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What Shopee’s entry into India mean for online shoppers

A news story from Reuters cited job postings and a YouTube recruitment campaign for vendors offering free shipping and no commission fees for sellers and buyers on "Shopee India".

By Newsd
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What Shopee's entry into India mean for online shoppers

Last week, news reports from Singapore emerged that Shopee, the number one e-commerce platform in Southeast Asia is taking initial baby steps to enter the India market.

A news story from Reuters cited job postings and a YouTube recruitment campaign for vendors offering free shipping and no commission fees for sellers and buyers on “Shopee India”.

Reuters also quoted a company source saying that it was preparing to expand operations in India with no firm date for launch at the moment. Although Shopee has a presence in India, it does not offer e-commerce services in the country. Shopee’s parent company, Sea Limited is the largest publicly traded company in Singapore. It is listed on the New York Stock Exchange with a market cap of USD 190 billion as of market close last Friday and is worth almost two and a half times second-placed DBS Bank.

Currently, Sea with Q2 2021 revenue of USD2.3 billion derives half of its revenue from what it terms digital entertainment (mostly online video games) and the other half from e-commerce. Whereas the digital entertainment arm is more established and profitable, the e-commerce division is loss-making. Based on Q2 2021 results, adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) for its digital entertainment division was USD 740.9 million, up 69.8 percent year-on-year, whereas EBITDA for e-commerce was a negative USD 579.8 million. This is 46 percent and USD 266.1 million worse off compared with a year ago. Net loss for the entire company in the second quarter was USD 433.7 million.

However, the company has raised guidance for both digital entertainment and e-commerce for the full year of2021. It is expecting digital entertainment revenue to come in between USD 4.5 and 4.7 billion whereas e-commerce is projected to deliver USD 4.7 billion and 4.9 billion of sales. Sea was founded in Singapore in 2009 as online video game company Garena and its first major success was League of Legends, developed by Riot Games, which Garena publishes and distributes. Sea’s latest game, Garena Free Fire was the most downloaded game globally in 2019. It also set a record with over 80 million daily active users globally as of May 2020.

When Sea listed in 2017, it had a market cap of just under USD 5 billion. It has since grown by more than 3,500 percent, making lead co-founder China-born Singaporean Forrest Li, the richest man in Singapore. When Shopee launched in 2015, it was not the first e-commerce platform in Singapore or Southeast Asia. There was Alibaba’s Lazada, eBay’s Qoo10, Amazon, and in Indonesia, Tokopedia which is backed by Softbank.

However, through aggressive pricing, attractive promotions, memorable marketing, and most importantly a wide selection of products, it slowly became the dominate e-commerce player in Southeast Asia. Shopee introduced game-changing approach to e-commerce. Among the innovative ideas is “Shopee Coins” which users can collect when making purchases, by playing simple in-app mini-games as well as when completing post-purchase reviews. These coins can then be exchanged for discount on future purchases.

It is also known for its quirky, silly commercials featuring famous local and global personalities. These commercials may look like cheap productions but have catchy tunes and are memorable usually for the wrong reasons. Celebrities who have been convinced to put their reputations at stake include footballer Cristiano Ronaldo and kung fu star Jackie Chan. In 2019, Shopee started its South American foray by launching in Brazil. By then, Sea’s online game Free Fire was already gaining popularity and would emerge as the most downloaded game in the country that year. Taking on the incumbent and then dominant e-commerce platform, MercadolLibre, it would soon chip away at its market share. Today, Shopee is the most downloaded shopping app in Brazil and has been for the last eight successive quarters. It has set its sights on Chile, Mexico and Colombia after launches earlier in 2021.

Analysts say that its success in Brazil is down to great execution but also fortuitous timing as the 2020 pandemic forced people to stay at home, creating an e-commerce and online gaming boom. It also has a knack for coming into a market late after learning of the pitfalls of the early entrants and then building a system to overcome those problems. Similar to the situation before its launch in Brazil, Sea’s online game Free Fire is the highest-grossing mobile game in India according to the company.

To be successful in India, it will not only have to beat Amazon India and Walmart’s Flipkart, it may face competition in the form of Reliance Industries and Tata Group who are also looking to expand into the e-commerce arena through JioMart and Tata Digital respectively. In addition, it may face infrastructural challenges which affect transportation and logistics as well as internet and mobile connectivity which are factors that impact e-commerce growth. There is also a cultural aversion to digital payments, especially in the lesser developed areas of the country, to overcome.

However, from Sea’s perspective, the Indian market represents huge untapped potential. Although its population is nearly as large as China, its digital economy is significantly underdeveloped with fewer than 3 percent retail transactions done online. This compares with 15 percent in the US and 45 percent in China according to eMarketer. The e-commerce market is currently valued at around USD 64 million, according to German market data firm Statista, and is anticipated to grow three times to USD 188 billion by 2025. If Shopee does eventually launch in India, shoppers will be presented with a vast selection of goods that are at bargain-basement prices. Many are from China, though depending on the market, Shopee does have a good number of local sellers. In Singapore, the majority of sellers are from China but in Brazil, it has more local sellers than cross-border merchants.

Another thing that avid online shoppers may or may not look forward to are sleepless nights. Shopee runs daily promotions where a limited number of digital discount coupons are available from midnight. These usually get snapped up very quickly by shopping addicts who stay up to shop. Commenting on its effort to improve profitability in Brazil, Goldman Sachs analysts said Shopee could start selling higher-ticket items, as it has in Southeast Asia.

“I wouldn’t be surprised,” if they reached number one (in Brazil), said analyst Jianggan Li of advisory firm Momentum Works to Reuters, “Given what they have done in Singapore, Indonesia and Malaysia, Thailand.” (ANI)

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