E78 – The Impulso Podcast – E78: Is TikTok Shop giving up overtaking Shopee?

Last week, both Sea Group and Grab released their Q1 2024 results, and the market responded positively – is tech in Southeast Asia recovering?

Grab reported strong Q1 results, but investors are still curious: will Grab become profitable? Over the past few quarters, the management team at Grab has consistently focused on relentless execution and continuous operational improvement. It will be interesting to see how Grab balances its path to profitability and growth (given its penetration in Southeast Asia is only around 5%).

Sea Group also reported a relatively good quarter (evident from the much happier tone during their recent earnings call),  with steady growth not only in Shopee but also in SeaMoney and Garena. The group is also trying to deepen its moat through Shopee Xpress (its in-house logistics arm).

On the other hand, we see TikTok Shop taking a much less aggressive approach in Q1. Earlier this year, TikTok Shop started increasing take rates (possibly as a strategy for sustainable growth in the region) – Does this mean that TikTok Shop is giving up on overtaking Shopee? 

Tune in to the latest episode of the Impulso Podcast as we delve into the latest earnings of these regional tech giants:

Also available on Spotify.

Featured materials: 

Sea Limited Reports First Quarter 2024 Results, Sea Limited

Grab Reports First Quarter 2024 Results, Grab Holdings Inc.

Ecommerce in Southeast Asia, Momentum Works 

The TIkTok Shop Playbook, Momentum Works 

Does Shopee have a moat, The Impulso Podcast

Dmitry Levit & Boon Ping Chua on the distress in Southeast Asia, and why it’s not evenly distributed, The Impulso Podcast

 

[AI-generated transcript] 

 

[00:00:00] Sabrina: Hello everyone, and welcome to episode 78 of the Impulsive Podcast by Momentum Works. So on today’s episode, we’re going to be looking at Sea and Grab’s Q1 results, which they recently released. I think it was just last week, 

so before we talk about the results, you want to talk a little bit about this photo? Maybe set some context. Where was this photo taken? 

[00:00:21] Jianggan: So, so obviously there’s a significant event happening in Singapore on the 15th of May. We have a new prime minister since 20 years, right? So there was an inauguration ceremony or swearing ceremony and some of the people in a society got invited.

So we saw these two photos. I say two photos because look exactly, they look different. 

[00:00:44] Sabrina: Yeah. Inverted. Yes. If you look at the photos. 

[00:00:48] Jianggan: Yes, and and, and, and, and, and we share this, I mean, one, one is from the LinkedIn of of the CEO of Grab, Anthony Tan. That’s the one below. And the next one is the founder CEO of Razor, if you still remember that company Tamilian.

So that’s on, on the top. I don’t know why this, this are inverted. I think, I think some of them are, are they cropped? 

[00:01:08] Sabrina: They’re not cropped. Yeah, exactly. 

[00:01:10] Jianggan: Yeah, they are exactly the same. Just, just, just inverted. Okay, cool. So the three people probably representing the, the tech sector, they went to the swearing ceremony and of course they took a, they took a nice selfie together, wifi together.

We shared that in our community, there were lots of comments one person from China on where, who these three people were. They said, are these three property agents? 

[00:01:32] Sabrina: I can see why though, based on the outfit. 

[00:01:34] Jianggan: Yeah. The shirt and 

[00:01:35] Sabrina: the tie. 

[00:01:36] Jianggan: So we asked him, I mean, if you see these three in the street, which one do you buy from?

And which one would you approach to, to talk to? He said, obviously the one in the, in the center because his fake smile is so professional. Sure. 

[00:01:50] Sabrina: The perfect capitalistic smile. The other two look too genuine, right? 

[00:01:53] Jianggan: They look very genuine. And yeah. So, so, so basically we’ll, we’ll come back to this picture later, but yeah.

[00:02:01] Sabrina: So let’s go back to the earnings. So maybe we’ll start taking a look at some of the highlights from Grab’s latest earnings in Q1. So first looking at their revenue growth, their revenue grew by 24 percent year on year. And of course, their mobility MTU has also been growing steadily, right? So, this is actually a new metrics that they’ve been reporting.

