and giving coupons to winners.
The Singapore-based business has combined online shopping with games from Garena, another Sea subsidiary moving into the mobile game business, the creator of “Free Fire”, which is downloaded the most in Brazil for 8 consecutive quarters. The move has helped generate sales estimated at almost a third of that of Brazil’s largest retailer Magazine Luiza SA.
In Singapore, Shopee only needs 5 years to become the most visited e-commerce website in Southeast Asia, surpassing two applications, Lazada – backed by Alibaba group (China) and Lazada. Tokopedia – backed by SoftBank Group (Japan).
“Shopee entered the Southeast Asian market quite late,” said analyst Jianggan Li from consulting firm Momentum Works, and this is an advantage that helps Shoppe “observe how other businesses solve problems and then build a system to ‘take shortcuts, stay ahead of’ those problems”.
Shopee’s rapid emergence has once again presented opportunities for foreign retailers to enter the South American market, which is dominated by regional players such as Magazine Luiza and Argentina’s MercadoLibre.
|Shopee is changing the e-commerce game in Brazil. Photo: Reuters|
Data from Brazilian payments company EBANX shows that Shopee’s launch in Brazil coincides with the outbreak of the Covid-19 pandemic, which has driven consumers away from brick-and-mortar stores, boosting the country’s 2020 e-commerce sales. This increased 44%, to 42 billion USD.
According to data from App Annie analytics platform, Shopee, along with Alibaba Group’s AliExpress app, is currently the top app in terms of downloads and usage time in Brazil.
Sharing with Reuters reporters, Shopee said that in the Brazilian market, the number of domestic sellers is now many times larger than foreign sellers.
However, to get this strong growth, Shopee is still suffering losses and has to rely on the support of Garena, Sea’s “super-profitable” game business. In the second quarter of 2021, Garena announced a profit before interest, tax, and amortization of $740.9 million, even if Shopee lost $579.8 million.
Itau BBA analyst Thiago Macruz said that the money generated by the “golden goose” Garena is being reinvested strongly in the Brazilian e-commerce market and has clearly shown successes.
Sea’s foray in Brazil is just one part of the group’s global ambitions. Sea-owned investment firm Sea Capital is also considering investing in startups in Latin America and other areas.
The group has also brought Shopee to Chile, Colombia and Mexico to expand the platform’s reach in the South American region. However, unlike the method of operation in Brazil, Shopee does not have a local staff in these countries, so it has chosen to cooperate with celebrities on social networking platforms to enhance brand identity to consumers.
Sea Group declined to comment on the matter.
Although Sea does not reveal much about Shopee’s activities in the Brazilian market, Itau BBA experts estimate that the value of goods and services of this application last year at about $ 2.27 billion.
The average price of products on this application is estimated at 40 reais ($7.7), less than a third of the selling price of MercadoLibre – the company that dominates the Brazilian e-commerce market and often sell branded and higher value products.
The biggest challenge for Shopee Brazil is the delivery in such a large country. The company has reduced its reliance on the local postal system this year in favor of private carriers, but is still competing with rivals with proprietary delivery services.
Shopee aims to establish a main logistics partner for each country in Latin America in the near future.
The company itself also expects that the growth of the e-commerce sector in the region will create more delivery partners, similar to what happened in Southeast Asia.
Commenting on the Brazilian market, Ms. Yanjun Wang, Sales Director of Sea group called it “a good market to continue investing”.
The level of competition in Latin America’s largest economy has increased when, just this month, Shopee’s rival AliExpress opened its market to domestic sellers with single-digit commission fees. AliExpress has been operating in Brazil for 11 years; Shopee did the same thing right after its first year of establishment.
Small business owner Luciana Carvalho started selling plastic packaging products on Shopee in February. She decided to open a Shopee store because of free shipping and only 6% commission, much lower than with MercadoLibre’s 17%.
“It’s easy to sign up, calculate commissions, get delivery cards, receipts. That makes us invest more in the platform,” Ms. Carvalho said.
In a move towards profitability, Shopee has increased its commission percentage to 18% for partners in Latin America – double that of markets in some Southeast Asian countries. Shopee’s move has shown the potential profit margin of this area. Ms. Carvalho herself continues to use Shopee, although she rates MercadoLibre higher for its “hard to beat” delivery system.
To further improve profitability, Shopee may start selling more premium items, like in Southeast Asia, analysts at investment bank Goldman Sachs said. In addition, Momentum Works analyst Jianggan Li also predicts Shopee will add financial services to its app in Brazil as it is doing with Shopee Indonesia.
“I wouldn’t be surprised if they took the No. 1 spot. Just look at what they’re doing in Singapore, Indonesia, Malaysia and Thailand,” Mr. Li said.
Source: ndh.vn – Translated by fintel.vn