E84 – The Impulso Podcast – TikTok Shop vs Temu in SEA

In this latest episode, we’re sharing exclusive snippets from our recent media briefing where we delve into the highlights of our newly released “Ecommerce in Southeast Asia 2024” report. 

Some key highlights:

• Total GMV of Southeast Asia’s 8 leading ecommerce platforms rose to US$114.6 billion in 2023;
• TikTok Shop is rapidly catching up with established players like Shopee and Tokopedia;
• Temu’s strategic entry into the region, and is Indonesia next?

This episode offers a glimpse into our findings, from market growth to key trends shaping the industry. Check out the full episode here:

Also available on Spotify and Apple Podcasts.

For more insights and detailed analysis, check out Momentum Works “Ecommerce in Southeast Asia 2024”: report which includes insights into the region’s six core ecommerce markets, as well as competitive dynamics of leading ecommerce platforms and ecosystem players including logistics. 

Featured materials:
Ecommerce in Southeast Asia 2024, Momentum Works 

[AI-generated transcript]

[00:00:00] Weihan: Hello, everyone. Welcome to episode 84 of the Impulso podcast by Momentum Works. Today’s episode will be a bit different from our usual programming, and we will be showing you a snippet of the press release for our e commerce in Southeast Asia 2024 report that was just launched this week. So without further ado, let’s jump right in.

[00:00:21] Jianggan: Good afternoon everyone. Thanks for joining us for our press briefing about e-commerce in Southeast Asia. And so I hope you guys have been having a great Monday. So we’ve scheduled an hour to talk about this topic and specifically the findings of our e commerce in Southeast Asia report 2024, which we are releasing to the public tomorrow.

 . So today with me is Wei Han, who is our insights lead at momentum works. She has led the authoring of this report Wei Han.

[00:00:52] NA: Hello, everyone. Nice to meet you. 

[00:00:55] Jianggan: Okay, cool. Next page, please. So some of you might remember a year ago in June, 2023, we released a report. We released last year’s report on e commerce in Southeast Asia, where we look at the competitive dynamics, the macro trends of e commerce in all the six key markets of the region.

And back then we had this conclusion. Which I will read the end game might not be a steady state, but a result of continuously shifting currents and how leading platforms are able or unable to write such currents. So, as we are zooming into what has happened in the last year, a lot of things have changed, but I would say that this conclusion still holds.

[00:01:39] Weihan: Okay, let’s start off. So I’m pretty sure we all know that in 2023 there are a lot of uncertainties and a lot of challenges. That many of the platforms have faced, but the thing is that the overall e commerce platform still managed to grow quite a bit over the past few years.

So we have reached about 114. 6 billion in terms of GMB coming from the eight major platforms, e commerce platforms in Southeast Asia, and this is by about 15%. Since 2022. But if we were to compare it with the first day of the pandemic, it is almost like a doubling of the overall GMB in the region.

However, we also do know that this growth is actually pretty uneven across different platforms as well as in different countries. So let’s move on to the next slide where we look at the country specifics. So if you can see here, Indonesia still remains the largest market in Southeast Asia. Reaching a GMV of 53.

8 billion in 2023. And this is, they’re still considered the largest player accounting to about around 46. 9 percent of the entire region’s GMV. But if you can take a look at Thailand as well as Vietnam, these are the two countries for which actually contributed the most in terms of the growth. And you can see that Vietnam has grown by about 52.

9 percent whereas Thailand has grown by about 34. 1%. So very significant growth by these two countries. But if you were to also to look at Philippines as well as Malaysia and Singapore, the countries mentioned actually also recorded decent growth about Almost double digit or double digit growth for all the three countries mentioned.

So I think let’s move on to the next part where we look at the market share by country for each of the key players. So from here, you can tell that Shopee leads in all countries with a GMV of 55. 1 billion dollars. And you can see that Lazada is still relatively strong. So they are at about 18. 8. billion In terms of the GMV, and they are the second largest in Thailand, Philippines, Malaysia, as well as Singapore, but I would like to draw your attention to TikTok shop.