Previously, they’ve only been reporting MTU. 

[00:02:23] Jianggan: I think they’re still reporting MTU for the overall, overall, but but, but they try to highlight them, the, the mobility MTU. And as you can see, it has it has been recovering from the pandemic. I think this came from like Q4 to 2019. When there was still, there were, there were still lots of incentives.

Mm-Hmm. There was still lots of growth. And of course the pandemic hit in q, Q1, Q2, Q1. 

[00:02:46] Sabrina: So I think Q1 is when the pandemic hit, and Q2 was when all the lockdowns started. 

[00:02:50] Jianggan: Yeah. Yeah, yeah. And and of course, end of 2 20, 21 this is when things started recovering and that, that, that also coincided with with the capital market going down.

Mm-Hmm. . So, so, so in a way, it’s interesting, right? I mean, you see the market going down and you see the. The people are going out. 

[00:03:07] Sabrina: More people are going out. And of course, in Q1, they grew by QOQ. But of course, I mean, there were a lot of events happening in Q1 in Singapore as well, right? We had several concerts and all, which I think Grab, I’m not sure if Grab partnered with them, but I saw a lot of Grab ads happening around the concerts.

[00:03:24] Jianggan: For people coming, and obviously Singapore is a significant part of Grab’s mobility business in terms of GMV. Not sure how much in terms of The user numbers because it’s a small country anyway. But I think I think for foreigners coming to Singapore, Grab is probably the only option that they can use because what’s the alternative?

Gojek? 

[00:03:43] Sabrina: I think Grab would also be the easiest to use because most of, for example, if they’re Southeast Asian travelers, they would already have Grab. 

[00:03:50] Jianggan: Yeah, and, and most, most people are probably not, I mean, most people from outside are probably not even aware of Tada yeah. And then you have Comfort Delro and the Zip app, which is actually quite good in terms of the offline service, right?

I mean, it always sends you a car, and the driver is likely to be sort of polite, etc. But the challenge is that for foreigners, it’s actually quite difficult because it’s, you know, I mean, for one thing, we try to search for a place, and their map is so outdated. 

[00:04:19] Sabrina: It’s not easy. Yeah, you try 

[00:04:21] Jianggan: to search for Changi Airport Terminal 1.

What comes out is the police station, I think. 

[00:04:25] Sabrina: And Grab actually, I think they’ve implemented this a few quarters back, but for pickup points, they actually have directions for you on how you can get to that pickup point, which I’m sure is very easy for tourists. unlike the Comfort Delgo app, right? Yeah, 

[00:04:38] Jianggan: I think in the earliest call, they specifically mentioned that the part of the part of recovery is driven by tourism volume and Grab is capturing that well.

And something that’s not mentioned is I’m not sure if you’ve ever heard of a company called Split, S P L Y T. It’s a company which helps provide API for For service providers in other countries to plug into the sort of right heading of a particular app. So Grab is embedded into that. So, so, so people in, people in China, for example, like Alipay, like Ctrip what else?

I think there are some which had many programs. So people do not need to download the app, they can use their existing account. 

[00:05:18] Sabrina: Oh, just to use Grab. Oh, that’s very convenient. 

[00:05:21] Jianggan: Yeah, so, so that, that, that brings them probably lots of volume. And I, I met lots of visitors from China and they said, Okay, I just use my Alipay and I use Grab.

And any other choice? They’re not aware of it. 

[00:05:31] Sabrina: Doesn’t matter because it’s not as easy to use as Grab. 

[00:05:35] Jianggan: And also, when you look at MTU, which in Grab’s case is defined as a monthly transacting users. I’ve checked the number in the, in the earnings. It’s 38. 5 million now. So, which has increased almost 30 percent from about a year ago.

But it’s still like 5 percent of the Southeast Asian population. 

[00:05:56] Sabrina: Yeah, I think the last, the last time we calculated it was about 5%. 

