Singapore’s Shopee changes the game in Brazil’s e-commerce sector By Reuters

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© Reuters. Shopee Singapore Offices 03/05/2021 REUTERS/Edgar Su

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by Jimin Kang

(Reuters) – Sea’s Shoppe took just two years to become the most downloaded e-commerce app in Brazil, gaining users to its low-cost marketplace with a revolutionary approach to e-commerce: minigames within the app that offer coupons to attract users.

The Singapore-based company has combined online shopping with the gaming expertise of its mobile gaming arm Garena – creator of “Free Fire”, the most downloaded title in Brazil for eight consecutive quarters – to generate sales that analysts estimate will reach nearly a third of local champion Magazine Luiza (SA:).

In his country, Shopee took just five years to become the most visited e-commerce site in Southeast Asia, surpassing companies such as Lazada, financed by the Chinese Alibaba Group, and Tokopedia, which is supported by the Japanese SoftBank Group.

“The Shoppe has a history in Southeast Asia of coming to market late, seeing how others have solved problems and building a system that overcomes those problems,” said analyst Jianggan Li of consultancy Momentum Works.

The Shopee’s initial growth underscores the open space for foreign participants to grow in an industry that was dominated by regional companies such as Magazine Luiza and Mercado Livre (NASDAQ:).

The startup’s timing was also fortuitous, with its launch in Brazil at a time when the Covid-19 pandemic was driving consumers away from physical stores and making 2020 e-commerce sales grow 44%, to $42 billion, according to data from the Brazilian payment company EBANX.

GLOBAL AMBITION

Sea’s foray into Brazil is just one element of its global ambition. The investment arm Sea Capital is also considering putting money into startups in Latin America and elsewhere, said a person with knowledge of the matter.

The company also took Shopee to Chile, Colombia and Mexico, where, unlike Brazil, it has no local employees and has partnered with social media influencers to grow its brand, said two people with knowledge of the matter.

Sea, whose shareholders include Chinese game leader Tencent Holdings, declined to comment.

Sea’s biggest challenge for Shopee Brazil is delivery in such a large country. It has reduced dependence on the local postal system this year, favoring private couriers, but is still competing with rivals who have their own delivery systems.

LOCAL SELLERS

Competition in Latin America’s biggest economy grew this month when the Shopee’s closest rival in terms of product offerings, AliExpress, opened its marketplace to domestic sellers with a single-digit commission. AliExpress had been in Brazil for 11 years; Shopee did something similar after its first year.

Owner of a small business, Luciana Carvalho started selling plastic packaging at Shopee in February, attracted by the free shipping and 6% commission – compared to 17% for Mercado Livre.

Seeking more profitability, Shopee has increased commission to 18% since then – almost twice what marketplaces can charge in Southeast Asian countries, indicating potential profit margins in Latin America. Carvalho continues to use Shopee, although he prefers Mercado Livre for its “unbeatable” delivery.

(Additional reporting by Fanny Potkin)