Shopee is now on par with Alibaba’s full international e-commerce business – Wired PR Lifestyle Story

Unusually, Alibaba and Sea Ltd. released their latest quarterly results this week, after the Chinese giant cut its forecasts and delayed publication two weeks earlier in November.

And they make for a pretty sad read, after losing targets for two consecutive quarters and lowering their forecasts for the full 2022 FY.

Although many of the company’s problems have slowed down in China and Beijing is the result of political repression against the country’s digital megacorporations, the company has come out equally abroad.

Alibaba has hit the ceiling

Sales on the mainland are still strong, but it seems to have hit a limit.

The company grew by 33 percent year-on-year in China’s retail trade, but at 126.8 billion RMB, up 6.7 percent from the quarter ended June, when its revenue reached 135.8 billion RMB.

It’s a similar story overseas, with revenue down $ 1.610 billion from $ 1.670 billion in the previous three months, down about 3.6 percent.

In fact, Alibaba has been at the same level as between $ 1.5 billion and $ 1.6 billion in the quarter since the beginning of 2021, which indicates that it has reached growth limits outside of China at a time when competitors are making rapid progress.

Meanwhile, Shopee’s parent company, Sea Ltd., has just achieved $ 1.5 trillion in the quarter of 2021, up from 134.4 percent year-on-year and 25 percent quarter-on-quarter (about $ 1.2 billion in the second quarter).

Looking at Q4’s track record for 2021 and adding $ 300 million and $ 400 million a quarter this year, it looks like Shopee has closed that small gap that remains or has already surpassed Alibaba.

Unlike its Chinese competitor, Sea Ltd. raised its full-year outlook for the second time.

In the last quarter, e-commerce revenue was expected to be $ 4.9 billion, and this quarter’s guidelines place it between $ 5 billion and $ 5.2 billion for the full 2021; even at the current pace, it may very well exceed expectations again as well as in the US. $ 5.5 billion is not outside the scope of the option.

This is particularly likely given the new revenue it has just entered the new markets in Europe and India, which, while small, will add to the company’s revenue by the end of the normally busy year.

The future is not without its tides

While these results seem to work very well for the company, we can’t forget that its business model is based on the profits generated by Garena’s digital entertainment army, offsetting some of the costs of growing Shopee and other Sea services.

As you can see below, after seeing the rise in reserves during the pandemic, it seems that the growth of Garen is normalizing, which may also affect the growth of Shopee.

If the digital entertainment business suffers a drop in profit margins (banned by the skies), then Sea’s overall performance could be pretty damaging – and fast – as the company continues to lose money to gain market share elsewhere, especially in e-commerce.

At the moment it still has quite deep pockets, considering its market capitalization, it has risen in the last two years and is now $ 170 trillion (well under management). More than $ 200 billion Such as Bank of America, Citigroup or UBS).

That allowed him to raise nearly $ 9 trillion last year alone and now has about $ 11 billion in his hands.

That said, advancing the normalization of life with Covid-19 around the world will dampen the growth of digital services, which have received a tremendous boost with billions of people stuck in homes during the pandemic.

The near future looks bright yet, with 51% more e-commerce revenue expected in 2022, which would bring in more than $ 7.5 billion.

However, achieving stronger and more profitable markets in more developed markets (e.g., Europe) will cost the company dearly in the coming years, while it continues to compete for market share in Asia and Latin America.

To successfully manage all of these, it needs to start making a profit among its adult customers and unleash the burdens that Garena has endured over the last two years.

No doubt Seak has made the most of the opportunity provided by Covid-19, reinvesting everything he could to ride the wave. Now it’s about strengthening those gains and the next two will show us how stable and enduring Shopee’s presence around the world will be.

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Featured Image Credit: Reuters