This works! Shopee is a game changer in Brazilian e-commerce

According to Reuters on August 30, Sea Ltd. Shopee became the most downloaded shopping app in Brazil in just two years. It gained a huge market share among Brazilian shopping apps by changing the rules of the game - offering coupons to winning users within the app to increase users' access to its low-cost market.

In Southeast Asia, Shopee became the most visited e-commerce site in just five years, surpassing Lazada, backed by China's Alibaba Group Holding Ltd., and Tokopedia.T, backed by Japan's SoftBank Group Corp.

Li Jianggan, an analyst at consulting firm, said Shopee has a record of entering the market late in Southeast Asia, usually observing how others solve existing problems and then building a system on its own to leapfrog those problems.

AliExpress is very close to Shopee in terms of product offering , but the difference is that AliExpress has a history in Brazil for 11 years. Just this month, AliExpress opened its market to domestic sellers and charged single-digit commissions, intensifying competition in Latin America's largest economy. In order to make a profit, Shopee did something similar after its first year.

Some small business owners started selling plastic packaging products on Shopee in February. They were attracted by the free delivery and 6% commission. The ease of registration, calculating commissions, obtaining delivery labels and receipts greatly attracted small business owners to invest in the platform.

To reach profitability, Shopee has since increased its commission to 18%, while in some Southeast Asian countries the marketplace can charge double that, an indication of potential profit margins in Latin America.

Data from a Brazilian payment company shows that Shopee caught up with the trend of consumers staying away from physical stores and launched a shopping app in Brazil, pushing up e-commerce sales by 44% to US$42 billion in 2020.

Although the data shows that Shopee is still losing money, supported by its profitable gaming division, which posted an adjusted EBITDA of $740.9 million in the second quarter of this year, while the e-commerce division lost $579.8 million, Itau BBA analysts said that funds generated by one side of the business are being actively reinvested in Brazilian e-commerce and are succeeding.

Shopee is not only entering Brazil, but its investment arm is also considering investing in startups in Latin America and elsewhere, people familiar with the matter said. It has also brought Shopee to Chile, Colombia and Mexico, where it has no local employees and can work with social media to increase visibility, people familiar with the matter said.

The average price of Shopee's products in the Brazilian market is just 40 reais, equivalent to $7.716, less than a third of e-commerce leader MercadoLibre, but analysts estimate that the platform sold products and services worth 12 billion reais ($2.314 billion) last year .

Some analysts also said that to further improve profitability, Shopee may start selling high-priced goods, as it has done in Southeast Asia, and Li Jianggan, an analyst at consulting firm, expects Shopee to add financial services to its Brazilian app as it has done in Indonesia.

There are opportunities, and of course challenges. Shopee’s biggest challenge in Brazil is that the country’s delivery space is very vast. This year it reduced its reliance on the local postal system in favor of private operators, but it is still competing with competitors with proprietary express delivery services. Shopee’s goal is to have a major logistics partner in every country in the region.

Sea Ltd Shopee executives told analysts on a conference call this month that the company itself expects e-commerce growth in the region to spawn more delivery partnerships, while group Chief Corporate Officer Wang Yanjun also called Brazil a " good market to continue investing in ."

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