[00:06:00] Jianggan: Yeah, it’s still, it’s still roughly 5%. I think the population has grown 

[00:06:04] Sabrina: as well. So there’s still a lot of untapped market for them too. 

[00:06:08] Jianggan: Yeah, that’s, that’s why you see them doing lots of things like, you know, the server program, etc, etc.

To, to basically tap into the people who are not that time sensitive, but very price sensitive. 

[00:06:20] Sabrina: So I think another thing to look at for Grab as well is their financials, right? So I think they’ve seen pretty steady growth in their lending operations. So their total loans disbursed has grown 

[00:06:31] Jianggan: quite a bit.

They didn’t give the breakdown about with how much of that is productive loan, I’m sorry, not productive loan, the loans to merchants and drivers. Yeah. And how much of that is by now pay later to consumers. But I, but as I understand, I think both have grown quite a bit. 

[00:06:46] Sabrina: And of course not just the loans dispersed, right?

When we look at their, so here we’ve compared their loans dispersed to their loan portfolio. Do you want to explain why we do that? 

[00:06:56] Jianggan: Oh this was just an early exercise we did to, to try to figure out what kind of loans would, would form the majority because loans dispersed means that, I mean, how much loan you have issued to borrowers.

A loan portfolio is more like a balance sheet item, right? At the end of the period. How much loan is outstanding, which is basically a loan book. So based on this, we did some calculation. Roughly, the loan tenure for Grab’s loans is about two months. , which means that I mean, lots of loans are micro and and, and, and sort of quick.

So this is, this is the typical, like, internet financing kind of, kind of kind of loans. Yeah, I mean, you look at credit card. Yeah. You do installment, it’s 12 months, right? Yeah. Hmm. So that business has been growing, yeah. 

[00:07:41] Sabrina: So I think overall we saw that the market responded quite positively to Grab’s latest earnings, right?

I mean, it’s a relatively good set of results, they’re growing steadily without burning too much extra money. But of course, I think the question at the back of a lot of investors mind, , is when will Grab become profitable or will Grab even become profitable? Because at the net income level, they are narrowing their losses, but they are still not net income positive, right?

But of course, in our Apples to Apples report, we’ve mentioned that there are different levels of profitability when we talk about it. So we look at adjusted EBITDA and then we look at cash flow and of course, eventually net income. So when do you think Grab will become profitable? Or do you even think they will eventually become profitable? I think that’s 

[00:08:23] Jianggan: a question which has been asked a lot. I I do think they can become profitable. So so so if you look at the steady quarter over quarter improvement in all fronts. If you look at the product innovation that we’ve been doing, I think they’re moving closer and closer towards profitability, and they have lots of cash.

So so, so, in one way, I mean, you should not worry about prospects of this, of this company. The question is that I mean, When you aim towards profitability, yet at the same time the market expects you to grow. So how do you balance these two? And and I do think that I think, I think the management team knows what they are doing.

[00:09:02] Sabrina: I think Grab, their management team has been very consistent since Maybe last year? A few quarters ago? Yeah, they’ve 

[00:09:08] Jianggan: been very conservative as well. Yeah, I 

[00:09:09] Sabrina: was like, they’ve kept reiterating, oh, relentless execution and continuous operational improvement, and I think we are seeing that in their results, right, as well.

[00:09:17] Jianggan: I think the good thing is that they really don’t have a strong competition, so Immobility, they have what, Gojek in Indonesia? 

[00:09:25] Sabrina: Yeah. 

[00:09:26] Jianggan: But aside from that, in most markets that are dominating, there are two Russian players which are capturing the, the lower end of the market, Ian Drive and Maxim. Oh. But, but somehow I think Grab has, has been, has been defending against them quite well, yeah.

[00:09:44] Sabrina: So now maybe let’s talk about the next company who also recently released their results, which is Sea group Right. So I mean obviously most of when we talk about Sea, normally we look at Shopee And we see that their GMV and gross orders have been growing quite steadily Over the past few quarters As well as their revenue and take rate.

