Last Thursday (17 Nov 2022), Momentum Academy held online sharing session “Off the record: Shopee’s turbulent 2022”. More than 400 people registered for the session, which focused on issues surrounding Shopee as well as ecommerce in Southeast Asia in general.

Due to time constraints, we could not answer all the questions during the session. But as promised, here are thoughts on some of the questions we received. Happy to elaborate/discuss further:

1. Why do you say Sea Capital’s FTX/Kayak investments were puzzling? They are run as a completely independent vehicle from Sea, in no way do their investments have to align strategically with the core group.

It goes back to why Sea Group injects significant $$ into Sea Capital, the expectations out of Sea Capital’s investments, and the value of these investments to Sea Group. 

There are areas/sectors where Sea Group would see significant opportunity to create value, and Sea Group’s existing resources would help unlock that value, but where it does not make sense for Sea Group to execute directly. 

If it is purely for financial returns with no synergy/leverage to the group, I am not very convinced that Sea Group investors putting money into a separate vehicle is a good idea. It could be argued that Tencent does a lot of investments which are not really related to their core business – but Sea Group is not at the stage of Tencent yet. Learning can be done with (much smaller) allocations. 

2. How much further do you think Shopee can raise its take rate from here in Southeast Asia, given that Shopee has already raised commissions etc. quite a bit in its bid to reach profitability?

This is a question on which we have actually been discussing a lot with our community. We have also been discussing with a lot of sellers on Shopee as well as enablers – there is enough margin in the value chain to support elevated take rates. 

The challenges, however, are with Shopee’s competitive landscape not only with other platforms but also with offline retail. Shopee will need more time to consolidate its moat versus other players as well as the dependency (value) to the sellers. TikTok Shop and Lazada are determined and deep pocketed competitors – their leadership, people and organization will decide how they respond to the market, as well as Shopee’s ability to raise take rates. 

In the meantime, Shopee is making the right move to exercise more control over fulfillment – in this regard they are ahead of the main competitors. 

3. Do you know why Shopee exited Mexico while keeping going in Brazil?

Brazil is the largest market in Latin America where Shopee has dedicated abundant resources (Shopee entered Brazil before the pandemic). In comparison its Mexico operations were more recent and much more modest in scale. Besides, Mexico’s ecommerce market structure is quite different from that of Brazil – operating in both essentially requires a separate set of teams and ecosystem.  

We also did a benchmark between Southeast Asia and Latin America with our partner Cento Ventures at the end of last year. You would see a lot of similarities between Brazil and Indonesia – while consumption power in Brazil is larger. 

4. Is SeaCapital being folded or reduced in scope? How much of its capital has been deployed? Any visibility on its success?

Sea Capital has pretty much functioned independently from Sea Group’s operational businesses, and has been very cautious about investments in the Southeast Asia region. With the current macro landscape, any growth investor would need to take a more cautious approach. Also reference to the answer to the first question above. 

5. Do you think Shopee’s rival Lazada & TikTok will enter fintech in the near future? or how will they diversify their revenue stream further?

Lazada is – as we mentioned they have already invested into Dana and Touch ‘N Go. If TikTok Shop wants to be serious about ecommerce for the long term, they will need to control payment as well as supporting (monetising from) the ecosystem through fintech services. 

6. Will Tencent not renew the ROFR with Garena?

Possible, as Tencent is going through its own set of challenges. What we know thus far is that Tencent is still determined to support its ecosystem of companies as well as its own affiliates, while at the same time allowing them to compete against each other. This has been the stance since 2011.

7. Any comments on their 3q reports?

Yes, we have written a commentary on their Q3 results on TheLowDown

8. What’s the future of Shopee? Do you think Shopee will expand into those markets that it had left?

While it is possible, it will definitely not be any time soon. Nobody knows how long the current macro uncertainties will last, and we do not foresee interest rates to drop to pre-2022 levels in the near future. Shopee’s imperative is to prove that it can make money, before further expansion.

9. Why did Tencent set up Level Infinite in Singapore? Is this in regards to the publishing arm?

I guess this question is relevant to the topic of this discussion because Shopee’s sister company Garena became successful as a publisher of Tencent’s games. 

Anyway, Tencent’s objective of setting up Level Infinite is probably two-fold: 

  1. Consolidating its international game publishing business, which had been under a few competing outfits within the group; 
  2. Avoiding geopolitical risks by having a Singapore based entity with a neutral name (rather than a Mainland China or Hong Kong based entity with Tencent name)

The deck

You can also download a complimentary copy of the full presentation for “Off the record: Shopee’s turbulent 2022” here. For other research reports and publications from Momentum Works / Momentum Academy, please visit our insights page.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].


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Jianggan Li is the Founder & CEO of Momentum Works. Prior to founding Momentum Works, he co-founded Easy Taxi in Asia, and served as Managing Director of Foodpanda. The two years running Rocket Internet companies has given him a lifetime experience on supersonic implementation, and good camaraderie with entrepreneurs across the developing world. He holds a MBA from INSEAD (GMAT 770) and a degree in Computer Engineering from Nanyang Technological University. Unfortunately he never wrote a single line of code professionally - but in his first job he was in media, travelling extensively across Asia & Europe, speaking with Ministers & (occasionally) Prime Ministers. Apart from English and his native Mandarin, he is also fluent in French and conversational in Cantonese & Spanish. He tried to learn Latin (for three years) and Sanskrit (for six months) as well. In his (scarce) free time, he reads, travels, hikes and dives. Pyongyang, Tehran & Chisinau are among the interesting cities he has been to.