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Shopee owner, Sea posts upbeat results on e-commerce strength and 2 million local sellers in Brazil

E-commerce phenomenon bets on expanding the base of local sellers to increase the volume and frequency of purchases, which also leads to more logistical efficiency.

Photo: REUTERS/Edgar Su
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E-commerce phenomenon Shopee, which is part of Singapore-based Sea, reported a 64% growth in revenue in Q1 2022 to $1.5 billion, noting that it managed to nearly halve “the loss per order” (an essential operational indicator of the company) in Brazil.

In the document, the company explained that it had a quarterly operating loss measured by the ‘Adjusted Ebitda loss per order,’ excluding everyday administrative expenses, of $1.52, an 45% improvement compared to the same period last year.

The company explained in the report that this is basically due to the start of operations with local logistics and sellers, who increase the volume and frequency of purchases, which, in turn, also allows the company to optimize the logistics part.

“We invest in growing a broad base of buyers and sellers across comprehensive core online marketplace categories and deepening engagement. This promotes user growth, conversion, and retention as well as purchase frequencies which allows us to efficiently grow order volume and density. (…) With sufficient and continually improving order volume and density, we aim to achieve cost leadership for our ecosystem (…) This also allows us to efficiently cross-sell more products and service offerings,
including digital financial services, especially to the underserved mass market,” said the company in a conference with analysts.

READ ALSO: Shopee releases live commerce feature in Brazil

And the growth of the base of local sellers in Brazil is at an accelerated pace. If there were more than 1 million Brazilian sellers at the end of last year on Shopee, now, according to the new balance sheet, there are more than 2 million. More than 85% of the company’s sales in the country already occur via local sellers.

Also in the report, the company explained that Brazilian sellers range from first-time SMEs to more established brands.

Shopee’s strategy of investing in local vendors is right: to remain competitive and grow in Latin America, more and more international platforms are betting on a hybrid strategy that combines the operational advantages of a global brand with local service, such as Amazon and from AliExpress.

The study Beyond Borders 2021/2022, published by the Brazilian fintech EBANX, which also owns LABS, shows that marketplaces’ hybridization allows fairer competition between global and local players.

Sea also highlighted in its earnings report that the Shopee app maintained the leadership in downloads and time spent by users in the segment in Brazil in the quarter while ranking second in terms of monthly average of active users. The company, which attributed the data to data.ai, also said that it topped the industry ranking in monthly active users in March and April.

READ ALSO: Magazine Luiza launches its fintech arm, Fintech Magalu

In the balance of the quarter, Sea highlighted that it is close to reaching breakeven in its operations in Southeast Asia and Taiwan and that, just two years after its arrival in Brazil, it is “close to conquering the leadership of the market” in the country.

A Citi survey shows a less optimistic scenario. According to a report released by analysts at the bank last week, Shopee’s downloads fell 32% in Brazil in April in the annual comparison, after slight drops in March and February.

The downward trend in downloads, according to Citi, is seen in all monitored companies. In terms of consumer traffic on its website, Shopee outperformed its peers, with a growth of 74% in April year on year, although the industry points to a decline.

In May, Shopee received approval from the Central Bank to operate as a payment initiator (a type of payment institution) in Brazil.

After a meteoric run in 2020 and part of 2021, with multiple quarters of triple-digital revenue growth and expansion into newer markets including Mexico, Spain, and South Korea, Sea’s growth tapered as the pandemic-fuelled boom in e-commerce and digital entertainment waned.

READ ALSO: ‘Instant’ will be the watchword in Latin America e-commerce for the next decade

Because of that, Sea widened its full-year 2022 e-commerce revenue outlook range to between $8.5 billion and $9.1 billion from $8.9 billion to $9.1 billion forecasts earlier. “We still think the original guidance is achievable,” Chief Legal Officer Yanjun Wang said on a post-earnings call, adding that Sea’s key Southeast Asian markets have so far been more resilient to COVID-19 outbreaks, while inflation has also been under control in the region.

The company’s first-quarter total revenue rose 64.4% to $2.90 billion, topping analysts’ expectations of $2.76 billion, according to Refinitiv IBES data. In addition to Shopee, Sea also owns financial services company SeaMoney and the gaming unit Garena.

EBANX LABS
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