So this is actually the first quarter in a while that Shopee has released their take rate 

[00:10:11] Jianggan: Hmm Which is interesting. And it’s actually increasing from the last two quarters. 

[00:10:16] Sabrina: Yeah. Why do you think they’ve suddenly released their take rates? 

[00:10:19] Jianggan: Because they feel confident about this number and I mean, I mean, take rate is kind of tricky, right?

So, so if you look at Q1 2023 on, on, on this chart, it’s 12%. Mm hmm. And of course, investors, we would expect them to increase that further, further, further. But they operate in an environment where. , I think many of the countries have a strong incentive to protect the SMEs, much SMEs, the, the small and medium enterprises.

And of course, if you charge them too high and you have political backlash, so, so, so, so, so it’s, it is a tricky issue. And also what happened in 2022 and 2023 is in TikTok Shop has been very aggressive in, in growing the market and taking the growth away from Shopee., so obviously to counter that, I think they actually, Shopee actually invest a lot in sales marketing, invest a lot into live, et cetera, et cetera.

So but, I think Q1 2024, they, they can somehow regain confidence. I was listening to the earnings call and Yeah, they sounded happy. 

[00:11:22] Sabrina: A little less stressed than they previously were. Yeah 

[00:11:25] Jianggan: one dynamic is is TikTok shop has been raising the tech rate as well. So, so we will 

[00:11:32] Sabrina: talk a little bit more about this later.

Right. But maybe first let’s look at the Sea money’s loan book as well. So this is the financial arm of Sea, right. And we see that their loan book has been growing yet. Pretty steadily as well. 

[00:11:47] Jianggan: That’s like 10 times that of Grab. What’s a Grab’s number? Yeah. 

[00:11:50] Sabrina: Cause it was in billions. Grab’s loans, loans dispersed is about 4, 8, 3 million.

[00:11:56] Jianggan: Yes. And the loan book is 363 million. So this is essentially about like nine to 10 times of that. So this is a business which has been growing very well for the last two years. Or even three years, I think but it’s a business which did not get much attention from the outside world. I mean, because, I mean, first they talk about their, , digital financial services business as a whole, and, and probably most people would just infer to that as mainly payment.

Yes. But the consumer lending business, consumer lending business has become huge. I mean, if you look at the long book now it’s, 3. 3 billion and 2. 7 billion from their balance sheet. So that, that includes the money actually they own and the money which is deposited to them at one of the digital banks they own.

So they are not taking as much leverage as Ant did with their lending business. That business was, was insanely profitable because they took, took leverage that banks are never allowed to take. But here you see that they’re still controlling the pace a bit. I mean, it’s not, it’s not like going insane, but because they probably know that in the current market, if you grow too big your delinquency ratio or your non performing loan ratio will probably go up.

 So they are engineering a fairly steady growth. And I think they made, what, 500 million EBITDA or something for, for, for this business. And and for a while it looked that it was going to overtake the digital entertainment business in terms of the cash generated for the group. But of course, I mean, the last word, what we saw is that the digital entertainment business started to, to, to recover.

So interesting dynamics. Maybe there’s some internal competition there. 

[00:13:35] Sabrina: Which is good. Interesting. Yeah. Yeah, I think it’ll be interesting to see over the next few quarters as well how this continues to grow so We actually did a little poll on our friends of momentum works group, right? When these results were out asking people what they were curious about or what they wanted to hear from janggan Based on the latest earnings and it seems like people are very very curious on The competitive landscape.

Right. So, 

[00:13:57] Jianggan: and specifically worried about TikTok, right? TikTok shop, yeah. . And how that gonna change. 

[00:14:01] Sabrina: So I think two of the questions people were really interested in is, one is TikTok shop giving up on overtaking Shopee, and secondly is e-commerce in Southeast Asia worth the effort and investment for TikTok?

