The Latin American-headquartered company has launched a new free-campaign in Brazil, slashing the minimum order fee from BRL79 ($18.43) to BRL19, while cutting seller shipping fees by up to 40%, with MELI shouldering the cost.
Saifee notes that the strategy specifically targets the low-to mid-price segment, an area where Shopee has been gaining strong traction.
He writes: “While MELI had been growing at a faster clip and gaining market share in Brazil, we understand Shopee had been growing at an even faster rate, improving its logistics capabilities and trying to penetrate the mid-higher end of the market.”
With this, Saifee understands that despite MELI's advances, Shopee’s value proposition remains highly competitive, as Shopee’s products are 11% cheaper on average, with faster delivery times.
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Already, with an estimated gross merchandise value (GMV) as at 1QFY2025 of US$15 billion, he believes that Shopee has overtaken another e-commerce player, Magazine Luiva.
Overall, Shopee sellers face lower take-rates, particularly on low-ticket items, even after factoring in shipping subsidies.
“While MELI’s new strategy narrows the gap, Shopee still holds a distinct edge in affordability and seller economics- key pillars in winning and retaining value-conscious consumers in Brazil’s e-commerce market,” writes Saifee.
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Shopee is ramping up in Brazil with 11 distribution centers and a new logistics hub in Goiás.
Aside from its first fully managed fulfillment center in São Paulo, the platform is also moving upmarket by on-boarding over 800 major brands, steadily lifting its average order value.
The Maybank analyst sees that Shopee Brazil is valued at around US$10 billion, contributing 9% to Sea’s sum-of-the-parts (SOTP).
Should MELI’s pricing move erode Shopee’s market share, Saifee has applied a 0.5 times enterprise value (EV)/ sales multiple to Shopee Brazil, the same valuation applied during Shopee’s trough in 2023.
He writes: “This would cut Shopee Brazil’s value by 87% to US$1.3 billion, reducing our Sea SOTP by 8%, from US$192 to US$176.”
Upside swing factors noted by Saifee include stronger-than-expected user growth and stronger topline growth as Shopee could potentially capture more market share.
Conversely, downside factors include weaker-than-expected consumer spending in the region amid macro uncertainties, slowing user growth metrics, higher-than-expected credit costs for SeaMoney due to a slowdown in economic growth and lastly, new entrants which could intensify competition in the Southeast Asia e-commerce industry.
Shares in Sea Limited closed US$3.81 higher or 2.47% up at US$158.19 on June 16 on the New York Stock Exchange.
