Source: Snow Leopard Finance (ID: xuebaocaijingshe) Author: Yan Xuegong
Roll and roll and roll, lie and lie uneven
TikTok and Temu came to the city, but Shopee never gave the order to go to war in full force.
Compared with the previous siege, Shopee, which is currently being challenged, is very restrained.
Shopee, who waited in silence for his opponent's soldiers to come to the city, may not be able to avoid this battle in the end.
ByteDance and Pinduoduo "soldiers" Southeast Asia, to fight or not? Shopee's entanglement and hesitation are visible to the naked eye.
On the one hand, TikTok and Temu, who have come with billions of dollars of money and inevitable determination, have already conquered cities in Europe and the United States, and now want to conquer Southeast Asia; On the other side is Shopee, which occupies half of the Southeast Asian e-commerce market and derives almost all of its revenue from here, which is the base camp it must hold.
A Shopee executive told Snow Leopard Finance that the executive meeting clearly stated that "we must resume growth and prioritize growth before earnings." Li Xiaodong, CEO of Sea, the parent company of Shopee, also said that he would increase investment in Shopee.
But for such a company that has been on the battlefield with real knives and guns, this sporadic smell of gunpowder is really nothing. Except for executives and individual departments, most front-line employees didn't even hear the company's call for charge.
What's more, they fear losing more than they desperate for the next big win.
After experiencing the big layoffs after last year's "9.9 promotion" (equivalent to Taobao Double 11), many Shopee employees were shocked and their fighting spirit was low. Their fear is that the company is putting its hard-earned money into another round of turf wars.
But with TikTok and Temu on the rise, a fierce battle is inevitable, how will Shopee hold the ring?
01
"Fight? This ragged cloak"
The earliest hint of gunpowder came from the highest levels of the company.
A Shopee executive told Snow Leopard Finance that there was a recent executive meeting within the company, and management clearly prioritized growth ahead of profitability targets. TikTok was mentioned at the meeting, but no war was explicitly proposed.
In Shopee, which has just spent up to a year to reduce costs and increase efficiency, this is tantamount to a shift in the company's overall business strategy.
In key business units, there are also some clues that send signals that the storm is coming.
"We're going to war with TikTok!" The words of the supervisor impressed Su Minghao. Shopee Video, where he works, is a content team that Shopee formed specifically to fight Tiktok in 2021, and it is also the only department within the company that directly mentions going head-to-head with TikTok.
But the paradox is that the wind of the coming war is released, but the soldiers, horses and food and grass have not followed.
Su Minghao noticed that his team began hiring for the first time after the layoffs in September last year, but there were only a dozen HC (staffing). Shopee Video was the hardest hit area of the last layoff, and the number of people was reduced by more than half from the primary department to the second department, and "even if all the HCs released this time are full, it will not be half the size of the previous one."
The supply chain department has also opened dozens of job postings, but this is not a big move for a company with tens of thousands of employees.
In the past 9.9 promotion, Shopee squeezed out some real money and launched live streaming coupons, advertising cashback and affiliate marketing to attract merchants to do live broadcasting. However, in addition to live streaming coupons, the rest of the activities are considered by many merchants to be insincere.
Cashback on ads requires a minimum of $20 to top up the advertising amount during the campaign time to enjoy the 10% cashback offer. Affiliate marketing is about partnering with local influencers through official platforms.
The storming horn from the top was half-blown, and before it could command the whole army, it quietly silenced the fire.
Shopee's restraint is not unrelated to its cash-shyness status.
At the end of the second quarter, Shopee's cash flow was $7.7 billion, which is slightly tight compared to TikTok, which is backed by bytes and spends billions of dollars at every turn. In the second quarter of this year, Shopee posted a third consecutive quarter of profitability, with adjusted EBITDA net income of $150 million, compared to a loss of $648 million in the same period last year. Compared with the large investment in the past, Shopee's net profit is not huge.
What's more, this hard-earned net profit is saved by reducing costs and increasing efficiency for up to a year.
In 2022, Shopee's parent company Sea laid off nearly 7,000 employees, more than 10% of the total number of employees in the entire group, and many Shopee teams were also hit hard, and only Brazil was still operating in the seven emerging markets that expanded into that year. If you rashly restart the war of burning money, it will inevitably affect the net profit that has just turned positive.
Tiktok is coming, face it or not? Su Minghao smelled obvious gunpowder from the company's overall strategic shift, but had not yet received a clear order to start a war.
Like some Shopee employees, he's less interested in growth. More than growth, employees are more concerned about whether a major layoff like last September's will happen again. After this year's 9.9 promotion, they received a notice to add a "C-" performance review, and getting a "C-" means they need to leave the company. (Editor's note: Shopee performance is generally divided into three levels: A\B\C, which are linked to the year-end bonus but usually do not involve optimization.) ）
For frontline workers who are in shock, they don't hear it, let alone want to hear it.
02
"War, with the humblest dream"
Shopee is not a company that hasn't been on the battlefield. It has reached the position of the first e-commerce platform in Southeast Asia in just 4 years, and it has rushed out of the gunfire.
Just two years ago, Shopee also expanded aggressively around the world, entering 7 countries and regions, and even running to South America, tens of thousands of kilometers away from Southeast Asia, to open up markets.
Shopee's way of supporting growth is simple and crude: throw money and people.
Every time it enters a new regional market, Shopee will form a new team, strengthen user inertia with low-price subsidies in the early stage, and then use the localization team to support local sellers to gain a larger market share.