[00:14:12] Jianggan: And, and if you look at that, essentially they’re the same question, right? Yes. I mean, it’s the same question basically. Basically what people are trying to figure out is that what does TikTok, or what does ance, the parent of TikTok really think about this market? Southeast Asia? Yeah. 

[00:14:25] Sabrina: So I think we mentioned earlier that when we are looking at Shopee’s take rate, that TikTok shop has also been increasing its commissions, right?

So this is a little screen grab from e commerce, which is a very popular Instagram account for 

[00:14:38] Jianggan: sort of 

[00:14:38] Sabrina: like tech news in Indonesia, tech gossip in Indonesia, pretty 

[00:14:42] Jianggan: good at digging out information. Yeah. Yeah. 

[00:14:44] Sabrina: So they said, so basically the screen grab says that TikTok shop sellers and admin fees actually increased up to 6.

5%. This was in. I think this is in Q, this was announced third May. Yes, and we’ve also seen that in, I mean, in Singapore and Malaysia as well, the take rates have been rising, right? 

[00:15:01] Jianggan: We have also been looking at data scraping services and what they have been tracking on, on TikTok sales volume had been relatively stable in the first quarter, which means that they didn’t really push for aggressive growth.

[00:15:14] Sabrina: Why do you think they’ve been increasing their commission? Do you think they felt like they’ve been burning too much money in Southeast Asia? Do they wanna grow a little more sustainably without having to give all these incentives too much money? I 

[00:15:27] Jianggan: I, I mean, I, and there’s also guesses, right?

And, and you look at the comments on, on this post from e-commerce, right? I mean, somebody was saying that. Uncle John wants a new summer mention. I don’t know which uncle song he’s mention about whether is the founder John, you mean, or, or Johnny Don, who’s in charge of the the, the whole commercial aspects of of bys.

They’re not related, by the way. And you look at all this, and it is, it’s people, people express their sentiments and people asking questions, but but it clearly shows that people don’t know what, what, what, what ance anti thoughts really thinking about, we don’t know either, but but, but we’ll have a guess.

So they have been burning money to reach a scale. I think, I think our team is still tallying the, the, the numbers for last year because there’s lots of calibration we need to do for our e commerce in Southeast Asia, 2024 report, which will be 

[00:16:15] Sabrina: coming out soon 

[00:16:16] Jianggan: next month. I hope there’s lots of work recently.

, but what we do realize is that I think initially they will need to burn lots of money to, for them to reach a significant scale that they start having negotiation powers across the ecosystem. I mean, imagine if they would come in initially saying that, Hey, I’m going to charge the same tech rate as Shopee and all the merchants and sellers say, why would 

[00:16:38] Sabrina: I bother 

[00:16:39] Jianggan: with you?

[00:16:40] Sabrina: Bother. 

[00:16:40] Jianggan: Yeah. So, so they will need a strong incentive to get merchants, to get consumers to come to this platform. Yeah. In the beginning, but once they have reached a significant volume, they will need to start optimizing. They will need to start, you know, looking at the, at the baseline and and testing the benchmark, et cetera, to start testing the, the baseline, looking at the benchmark.

Sorry, got it reversed. To see how much revenue potential there really is the fact that Shopee could be profitable, I think some quarter last year. Probably gave them lots of confidence that this market, they can make money, especially they don’t have to pay anyone for the traffic. So the users are there.

[00:17:20] Sabrina: So do you think that they’ve given up on overtaking? So it’s not that they’ve given up on overtaking Shopee, right? I think they’re just trying to optimize their operations a little more. And this is a little graph that we did 

[00:17:31] Jianggan: last October in our 

[00:17:32] Sabrina: TikTok shop report, where we looked at, and then of course we have the revised projection as well, because there was that whole TikTok shop.

sort of 

[00:17:41] Jianggan: ban in Indonesia and then 

[00:17:42] Sabrina: they merged with Tokopedia. 

[00:17:45] Jianggan: We don’t 

[00:17:45] Sabrina: have the latest predictions after the merge, 

[00:17:48] Jianggan: but it will be an actual numbers. So you will see that next month. But I don’t, I mean, I don’t think they want to give up. But, but I do think that ByteDance is a large organization and how you set the KPIs for managers for them to to operate in the market will probably matter a lot.

