shopee alibaba

Shopee is now equal to Alibaba’s entire international e-commerce

Rather unusually, Alibaba and Sea Ltd. released their latest quarterly results this week, after the Chinese giant cut its projections and delayed the release two weeks earlier in November.

And they give a relatively grim reading, having missed its targets for two consecutive quarters and slashed its guidance for the full 2022 fiscal year.

While much of the company’s problems are due to a downturn in China and Beijing’s political crackdown on the country’s digital mega-corporations, the company is doing just as badly overseas.

Alibaba hits the ceiling

Its sales on the continent are still strong, but appear to have reached a limit.

The company saw a 33% year-over-year increase in Chinese retailing, but at RMB 126.8 billion, it was down 6.7% from the quarter ending in June, when its revenue had increased. peaked at RMB 135.8 billion.

It’s a similar story overseas, with revenues down to $ 1.61 billion from $ 1.67 billion in the previous three months, down about 3.6%.

In fact, Alibaba has been at the same level of around $ 1.5 billion to $ 1.6 billion per quarter since the start of 2021, indicating that it has reached the limits of its growth outside China at a when its competitors are progressing rapidly.

Meanwhile, Shopee’s parent company Sea Ltd. just posted third-quarter 2021 revenue of US $ 1.5 billion, up 134.4 percent year-on-year and 25 percent. % quarter over quarter (vs. approximately US $ 1.2 billion in the second quarter).

alibaba vs shopee sea quarterly e-commerce revenue
Data source: annual reports

Given the trajectory through Q4 2021 and the fact that it added US $ 300-400 million per quarter this year, it seems certain that Shopee has either closed that remaining small gap or already passed Alibaba.

Unlike its Chinese competitor, Sea Ltd. for the second time increased its projections for the year as a whole.

Last quarter, it forecast as high as $ 4.9 billion in e-commerce revenue and this quarter’s forecast puts it in the range of $ 5 billion to $ 5.2 billion for all of 2021 – albeit given its current rate, it could very well exceed expectations again and even in the United States. $ 5.5 billion is not beyond the possibilities.

This is especially likely given its recent entry into new markets in Europe and India, which, while small, will boost the company’s revenue during the generally busy end of the year.

The future is not smooth for Sea

While these results may suggest that the company is doing extremely well, we cannot forget that its business model relies on the profits generated by Garena’s digital entertainment arm, which offsets some of the costs incurred by the growth of others. Shopee and Sea services.

As you can see below, after seeing an increase in bookings during the pandemic, Garena’s growth appears to be normalizing, which could have ripple effects on Shopee’s growth as well.

Growth in Sea Garena bookings
Image Credit: JR Research

If the digital entertainment industry experiences a drop in profit margins (heaven forbid), Sea’s overall performance can be severely affected – and quickly – as the company continues to lose money in pursuit of shares. market elsewhere, particularly in electronic commerce.

It still has pretty deep pockets at the moment, considering its market capitalization, which has skyrocketed over the past two years and currently sits at US $ 170 billion (with forecasts of over US $ 200 billion). Americans by companies like Bank of America, Citigroup or UBS).

As a result, he was able to raise nearly US $ 9 billion in the past year alone and currently has around US $ 11 billion in cash.

That said, the gradual normalization of life with Covid-19 around the world is expected to slow the growth of digital services, which have received a huge boost with billions of people trapped in their homes during the pandemic.

The immediate future still looks bright, with e-commerce revenue expected to increase by 51% in 2022, bringing it to over $ 7.5 billion.

That said, establishing a stronger and more profitable footing in more developed markets (e.g. Europe) is likely to cost the company dearly in the years to come, as it still competes for market share in the future. Asia and Latin America.

To manage them successfully, he needs to start generating profits from his more mature clients and offloading the burdens that Garena has borne over the past two years.

Undoubtedly, Sea used the opportunity that Covid-19 presented to its absolute maximum, reinvesting everything he could to ride the wave. Now it’s a matter of building on those gains, and the next two are likely to show us just how stable and sustainable Shopee’s presence in the world will be.


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Featured Image Credit: Reuters

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