Shopee Becomes Brazil’s Most-Downloaded Shopping App in 2 Years: Learn Its Game-Changing Approach

Sea’s Shopee took just two years to become Brazil’s most-downloaded shopping app, winning users to its low-cost marketplace with its game-changing approach to e-commerce: in-app mini-games offering coupons to winning users.

The Singapore-based company has combined online shopping with the gaming nous of its separate mobile game arm Garena – creator of Free Fire, Brazil’s most-downloaded title for eight consecutive quarters – to generate sales analysts estimated at almost a third of local champion Magazine Luiza SA.

Back home, Shopee only needed five years to become Southeast Asia’s most-visited e-commerce website, overtaking the likes of Lazada, backed by China’s Alibaba, and Tokopedia, backed by Japan’s SoftBank.

“Shopee has a track record in Southeast Asia of coming into the market late, looking at how others have solved existing problems and then building a system to leapfrog those issues,” said analyst Jianggan Li at advisory firm Momentum Works.

Shopee’s early surge highlights the space left for foreign entrants to grow in a sector once dominated by regional firms like Magazine Luiza and Argentina’s MercadoLibre.

To be sure, the startup’s timing was fortuitous, launching in Brazil just as the COVID-19 pandemic drove consumers away from physical stores, pushing up 2020 e-commerce sales by 44 percent to $42 billion (roughly Rs. 3,08,555 crores. showed data from Brazilian payments company EBANX.

Shopee – akin to Alibaba’s AliExpress, carrying Chinese-made knick-knacks – emerged as Brazil’s top app by downloads and time spent in use, showed data from analytics platform App Annie.

Yet, in pursuit of growth, Shopee is still losing money, propped up by Sea’s profitable gaming division. In the second quarter of this year, Garena posted an adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) of $740.9 million (roughly Rs. 5,440 crores) even as the e-commerce arm lost $579.8 million (roughly Rs. 4,260 crores).

“Money being generated by one side of the business, which is a cash cow, is being reinvested aggressively in Brazilian e-commerce – with success,” said Itau BBA analyst Thiago Macruz.

Global ambition

Sea’s Brazil foray is just one element of its global ambition. Investment arm Sea Capital is also considering putting money into startups in Latin America and beyond, said a person with knowledge of the matter, who was not authorized to speak with media and so declined to be identified.

The firm has also taken Shopee to Chile, Colombia, and Mexico where, unlike Brazil, it has no locally based staff and so has partnered social media influencers to increase brand awareness, said two people familiar with the matter.

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

The firm has disclosed little data about Shopee Brazil, but Itau BBA analysts estimated the value of goods and services sold on the platform last year hit BRL 12 billion (roughly Rs. 16,950 crores).

The average price on its marketplace is BRL 40 (roughly Rs. 565), other estimates showed, less than a third that of e-commerce leader MercadoLibre, which often carries higher-value branded products.

Sea’s biggest challenge for Shopee Brazil is delivery in such a vast country. It reduced its reliance on the local postal system this year in favour of private carriers, but is still competing against rivals with proprietary delivery services.

Shopee aims to have one main logistics partner per country in the region, a company source told Reuters.

The company itself expects e-commerce growth in the region to spawn more delivery partnerships, as happened in Southeast Asia, Sea executives told analysts on a call this month.

On the same call, Group Chief Corporate Officer Yanjun Wang called Brazil “a good market for continued investment.”

Local sellers

Competition in Latin America’s largest economy stepped up this month when Shopee’s nearest rival in terms of product offering, AliExpress, opened up its marketplace to domestic sellers charging single-digit commission. AliExpress had been in Brazil for 11 years; Shopee did similarly after its first year.

Small-business owner Luciana Carvalho began selling plastic packaging products on Shopee in February, attracted by the free shipping and 6 percent commission – compared with MercadoLibre’s 17 percent.

“It’s easy to sign up, calculate your commission, get your delivery tags, your receipts. It makes us invest more in the platform,” she said.

In a move toward profitability, Shopee has since raised commission to 18 percent – as much as twice marketplaces can charge in some Southeast Asian countries, indicating Latin America’s potential profit margins. Carvalho continues to use Shopee, though she prefers MercadoLibre for its “unbeatable” delivery.

To further improve profitability, Goldman Sachs analysts said Shopee could start selling higher-ticket items, as it has in Southeast Asia. Momentum Works’ Li expects Shopee to add financial services to its Brazil app as it has in Indonesia.

“I wouldn’t be surprised,” if they reached number one, said Li, “Given what they have done in Singapore, Indonesia, and Malaysia, Thailand.”

This article was originally published by Ndtv.com. Read the original article here.