If you, if your KPI is only top line, I mean, grow GMV at all cost, you’re probably not set for something sustainable. Yes. But if your KPI is, okay, I want to grow the GMV. But I want to limit the burn or to, to a certain level, or I want to not burn at all. So that forces the managers to think about creative solutions, to improve the experience, to actually work with sellers and, and ecosystem to provide better customer experience.

So this seems to me what they’re doing, 

[00:18:37] Sabrina: just creating a more sustainable way to grow. And of course, at the same time, optimizing their operations for the customers and merchants as well. Right. And because I think you said before Shopee has shown that they can be profitable, which of course gives TikTok the confidence that Southeast Asia might be worth the investment, right?

So we’ve did, this was in our 2023 e commerce report, we did a sort of market sizing for how big the market is in Southeast Asia, and it’s about 99. 5 billion US dollars. I’m not sure, preliminarily, do you think the number, the market should have grown a little? The market has 

[00:19:11] Jianggan: grown, the market has grown. 

[00:19:13] Sabrina: So, but of course, we know TikTok shop is also has plans to expand to other regions, right? They are looking at, I’m not sure the U. S. is still on the markets, probably not, but 

[00:19:23] Jianggan: Europe. U. S. is a big focus now. And as I heard as of like earlier this week, they actually postponed. Some of the launches in Europe to double down on U. 

[00:19:34] Sabrina: S. But with the U. S. TikTok, U. S. ban, whenever That’s what 

[00:19:37] Jianggan: you see in the headlines.

Yeah, 

[00:19:38] Sabrina: I was like, is that, would, would that be something that would be of, I imagine that would be something that would be of concern to them. 

[00:19:45] Jianggan: Of course, that’s something, that’s something of concern to them. And of course, it’s something that they’ll be working very hard to, to lobby, to, to, to take legal actions, et cetera, et cetera.

But if they started doubling down in the U. S., that’s what I heard from sellers and an ecosystem, probably means that they have some reasonable confidence that they have bought more time. And of course, if with this more time, they become more significant in terms of scale. And they have better equalization power.

So, so this is probably their calculus. Whether this calculus is right or not, whether the assessment is right or not, I mean, that’s, that’s entirely different question, right? Because we know that before the Indonesian ban, before the current bill was, was floated they were not aware of it. 

[00:20:28] Sabrina: So I think, I think my question that so while the participants of our upcoming live commerce immersion also asked now that TikTok shop is kind of doubling down in the U. S. and planning on its expansion in Europe, how much focus would they actually put on Southeast Asia? 

[00:20:44] Jianggan: The truth is that they have not been focusing on Southeast Asia. I mean, all the major managers for, for the business have been focusing on the U. S., U. S. market. And And each country was left to, to, to some lieutenants they sent in the market to run, which which, which I think was one of the factors for the problem that they had in Indonesia, right?

Indonesia see this thing growing very fast and they realized there’s nobody in charge they could talk to. Of course they’re worried. I mean, from an authority’s point of view, but I think TikTok has learned their lesson. So now they have a professional team dealing with the government relations, which, which are not entirely hired locally and they have some central coordination for TikTok shop per se.

 But again, that team would help free up the, the time and resources of the key managers to focus on the US market. So let’s see how their sort of raise integrity, et cetera. If they can raise to a point that they are burning very minimally, they’ll probably, they’ll probably stay in the market for a long time and they probably rich profitability at some point of time.

But the question is that if there’s equilibrium and when that happens, what will be the market share of all the different players? 

[00:21:53] Sabrina: When the, when TikTok shop, we’re just profitability. 

[00:21:56] Jianggan: And also at the end of the day, I mean, I don’t know why people are not worried about Temu. Because, because you don’t see them, right?

[00:22:04] Sabrina: I was like, because they’re only in two countries in this region. 

