There are a few e-commerce plays that are going strong - SHOP, MELI, SE and ETSY.
Of them, I have a small position in SE, a bit under 5%. It’s very out of my wheel house, but I’ve found several great deep dives and a few folks on Twitter that follow it closely. I like it more than the e-commerce marketplace pure-plays (SHOP, ETSY) given how gaming division is funding the rest of the companies strategies. As for MELI, I have owned them before and it is obviously also a strong company with well-honed divisions that extend the marketplace (payments, shipping). But with SE, gaming is having incredibly strong execution, and has become a great way to fund their other strategies.
It is vital to understand how their 3 divisions tie together. Gaming success funds the e-commerce and e-wallet/payment services. Both gaming and e-commerce use the payments. They are spreading internationally first by gaming, then going after highly localized e-commerce. All divisions are mobile-first, and all focus on increasing engagement.
They are not based in or operating in China. This is a Singapore-based company focused on SE Asia [SEA] countries (Singapore, Vietnam, Philippines, Malaysia, Indonesia, Taiwan, and Thailand), but is also expanding into Latin America (mostly Brazil, with gaming and e-commerce) and now also India (with gaming).
An easy comparison is Tencent, which had a very similar cross-focus (where early successes funded other directions). In fact, Tencent owns 20% of the company - which is something to watch (the SE Asia regulators have warned that they don’t want Chinese companies running e-commerce/e-wallet services).
If you want to know more, dig into these links.
Julie Young deep dive: https://julieyoung.substack.com/p/thoughts-on-sea-limited
- Tencent of SE Asia
- started 2009 by Forrest Li as comm tool for gamers
- Gaming funds the e-commerce and e-wallet spread
Garena: digital entertainment and gaming
Shopee: mobile e-commerce
SeaMoney: e-wallet, digital payments, financial services
Started licensing League of Legends in 2010, released Free Fire in 2017 (battle royale, similar to PUBG and Fortnite). Most downloaded mobile game in 2019. May 2020 set record with 80M users in a day. [Later in summer had 100M daily user record.]
Launched in 2015, mobile shopping platform w/ integrated payment, distrib/logistics and fulfillment services. Social features like in-line mobile games, live streaming and ability to follow other users. Makes money from tx fees and ads.
Major competitor in SE Asia is Lazada (Alibaba funded). Shopee kept asset light, only have marketplace, not inventory. Focus on high margin products purchased frequently (not computers, electronics). Shopee App ranks #1 in most of SE Asia by downloads, MAUs and time spent. Have expanded into Latin America esp Brazil, where main competitor is Mercado Libre (MELI).
SeaMoney: E-wallet, credit services and payment processing. Integrated into Shopee but also standalone.
SE Asia is very underbanked. Indonesia has <50% w/ bank. Very few <10% have credit cards. Competitors exist but China-based (AliPay and Wechat Pay), which are having issues due to reluctance w/ Chinese cos.
Seifel deep dive: https://seifelcapital.substack.com/p/sea-limited-nyse-se-sum…
- 3 business verticals that create virtuous cycle, gaming funds the e-commerce spread, both use SeaMoney
- all verticals focus on mobile-first & increasing engagement
- FreeFire game in Q220 has >1B revenue, 100M peak DAU, 3rd most downloaded game; can increase monetization of it more
- e-commerce is seller/buyer marketplace, enhanced with Shopee Games (in-line games), Shopee Coins (virtual coins for engagement, for discounts), Shopee Live (video streaming), Shopee Web Chat (live chat with sellers)
- has becoming largest and fastest growing e-commerce platform in just 5 years
- SEAsia population 670M people, undergoing massive shift to digital
- presence in Singapore, Vietnam, Philippines, Malaysia, Indonesia, Taiwan, and Thailand
- recent expansion into Latin America (Brazil) with Garena (FreeFire) and Shopee
- India had PUBG ban, Garena having huge sudden success there
James Booth view: https://twitter.com/emparadigmshift/status/13061167217118289…
- #1 download and engagement metrics
- look at improvement in unit economics - EBITDA per order
- EBITDA positive in Taiwan, other countries getting there one by one
- Indonesia is largest market atm, bullish if it goes pos
SE overview thread: https://twitter.com/santiagohunt/status/1329893851348295681?..
- Mostly in SE Asia but Garena big in Latin American and India, and Shopee appearing in Brazil.
- Modelling after Tencent, who is 20% investor.
Garena has high growth & margins/profits, and is moving into other geographies. Top game is Free Fire, a battle royale mobile game. Also acts as SE Asia distributor of other games like Call of Duty Mobile and FIFA Online. Feeds the other businesses (flywheel, some call it metaverse).
eCommerce and Payments in developing SE Asia countries w/ high # of underbanked but strong currencies & economies (Indonesia, Malaysia, Taiwan, Thailand, Singapore, Philippines).
Shopee moving into Brazil, is in top 10 app downloads for iOS/Android.
30% of Shopee tx paid via SeaMoney.
Lots of competition in payments, including Lazada (Ali Pay).
Ecommerce unprofitable (but greatly improving).
Tencent is 20% owner which gives shades of China, make sure it doesn’t grow (causing countries to get leery).
Market penetration stats for Shopee: https://twitter.com/saxena_puru/status/1329994204441763842?s…
Shopee vs Lazada take: https://discussion.fool.com/thanks-majorfool20-in-addition-to-th…
- Lazada has logistics, Shopee has better mgmt
- Lazada better at electronics, Shopee fashion, health, cosmetics
- Shopee better at localization
Shopee vs Lazada take: https://discussion.fool.com/i39m-connected-to-the-pe-space-withi…
- Shopee focuses deeply on localization, culture
- Self-funding its own growth from Garana (gaming)
- Entering Latin America, Shopee now 20% market share in Brazil
Google e-Conomy SE Asia 2020 Report: http://Economysea.withgoogle.com
- Pandemic boosted long term GMV projections from 150B to 172B by 2025
Earnings from last 2Q next.