I’m connected to the PE space within Asia and would like to share some info on the Sea vs Alibaba (Shopee vs Lazada) debate.
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Lazada was founded by Europeans and subsequently sold a controlling stake to Alibaba. There is a strong culture clash within the company where European management and Chinese ownership struggle to work together. This is one reason why Lazada has been losing ground to Shopee.
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An ex-classmate of mine interviewed management of both Sea and Lazada a couple years back. He asked management how many times they take a break from work in a year. Lazada CEO: Twice for holiday, once during summer and another during the winter break. SEA COO, Gang Ye: He checks into a health institution twice a year to check his mental wellbeing. That’s how hard they work in SEA.
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Chris Feng (Shopee CEO) led the company’s entry into the Indonesian market 5 years back. Now he speaks fluent Behasa (Indonesian national language). He gives instructions in Behasa, and gives 1-hr speeches in Behasa. Sea’s executives work extremely hard to localize themselves in each Southeast Asian country. Shopee is now the top e-commerce platform in Indonesia.
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Shopee is growing extremely rapidly in Latin America. From a standing start in Brazil a couple years back (where MELI had almost 100% market share), Shopee now has roughly 20% market share in the country (mainly cross border e-commerce).
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E-commerce requires heavy investments. Not many companies have the resources to compete with SEA. SEA generates huge amounts of FCF from Garena (its gaming arm) and uses that to invest in building up Shopee. Lazada, on the other hand, has to depend on the largesse of Alibaba to continue finding its cash burn.
From SEA’s Q2 earnings transcript:
"In terms of competitive landscape, I think we’re in a very strong position that we were growing “fast and faster” even. And we are also further strengthening our market leadership position. And we have demonstrated we are self-funding our growth in e-commerce.
Now, if you look at certain other competitors who are both losing money and therefore, dependent on external funding for it and losing market share. I can see why it could be very difficult to fundraise. So I think this has put us in an even stronger competitive position."