[00:22:07] Jianggan: They’re in 66 countries now across the world. Yes, but in 

[00:22:11] Sabrina: Southeast Asia, it’s Malaysia? 

[00:22:14] Jianggan: So basically something which is currently small and therefore you’re not worried about it I mean, you don’t know what they’re doing at the back. You don’t know what they’re 

[00:22:21] Sabrina: planning Yeah, you 

[00:22:21] Jianggan: don’t know what they’re planning and but if you don’t see them being big, you know, we’re worried about that I think that sounds like a dangerous 

[00:22:27] Sabrina: As 

[00:22:28] Jianggan: a 

[00:22:29] Sabrina: consumer though, I am I am hoping that Temu would enter So, of course I think we’ve done an episode about this where I think we were talking about Shopee’s Q4 results when we talk about does Shopee have a moat and this is something that we see them working on as well, right as they defend against competitors like tik tok shop, and maybe They are preparing for Temu;s entrance.

We don’t know but One of the ways that Sea group is kind of hoping to deepen their moat is through Shopee Express So this is their in house logistics service And of course they deliver now over 50 percent of Shopee’s orders in Southeast Asia and over 70 percent in Brazil 

[00:23:08] Jianggan: And of course the benefit of owning their own logistics that I mean, first of that gives them sort of better negotiation power over third parties and that helps lower the price.

And the second is that it ensures consistency in terms of service levels, right? I mean, which Which initially everyone said Shopee Express serverless was, was bad, but I think they have been improving along the way. And and Shopee has a relatively small cross border business, and a lot of focus on that cross border business is also focused on fulfillment and logistics, ensuring good customer, customer, customer experience.

So, is that the moat? I think short term, definitely yes. Against I think all the other players, aside from Lazada, nobody has their own logistics, large in house logistics. Is, is, I mean, but, the thing about mode is, I think if you look at Chinese companies and nobody believes that there’s a mode that can’t be overcome.

Some people’s sense is that quite often when we try to build a mode, your objective is to make this deep enough so others find it like, you know, Not worthwhile to enter. Yeah, yeah, too costly to attack your city and then they go attack someone else. 

[00:24:14] Sabrina: So, I mean, it’s a decent strategy. 

[00:24:18] Jianggan: You know, of building a moat.

It’s the only strategy you can take. 

[00:24:21] Sabrina: But you know, there might always be someone who just thinks it’s worth the 

[00:24:24] Jianggan: effort. 

[00:24:25] Sabrina: And then they’ll enter, so. 

[00:24:27] Jianggan: So that’s why they’ve been trying very hard to guess what TikTok really thinks. 

[00:24:29] Sabrina: Yeah. 

[00:24:31] Jianggan: Yeah. 

[00:24:31] Sabrina: So, I mean, when we talk about Shopee Express, one of their biggest competitors, it’s Shopee Express.

in this region is J& T, right? 

[00:24:37] Jianggan: J& T is a public listed company, 

[00:24:39] Sabrina: yeah. Yeah, so we also went in to look at their a little bit of their financials. So their average daily parcel volume has also been growing quite steadily over the years, right? From in Southeast Asia, now it’s like 11. 3 million parcels. And this is per day.

This 

[00:24:54] Jianggan: is per day. Per 

[00:24:55] Sabrina: day, which is very high. 

[00:24:58] Jianggan: It’s quite significant. So obviously one factor in Q1 2024 is TikTok shop went back live in Indonesia. But I’m not sure how much of this 11. 3 million orders are, with TikTok shop, I mean, if it’s too much, then there’s probably a strategic problem in the future of whether TikTok shop wants to build something on their own, which I don’t think they want at the moment because they want to focus on the U. S. Yeah, 

[00:25:23] Sabrina: it’s like probably not anytime soon, right? So maybe now, like maybe just a partnership between TikTok shop and J& T is the best way for them. Going forward 

[00:25:31] Jianggan: it. And then one one thing for the order third party logistic players is that I mean if the market continues to To grow in a way that you have two or three big platforms Which don’t get all the volume and how much negotiation power logistic companies will eventually have 

[00:25:48] Sabrina: So I think we had a question from a member of our community, which is kind of us Cynical question.

