Shopee owner Sea misses on profit amid fierce competition
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Sea’s e-commerce arm Shopee, its biggest unit, is facing competition from deep-pocketed global challengers.
PHOTO: REUTERS
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- Sea's Q3 profit missed Wall Street expectations due to increased operating expenses, rising 28% to US$2.12 billion, driven by e-commerce spending.
- Shopee used financial incentives like cashbacks to attract consumers amid economic uncertainty and fend off competition from TikTok Shop and Alibaba.
- Despite higher spending, Sea's revenue rose to US$5.99 billion, exceeding estimates, with e-commerce revenue reaching US$4.3 billion.
AI generated
SINGAPORE - Sea’s quarterly profit missed analysts’ estimates after the company boosted spending to battle competitors in South-east Asia’s cut-throat e-commerce market.
Net income for the July-through-September period came to US$375 million (S$489 million), the company said on Nov 11. Analysts were expecting US$433 million, according to Bloomberg-compiled data. Revenue rose 38 per cent to US$6 billion, topping the US$5.65 billion average estimate.
The company’s American depository receipts tumbled 8.2 per cent on Nov 11 in New York.
Sea’s e-commerce arm Shopee, its biggest unit, is facing competition from deep-pocketed global challengers including ByteDance’s TikTok Shop and Alibaba Group Holding’s Lazada. While South-east Asia’s burgeoning online retail market is growing at a rapid clip, margins in the industry remain slim as contenders vie for users with promotions and improvements to their service.
Sea chief executive Forrest Li has focused on strengthening Sea’s logistics arm, winning over consumers with cheap deliveries. The effort has cemented Shopee’s position atop the regional market, which is expanding as more consumers go online and turn to shopping apps for anything from iPhones to daily groceries. Shopee’s gross merchandise value (GMV), or the total value of goods sold, is set to increase more than 25 per cent in 2025 rather than the 20 per cent projected previously, Sea said.
Shares of Sea have more than quadrupled from 2024 lows as its earnings performance has improved. But they have lost more than 20 per cent in the past two months over concerns that its valuation has become too high, given the increasing competition. Emerging players such as Shein and PDD Holdings’ Temu are also looking to break into the rapidly growing market of 675 million people.
Mr Li said in October that artificial intelligence (AI) is set to help Sea with its next growth phase. The company has boosted investment in the technology, integrating AI into its daily operations in areas such as customer service and gaming. Its gaming business Garena boosted bookings by 51 per cent in the quarter, the most since 2021.
To attract more online shoppers, Sea has also focused on improving customer experience by building its own in-house delivery network, called SPX Express. SPX now handles the majority of Shopee’s billions of parcels annually.
Meanwhile, Shopee has been steadily raising the commissions it charges merchants in various core markets. The increases, which bring Shopee’s fees above its rivals, show that Sea is confident it can attract and retain merchants, helped by a broad user base and well-established delivery services. Quarterly revenue at Shopee rose 35 per cent to US$4.3 billion, while its GMV increased 28 per cent.
Sea is also betting on new initiatives including digital finance to grow its dominance and convince investors of its growth potential. Its finance arm – now known as Monee – has been gradually gaining traction. BLOOMBERG
