As Shopee succeeds in Southeast Asia, rivals such as Tokopedia are heating up the competition
- The mobile commerce platform owned by Singapore-based Sea Group was the most downloaded in the region’s six largest markets last year, including Indonesia and Thailand
- But its competitors are also vying for a slice of Southeast Asia’s US$62 billion e-commerce sector, looking to secure resources and partnerships as the sector evolves
“Shopee’s growth has been impressive. The company is supported by the stability and capital from Sea, making it possible to push its marketing to a new height,” said Chandra Tjan, co-founder and general partner at Jakarta-based Alpha JWC Ventures, noting how the company had tapped superstars such as K-pop group Blackpink and footballer Cristiano Ronaldo as brand ambassadors, and drew customers in through gamified features on the app and discounts.
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But this success has not gone unnoticed by Shopee’s rivals, who have been forced to rethink their strategies in the fierce competition for dominance in the region’s US$62 billion e-commerce sector.
Some of these companies have responded by joining forces or beefing up their resources. Gojek and Tokopedia, the two most valuable technology companies in Indonesia, are reportedly in talks for a merger that would create a company with an estimated value of US$18 billion. This “super app” behemoth would be a one-stop app catering to users’ multiple needs, from ride-hailing to booking flights and digital payments.
“I think part of the reason for the [Gojek-Tokopedia] merger is definitely pressure from Shopee, as well as Grab. In the last few months the capital market has been pretty good and I think that has benefited Shopee a lot,” said Jianggan Li, chief executive at Singapore-based venture capital firm Momentum Works.
“If you look at [Sea’s] share price and their ability to raise more money very quickly, that puts private companies at disadvantage, because private placement takes a lot of time for negotiation, whereas if you’re publicly listed you can issue additional shares and [money can be raised] very quickly.”
Bukalapak, an Indonesian e-commerce firm valued at US$2.5 billion that is backed by Chinese fintech giant Ant Group, has also made several moves in the past few months. It last month announced a partnership with Standard Chartered to boost its digital financial services offering, while it is also said to have recently secured US$100 million in funding from Microsoft. Chief executive Rachmat Kaimuddin has said Bukalapak is considering going public this year.
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Kuo-Yi Lim, co-founder and managing partner at Singapore-based Monk’s Hill Ventures, said it was likely that major e-commerce players in Southeast Asia would accelerate their activities in the next few years to help them scale up in the region.
“What we’ll likely see in the next few years is the [fragmenting] of the e-commerce scene, and it means you may see several major alliances and camps across the region. A couple of drivers that are going to make it happen are the availability of the capital and liquidity in the market in general,” Lim said.
“I believe over the next few years you’re going to start seeing [this activity] across several major players, whether it’s Chinese or American or Japanese, in the e-commerce scene, and Shopee is probably one of the key centers of that grouping.”
However, investors have questioned whether these price cuts and other subsidies can sustain Shopee’s business without risking its path to profitability.
“What will be interesting is to see whether their strategy holds in the long run and if they manage to shape customer behaviour. This will be tricky as Indonesians are very price sensitive, so it’ll be interesting to see what will happen once the discounts and gimmicks end,” said Tjan of Alpha JWC Ventures.
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While the likes of Shopee, Lazada, and Tokopedia have become household names, analysts say the sector is not close to maturing as Southeast Asia is a complex market with different characteristics in each economy.
“Southeast Asia is a complicated region, so there’s still opportunity for any sort of country-specific e-commerce player to be able to carve out a very nice and sizeable niche for themselves,” Lim from Monk’s Hill Ventures said. “I don’t think it is going to be a one-winner-take-all situation across the entire region. We’re not seeing the end of the evolution yet and we’ll see a lot more interesting innovations coming forward.”
