Yesterday (14 May) evening Asia time, Shopee’s parent SEA Group released its Q1 2024 results. It is a good set of results: digital entertainment is back to growth with its star game Free Fire recovering, Shopee increased its GMV and take rate while reducing sales & marketing expenses significantly. 

The market reacted mildly positively to the results, sending Sea’s share price up by 2.79% at the end of the first trading day after the release. There were some swings during the intraday trading but much less compared to the day after the previous earnings report. The share price had actually gone up by almost a quarter in the month leading up to the current release of earnings. 

Some of our thoughts: 

  1. Shopee’s Q1 results were set in a backdrop where its main rival, ByteDance’s TikTok Shop, reined in its aggression and started to push up their own commission levels charged to the sellers;
  2. There are speculations on why TikTok Shop is doing that, ranging from concerns about excessive burn, giving up on becoming number one of the market, to internal shift of KPIs to focus more on revenue (hence increased commissions);
  3. We however feel that TikTok Shop is probably doing some tests to find the revenue and profit potential of the market, before plotting and executing their next moves. They had done that before (pausing growth in Indonesia in mid 2022 before stepping on the pedal again). And we have to remember ByteDance is almost an excessively data driven company; 
  4. The next moves of TikTok Shop could be renewed aggressive push with differentiated focus. Whether this happens or not probably does not depend on how Shopee competes or feels, but on how attractive Southeast Asia’s ecommerce market really is for TikTok to be worth the effort and investment. Although Shopee would very much want TikTok to believe that the market is not worth it; 
  5. Which means, although Shopee has some room to breathe in the short term, until we see a definitive conclusion from TikTok (that the market is not worth the effort), Shopee will still face fair bit of uncertainty in competitive dynamics; 
  6. That point was discussed a couple of times during the earnings call, with analysts asking and managing to respond that they do not know whether “the competitor” will restart aggression again; 
  7. What Shopee management explained, and was trying to do, is the right thing. Focusing on improving customer experience, and responding to competition market by market, category by category;
  8. We have had our doubts about Shopee live commerce push in the previous quarters, on the ground that it would probably never do as good a job as TikTok Shop. We have been studying live commerce intensely for the last couple of months (and will be running our next Live Commerce Immersion in Hangzhou later this month). We are now starting to believe that as a defensive tactic, and as a way to strengthen the marketplace, the investment Shopee has made in live might actually be worth it;
  9. On the other hand, TikTok Shop has progressed its marketplace fairly well in Southeast Asia, which has been a big threat to Shopee. Whether that threat will aggravate or alleviate, we will probably find out soon; 
  10. Shopee management revealed that its in-house logistics arm now delivers >50% of Shopee’s orders in Southeast Asia (and >70% in Brazil). They also mentioned that they would continue to increase that percentage while not having a specific target in mind. To benchmark, J&T Express, the largest 3PL in the region, revealed that in Q1 it was delivering 11.3 million parcels a day in Southeast Asia, probably benefiting from the recovery of TikTok Shop’s volume in Indonesia; 
  11. Sea group management also mentioned that it sees a lot of potential in Brazil’s digital financial services business. We speculated in 2021 that Seamoney would potentially compete head to head against Nubank in Brazil. Alas, because of the capital market sentiments in the last two years, the opportunity to unseat Nubank as market leader is probably gone – Nubank just announced crossing 100 million user mark last week. Seamoney, however, could still build a sizeable and very profitable credit business in Brazil. 

In our commentary about the previous (Q4 and FY 2023) earnings release, we noticed a trivial point that most transcribers seemed not to be familiar with Chris Feng, Group President and CEO of Shopee & SeaMoney, misattributing his comments to Forrest Li, Founder and Group CEO. Many transcribers have corrected that mistake this time round, after Feng had spoken much more and much eloquently during yesterday’s earnings call. He seemed to be in good spirits as well. 

The question whether Shopee has a moat, which we raised a few months ago, is still ongoing and evolving.


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