In pursuit of increments, Shopee will subsidize both buyers and sellers, including returning Shopee coins that can be deducted in cash to buyers, subsidizing sellers or paying shipping directly. In 2021, Shopee ran a free shipping campaign in Spain and France for about two months, all paid for by the platform.
According to Wang Shuai, who has worked at Shopee for 4 years, in order to grab land, Shopee spent a lot of money to recruit people and set up a localization team, and the number of employees soared to more than 10,000 people in a year. At the end of 2021, Sea had 67,000 employees, double the number of the previous year, according to Sea, Shopee's parent company.
A former employee who was poached from Lazada to Shopee said the call from HR was succinct: "How much a month are you doing now?" Give you a double, come to Shopee. ”
"Every day new colleagues come to report, and many people are arranged (KPIs) before they have time to introduce themselves, how much market share they want to win in a month." Wang Shuai told Snow Leopard Finance and Economics, "The slogan of the whole company is no upper limit, only growth. ”
In contrast, the current sporadic actions of Shopee to return to growth are nothing more than "dragonfly water" in Wang Shuai's view.
The team's expansion was weak, and the previous slogans, passion and dedication became coupons, lying quietly in the live broadcast room. For Shopee, which is dominated by shelf e-commerce, this style of play has a limited radiation range.
Shopee's embarrassment is that this battle of exhaustion and lack of food and grass has to be fought.
Tiktok has set an aggressive goal of capturing $15 billion in GMV in Southeast Asia by 2023. If this goal is achieved, TikTok's e-commerce GMV in the Southeast Asian market will jump from less than 1/10 of Shopee last year to nearly 1/3.
In June, TikTok CEO Zhou Shouzi publicly stated at a forum in Jakarta, Indonesia, that he would invest billions of dollars in Southeast Asia in the coming years. He also revealed that more than 325 million people in Southeast Asia visit TikTok every month, almost half of the region's total population.
Temu has also made high-profile forays into Southeast Asia. At the end of August, Temu Philippines officially landed, with the slogan "up to 90% discount" hanging at the top of the official website page, accompanied by eye-catching big red. According to media reports, Temu will land in Malaysia, Thailand, Vietnam and Singapore in September.
Citi analyst Alicia Yap bluntly said Shopee's "brutal battle" to defend its market share may have just begun.
03
The inevitable crucial battle?
Southeast Asia, with a population and area of less than half of China, is currently one of the few blue oceans in the global e-commerce market. In 2022, Southeast Asia's e-commerce scale will grow the first in the world, nearly 6 times that of China's e-commerce market. For TikTok and Temu, it's the perfect place to expand their territory.
TikTok's approach to Southeast Asia is the same as Shopee's expansion.
TikTok, which comes to Southeast Asia with determination and large sums of money, has subsidies for both buyers and sellers. For example, in this year's 9.9 promotion, TikTok's subsidy "three-board axe" is obviously broader than Shopee: event goods, cross-border joint venture coupons and direct reduction subsidies, etc., the amount of sellers' commodity discounts is borne by the platform and merchants.
In addition, TikTok has significantly lowered the barrier to entry for merchants.
In August this year, the deposit for Tiktok merchants was reduced from $400 to $90, or about 650 yuan, while Shopee's margin was about 3,000 yuan. TikTok Shop also lowered its commission in Southeast Asia, set a 3-month commission-free period, and lowered the commission from 2.5%~3% to 1%. At present, Shopee does not have a commission-free period in Southeast Asia, and the commission is generally 6%~7%.
Compared with Shopee's sporadic gunpowder smell, TikTok is full of firepower from battle intent to investment.
Even so, Shopee's response was restrained.
Management did not explicitly propose to take on the battle, only said it wanted to return to growth. Internally, the overall strategic goal shifted from pursuing profitability to seeking growth. Externally, Li Xiaodong, CEO of Sea, the parent company of Shopee, said that he would increase investment in Shopee. Management believes that Shopee's user base and track with TikTok are only partially overlapping, and cannot be called an all-out war.
Since winning the throne of Southeast Asia's No. 1 e-commerce in 2019, Shopee has been fighting for another 4 years, and the chassis has been basically stable. According to Momentum Works, a research institute focused on the Southeast Asian market, Shopee accounted for 47.9% of the Southeast Asian e-commerce market in 2022.
This means that while TikTok is growing rapidly, it won't pose a huge threat to Shopee anytime soon, giving the latter the possibility of exchanging space for time. Momentum Works predicts that in 2023, TikTok Shop will have a market share of 13.2% in Southeast Asia and Shopee at 46.5%, compared to 4.4% and 47.9% respectively in the same period last year.
In addition to financial strains and low morale, another reason why Shopee is not going to go to all-out war at the moment is that the capital markets are also eyeing Shopee's purse.
Li Xiaodong predicted in the Q2 earnings call that increasing investment in Shopee will have an impact on Sea's profits and may lead to losses for Shopee and the entire group in some periods. On the day of the earnings report, Sea's stock price fell nearly 29%, the largest one-day decline since listing.
Alicia Yap, an analyst at Citi, said the practice of defending market share with sustained investment was worrying.
No one wants Shopee to remain at war. But Shopee, who is waiting for his opponent to come to the city, may not be able to avoid this battle in the end.
(Su Minghao and Wang Shuai are pseudonyms in the text)
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