So it has now caught up with Tokopedia in terms of its GMV, reaching about 16. 3 billion. And I think in the next slide, you would see that The combined GMV of Tokopedia and TikTok would actually put them at around the second largest platform in Southeast Asia. So let’s look at the key players first. So you can see here that all, most of the platforms here actually recorded quite decent growth over the years.

Shopee still the largest and have continued to maintain its growth in terms of GMV and has about a market share of about 48% in 2023. However, I would like you to take a look at TikTok shop in particular. You can see that from 2022 to 2023, they have actually almost quadruple or have their GMV grown by four times, and it is almost all at the same scale as encyclopedia and Lazada.

And last but not least, you can also see that Temu has actually entered Southeast Asia in 2023, specifically in the countries of Malaysia and Philippines. And their estimated GMV is less than 0. 1 billion. So I think Jianggan has some insights in terms of what they are going to be focusing on in Southeast Asia or whether they will not focus on Southeast Asia.

[00:05:18] Jianggan: Let me add a few pointers to to this slide. And obviously last year, what people were concerned about is is TikTok shop was aggressively pushing on the growth in the market. And the people are concerned about Shopee not being able to hold that position. But if we look at the total numbers, I mean, Shopee’s market share of 48 percent is roughly the same as the previous year.

We will look at TikTok shop and Tokopedia combined. That puts them already at about 60 percent of Shopee’s total GMV. That makes them a very relevant player in this region. And And another thing we should look at is is this number looks at the whole year of of 2023. And obviously we know that TikTok has been following a growth trajectory with a little bit of a glitch between October and December when they were banned by Indonesia.

So if we look at the numbers in the second half of the year on a month where they were not Banned or seizing operations. They were actually at the at a position where I think Indonesia, they might not be that far from shopping already. So, so this year, depending on how the integration they have with Tokopedia goes they could very much become the number one player in Indonesia.

So in addition to the macro numbers, we also look at key trends in Southeast Asia this year next page. So we have summarized four key trends on live commerce, generative AI, adoption, e commerce enablers, as well as third, third party logistic providers.

So one thing we have seen in Southeast Asia over the last two years, ever since TikTok started pushing aggressively is live commerce. People doing sort of live videos while selling products. 

During the first half of the year, we also organized two live commerce immersions for people in the ecosystem to go to China’s cities of Shenzhen, Guangzhou, and especially the live commerce capital Hangzhou, respectively. We visited the top live studios, top MCNs, the ecosystem. We talked to the platforms.

We talked to the investors and we, we explored the supply chain. So I think that lots of learning points. But a bigger conclusion is that people believe that the live commerce would work in Southeast Asia and and during these discussions, and we kind of figured out that a bigger issue that people need to figure out is the supply.

 Trend number four logistics. We all know that logistics, the key infrastructure of e commerce, because that delivers the goods from the warehouses, from the sellers to the consumers.

[00:07:50] Jianggan: So on the left of this page, you will see a comment. made by Shopee’s leadership in their last earnings call. More than 50 percent of their orders in Southeast Asia are now delivered by their in house logistic arm, Shopee Express. And more than 70 percent of their orders in Brazil are developed, developed in house.

So of course that puts lots of pressure on third party players. And on this page you will see, I mean, some of the vehicles of Shopee Express on the bottom right. That’s their sorting center in Brazil. And you can see the scale and the investment they have been making in logistics. 

So the pressure is on a third party players. Even the largest e commerce logistic player in the region, J&T Express Which in the first quarter of this year delivers 11. 3 million parcels a day. That’s about a quarter of what they do in China, which is quite significant. You see the amount of revenue they could charge per order has declined since 2021. And that shows, I mean, the concentration of e commerce platforms and how that does to the third party e commerce logistic players.

