SEA’s Shopee is one of the largest eCommerce sites in Southeast Asia, and the company now has its sights on dominating the market in Latin America. The company is steadily expanding its presence in the region after the success of its eCommerce platform in Brazil[i]. After first launching in 2019, Shopee had become the 9th most downloaded mobile app in Brazil by January 2021. However, according to App Annie data, rival and longer established eCommerce platform, MercadoLibre had more monthly active users (MAUs).
Shopee has since launched its app in Mexico and will shortly offer online sales via its website and localised apps in Chile and Colombia, according to reports.[ii] With reputedly no sales staff or offices in those countries, SEA appears to be relying on an “asset-light” strategy that uses social media influencers for advertising its services while partnering with local merchants and delivery firms to handle sales and logistics.
Shopee also has an advantage in combining online shopping with games from its mobile division Garena, including battle royale title Free Fire which also topped App Annie’s rankings for MAUs, downloads, and consumer spend in Brazil and Mexico in January 2021. The game isn’t as popular in Chile or Colombia but was still the top-ranked game for consumer spending in both countries.
The link between Shopee and Garena Free Fire isn’t coincidental. Garena’s profits, which reports suggest topped US$2bn in 2020 – also give SEA the investment resources it needs to fund Shopee’s expansion. Garena’s other popular games include PUBG, League of Legends, Arena of Valor, Call of Duty Mobile and FIFA.
Digital wallets increasing users and payment values
SEA also has a digital financial services arm SeaMoney, which offers two digital wallets – ShopeePay and Airpay – currently available only in the Southeast Asian countries of Indonesia, Malaysia, the Philippines and Singapore (ShopeePay) and Thailand and Vietnam (Airpay). Both allow customers to use their smartphones to shop online, transfer money and pay for goods in physical stores at select merchant partner locations.
SeaMoney is a minor component of SEA’s business by revenue, though the company doesn’t split out the performance of its digital financial services unit. Out of US$4.4bn of total turnover in FY21 (up 101% year on FY19), the company reported GAAP revenue from eCommerce and other services increased 116% year on year to US$1.8bn. Digital entertainment – which includes games and related content – accounted for US$2bn (up 78% on FY19), with the remainder coming from unspecified product sales.
Of all its business units, however, it was digital financial services that saw the most significant increase in sales and marketing expenses (up 430% year on year to US$415m in FY20) as SeaMoney pushed hard to accelerate the adoption of its mobile wallet services.
Those efforts appear to be reaping significant rewards. The company handled US$7.8bn of total payment volumes in 2020, supporting 23.2m paying users in the fourth quarter of that year. By the second quarter of 2021, mobile wallet total payment volumes had increased to US$4.1bn, up almost 150% on Q220 and 21% on Q121 (US$3.4bn). The number of quarterly paying users for SEA’s mobile wallet services also expanded to 32.7m in the same period, triple the number in Q220 and up from 26.1m in Q121.
LatAm ready to embrace digital wallets
When SEA does decide to launch its digital wallets in Latin America to complement its existing eCommerce and gaming businesses, it is likely to find a large pool of potential customers. The region bears many similarities to Southeast Asia in as much as many adults don’t have an account with a financial institution according to World Bank global financial inclusion data – only 37% in Mexico for example and 46% in Colombia, rising to 70% in Brazil and 74% in Chile. Credit card ownership is also low compared with other regions – less than 10% in Mexico and 14% in Colombia, rising to 27% in Brazil and 30% in Chile.
The appetite for mobile payments appears to be growing, however. Around 20% of Internet users aged between 16 and 64 in Colombia used an OEM mobile payment service like Apple Pay, Google Pay or Samsung Pay in the third quarter of 2020, according to GlobalWebIndex. That number rises to 27% in Mexico and 36% in Brazil. Around 5% of adults in Brazil, Colombia and Mexico also have mobile money accounts which store funds in an electronic wallet linked directly to a mobile phone number, rising to almost 19% in Chile.
Those digital wallets can be put to good use in funding their eCommerce activity, either linked to Shopee or otherwise. GlobalWebIndex estimates that almost 51% of internet users aged between 16 and 64 in Brazil purchased a product online using their mobile phone in the third quarter of 2020 (54% in Mexico and 45% in Colombia). Almost two thirds (66.3%) of Colombians also used a shopping app on a mobile phone or tablet, a figure which rises to 77% in Mexico and 79% in Brazil.
The combination of those drivers will undoubtedly help Shopee expand its business in Latin America, and the only question is how quickly the company can scale up its operations to meet end-user demand.
[i] Singapore’s Shopee changes the game in Brazil’s e-commerce sector, LABSnews, 30th August 2021
[ii] Sea’s Shopee to launch in Chile and Colombia, Reuters, 9th June 2021