So his question was, what’s next for Southeast Asia, right? With billions invested, is the game over? Which is interesting because we’ve seen that both Sea and Grab actually had pretty good Q1 results. And the market has responded positively to both, 

[00:26:10] Jianggan: yep. I think I think the question is more, more coming out of a bit of frustration, right?

Because there’s so much money invested, not only see and grab. I mean, people look at it, Sea and grab because These are the companies which are the, I don’t know, the beacon or whatever. So, so if these companies are not performing well in a stock market, it’s very hard for other companies to IPO. And and, and, and, and, and I think, I think, I think his question is mainly, mainly referring to the unicorns.

The dozens of unicorns in Southeast Asia, many of them have raised too much money, so they will not die anytime soon, but they will have a hard time to, to justify their valuation and grow their business. So I think I don’t know, I think, I think all the VC people I know in this region, their sentiment has been quite gloomy.

I mean, if, of course, I mean, not in public, in private, they tell you that, okay, I don’t know what to do, right? And but some VCs have been, trying really hard to, to, to go overseas. That means, I think East Ventures now has a fund for South Korea. And some other VC, I can’t remember which one, like two of them probably have, like, an investment focus on Japan.

Which I, I don’t know, I mean, Korea and Japan, Japanese start ups for, for foreigners to invest in, that’s a, that’s a tough proposition. And I think Golden Gate launched a, launched a VC fund for Qatar. So yeah, so so so they are basically trying to diversify and and stuff which which could be quite interesting 

[00:27:31] Sabrina: I think if you want a little bit more insights from some people from VCS on the soft tech investment scene in Southeast Asia We did do an episode with central ventures, right where we spoke about H1 2023?

Yes, Sento 

[00:27:47] Jianggan: is still telling the data of a free year 2023, which Because the challenge is that I mean Like March, April, may and September, October, November are typical busy times. Mm. And if you don’t get it out before, before March and that and it just too much work, you just 

[00:28:02] Sabrina: get busy. Yeah. So I’ll link the podcast in the show notes below.

You guys can check it out if you’re interested. 

[00:28:07] Jianggan: That’s for the H one, right? Yes. The one for H one. Yeah. That would’ve showed quite a lot of change for BC 

[00:28:12] Sabrina: and, and it’s quite an interesting episode as well. 

[00:28:14] Jianggan: We promised was we circle back to the photo This came from a friend we’re debating about amongst these three and who is the happiest and obviously nowadays, People use chat gbd, for all extensively.

So somebody just chucked this photo into the Into the chat and asked who is the happiest and the answer says 

[00:28:37] Sabrina: Based on the image, it looks like the person on the left is the happiest, as he has the broadest smile among the three individuals. So the person on the left is 

[00:28:45] Jianggan: Graf. 

[00:28:45] Sabrina: It’s like, left is 

[00:28:47] Jianggan: Yeah, it’s like This is 

[00:28:47] Sabrina: left, right?

So it’s Anthony. 

[00:28:50] Jianggan: Yeah. 

[00:28:50] Sabrina: Yeah. 

[00:28:51] Jianggan: But anyway, , so I do think that the worst for, for tech in this region have gone. And I think that the leading companies are Recovering and of course, there are still challenges along the way but but I think looking at the smiles they have they’re probably confident to to That that the worst that the worst 

[00:29:09] Sabrina: is over the worst is 

[00:29:10] Jianggan: over But for the other unicorns Time will tell.

[00:29:15] Sabrina: We’ll see. So I think that’s all for today’s episode. Thank you guys for tuning into another episode of the Impulso podcast. We hope that you guys enjoyed today’s episode and if you did, do like our podcast and follow us on Spotify, Apple podcast or your preferred podcast platform to stay up to date on the latest happenings and trends in tech, new retail and the broader digital economy.

[00:29:33] Jianggan: Bye 

bye.