And now that is to the question of next page, please. Whether TikTok shop would build its own logistic and some of you might have read in the news that TikTok has been building local services, I mean, restaurant Advertisement and maybe for delivery. So will they build their own e commerce logistics?

We have, our assessment is that they don’t have plans at the moment, but we also know that this is a company which is I mean, despite, despite its size, it’s very agile and it makes lots of decisions based on data. So if one day they make the calculation that, okay, ROI of building their, or acquiring their own logistics has become positive, they might execute.

So you will not. Aside away from things because it’s difficult, it shies away from things because it doesn’t make sense. So, one day we might expect them to to build their own logistics. 

Another question, which I think people in Indonesia will care a lot is whether Temu the overseas arm of Pinduoduo or PDD group, will enter Indonesia.

So in the last quarter, there has been a lot of speculation that Temu is exploring the entry of Indonesia. And of course there are reasons for the speculation because a lot of the payment and logistic providers in the country were approached by Temu executives for information. So. And of course the government becomes very concerned, right?

Because Temu is known for running its full consignment or full management model to ship massive amount of Chinese manufactured goods directly cross border to the consumers. But what we do think is that I mean, Temu now has a pretty stable footing. It’s global markets, especially in developed, developed countries.

And knowing Pinduoduo as organization, I don’t think they will leave Indonesia alone. I think they will find a way to play a role in the Indonesian market. But I do think they are smart enough to know that pure cross border model is not welcome in Indonesia and that they will probably explore a different model.

Even in the U S now they are pivoting from pure cross border to local to local. And since. March this year, most of the market spent marketing spend in the U. S. has been focused on sellers which have goods already stored in a warehouse in the U. S. Next page. And this, this page shows Teemo’s footprint since its launch in September 2022, right?

As of Ju 1st of July, I mean, the 1st of this month, they were available in 72 countries and territories, covering most of the developed world. And we know that since then, like, another name has been added to the list. So they’re, they’re still constantly expanding. Next page. And they have also been expanding their GMV.

And I do have a number of public marketing investor friends who have been doing nothing but looking at Temu closely for the last year and a half because they hold lots of Pinotus shares. And and many of them, I’ve been discussing with many of them and some of them are fairly confident that team is already close to breakeven and two of them based on their calculation have said that, okay, I do think that team has already achieved breakeven.

So, this is a formidable organization. And and if they decide to come to Southeast Asia, it could, I mean, Shopee has occupied the mindshare of of low cost products and team could still be a formidable competitor because organization wise. They’re very, very efficient and whether they will, I mean, they will probably enter this region.

So it will be interesting. And for all the ecosystem players to think about, I mean, if it becomes a fight between Temu, Alibaba TikTok shop and Shopee, where should our position be? I mean, e commerce enabler, logistic player, et cetera, et cetera. 

I hope that what we have shared in the last 40 minutes give you a brief understanding about the currents, the trends, the competitive dynamics, and the strategy of key players, as well as the the happenings in China, which might impact the markets in Southeast Asia.

Now back to the what we mentioned at the beginning of this presentation and the conclusion in our last year’s report, the end game might not be a steady state, but a result of continuously shifting currents and how these platforms are able to or are able to write such currents. So when we look at each e commerce platform, how exactly they will succeed or how exactly they will place themselves in a competition.

It might make sense not to look at simply at the existing financials, their performance, their GMV, etc. You might want to go into the organization to look at who are the leaders, who are the key people, and that will make a lot of assessment far more accurate. ,

[00:13:48] Weihan: thank you for tuning into another episode of the Impulso podcast. We hope you’ve enjoyed today’s episode. If you find today’s insights interesting, do check out our e commerce in Southeast Asia 2024 report, which will be linked in the show notes. As usual, do like our podcast and subscribe on YouTube, Spotify, Apple podcast, or your preferred podcast platforms to stay up to date on the latest happenings and trends in e commerce, tech, new retail, and the broader digital economy.

Bye bye.