Is the worst over for Shopee?

In The Checkout this week, we predict what lies ahead for Shopee in 2023 and discuss why Alibaba needs to make some adjustments for Lazada. [Read from your browser]( The Checkout 🛒 --------------------------------------------------------------- Welcome to The Checkout! Delivered every Thursday, this free newsletter breaks down the biggest stories and trends in ecommerce. You can find past issues [here]( or [sign up here]( to receive future newsletters. Also, If you’re not a subscriber, get access by [registering here](. Written by Thu Huong Le Journalist Hello {NAME} As the year draws to an end, I feel an urgent need to break out of the mold. Routine can kill creativity. This is perhaps something that could also apply to the tech industry, which has been reeling under a slew of bad news. Uncertainties abound even though history has shown that some great companies were born out of economic recessions. To survive this downturn, we need to be innovative. After all, isn’t that what the tech industry is about? As Alibaba Group chair and CEO Daniel Zhang said, the focus is now about “creating user value rather than just scaling.” He was talking about AliExpress and Lazada. But that point also resonates with Lazada’s biggest rival in the region, Shopee. The Sea Group-owned ecommerce firm has been under unprecedented scrutiny this year, and it has probably implemented all the cost-cutting measures that are on the table. It’s facing a looming (self-imposed) deadline of 2023 to break even. But is laying off staff and shutting market operations sufficient? This week’s Big Story, written by my colleague Putra, talks more about whether the recent quarter’s encouraging results mean that Shopee is out of the woods. In the Hot Take, I note that Lazada also needs to reinvent itself to stay competitive in the long haul. For both marketplaces, the clock is really ticking. – Huong  --------------------------------------------------------------- THE BIG STORY [Shopee tries to right ship after a turbulent 2022]( The ecommerce giant has come through the first phase of the storm. Can it stay on track for 2023?  ---------------------------------------------------------------  THE HOT TAKE  What’s Lazada’s next breakthrough? Here’s what happened: - According to its latest earnings, Alibaba’s revenue from international ecommerce retail, which includes Lazada, AliExpress, Trendyol, and Daraz, grew only 3%. - The group notes that Lazada’s orders in particular have declined year on year during the quarter mainly due to “shopping activities normalizing back to offline channels.” - Daniel Zhang, chair and CEO of Alibaba Group, elaborated in the call with investors that “for AliExpress and Lazada, we are taking steps to adjust our business model and investing in creating user value rather than just scaling.” Here’s our take: Unlike Lazada, Shopee has been the one swimming in layoff news. But it’s worth noting that the platform is still leading Lazada in terms of downloads and monthly active users in all Southeast Asian markets, according to third-party estimates. In terms of revenue, Shopee has consistently narrowed the gap with Alibaba’s international ecommerce business, which has several entities. In March, Tech in Asia [wrote]( about why Alibaba should spin off Lazada. Given the current market conditions, though, that scenario is unlikely to unfold, at least in the near future. According to Bloomberg, Alibaba [has also delayed]( its primary listing in Hong Kong. Unlike Shopee, whose different rounds of layoffs and market closures have been widely reported, it’s unclear what Lazada’s cost-cutting measures are. Alibaba’s management only revealed in its latest results that “loss per order for Lazada narrowed by over 25% compared to the same period last year.” However, for the first time, they also acknowledged that the number of orders on Lazada, which was touted previously as a long-term driver for Alibaba’s growth, has decreased as consumers go back to shopping on offline channels. The global slowdown of ecommerce has awakened even industry giants to the new reality. Amazon, for instance, [reportedly has to lay off]( 10,000 people as its retail ecommerce business has turned sluggish in recent quarters. Lazada hasn’t been as aggressive as Shopee in terms of subsidizing both consumers and sellers, but just cutting back on subsidies won’t be enough. As Zhang pointed out in Alibaba’s earnings call, the focus is no longer about “scaling” but value creation for consumers. With Alibaba’s [mounting problems]( at home, Lazada needs a breakthrough to sustain the competition without solely relying on internal funding. Logistics seems to be its safest bet. Notably, Toby Xu, Alibaba CFO, disclosed during the call with investors that 73% of Cainiao’s total revenue in the September quarter came from external customers. In Southeast Asia, Cainiao - the logistics firm owned by Alibaba - [has supported Lazada]( to improve the ecommerce platform’s cross-border logistics efficiency. However, more synergies between the two firms would potentially bring in new revenue streams for Lazada. Additionally, Lazada needs to better engage its users. Chinese short-form video platform TikTok has proven that consumers convert better when they’re entertained. While Lazada introduced its LazLive feature as early as 2018 and enjoyed a boost amid the Covid-19 period, livestreaming hasn’t proven to be one of its key strengths. For shoppers, online content is one thing that perhaps most traditional offline stores can’t offer. Shopee has reassured investors that it will break even in 2023. We think Alibaba will be under greater pressure in the coming months to provide a similar deadline for Lazada. If not, it will have to continue pumping more money into the Southeast Asian ecommerce company. – Huong  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ JD.com said it [would cut salaries]( for 2,000 senior managers next year and transfer the amount as benefits for other staff as part of China’s “common prosperity” goal. 2️⃣ India [has issued]( a guideline to curb fake reviews on ecommerce platforms. 3️⃣ Indonesia’s ecommerce enabler Sirclo [has cut]( 8% of its staff due to bleak economic conditions. 4️⃣ Temu, a shopping app by Pinduoduo that rivals Shein, [has topped]( the App Store in the US. 5️⃣ Russia’s ecommerce company Ozon [will open]( an office in Shenzhen to target 100,000 Chinese merchants.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. 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