Shopee owner Sea turns a full year profit
E-commerce & mobile retail
Brand growth
Online retail
Following many years of cash burning in the name of growth, Singapore-based Sea, owner of the e-commerce site Shopee, made its first-ever annual profit in 2023 following strong e-commerce sales growth.
Why Sea’s fortunes matter
E-commerce is a brutal game, made fiercer by the intense competition across Southeast Asia where TikTok Shop/Tokopedia, Alibaba-owned Lazada and other tech giants from around the world are staking a claim. It’s forcing market leaders to prioritise growth over profits. Market share is vital, therefore, but a more robust margin for Sea appears to be in payments and financial services.
Competition is only getting more intense, with TikTok eyeing growth everywhere but Indonesia (where there’s a ban on social media companies taking direct e-commerce payments).
By the numbers
In a release to investors, Sea Group posted:
- Revenues up 5% to $13 billion
- Positive net income of $163 million
- E-commerce revenues (including advertising services) up 23% to $9bn
- Gross merchandise value (value of all goods sold through its service) grew 7% to reach $79bn
From the top
Looking ahead, chairman and CEO Forrest Li explained: “Despite an environment of intensified competition in Southeast Asia, we believe Shopee had a meaningful gain in market share between the start and the end of 2023.
“We expect Shopee’s full-year GMV growth to be in the high teens range and its adjusted EBITDA to turn positive in the second half of this year.”
The problem with e-commerce
Full year adjusted EBITDA (or its underlying profitability) for the e-commerce division was still -$214m, but a huge improvement on last year’s -$1.7bn. It’s not the first company to be turning over vast sums while barely breaking even.
In part, this is down to heavy sales and marketing expenses, which more than doubled in the fourth quarter compared to the same period last year for the e-commerce division. That said, heavy reductions in marketing spend across other divisions saw total marketing budgets for the full year decrease for Sea as a whole.
Meanwhile, financial services through SeaMoney offered a more straightforward story of profitability with adjusted full year EBITDA up 58% year-on-year for the division. “For SeaMoney, 2023 was the first year of positive profit, primarily attributed to our consumer and SME credit business. In 2024, we will continue to invest in user acquisition for our credit business, both on and off Shopee platform as we see significant upside in our markets,” Li commented.
Sourced from Sea Group, Investopedia, Tech in Asia
[Image: Shopee]
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