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In spite of painful cuts, layoffs of thousands of employees and rollback of its ambitious investments in Europe and India, Shopee still keeps growing.

After increasing its revenue by 32.4 per cent in a year, reaching US$1.9 billion in Q3, it has pulled out a huge lead over Alibaba’s international e-commerce retail, which it matched only a few months earlier.

Alibaba vs Shopee quarterly revenue
Alibaba vs Shopee quarterly revenue / Source: Company quarterly reports

Meanwhile, the Chinese giant has just posted mixed quarterly figures, particularly in ex-China retail e-commerce where it has clearly hit a wall and posted slightly smaller revenue figures than in the previous period — at a little over US$1.5 billion, 21 per cent short of Shopee (which it was ahead of just two quarters ago).

In fact, the company has kept losing ground throughout the entire 2022 and appears to be in gradual retreat, perhaps due to the shaky situation at its Chinese core, where it earns all of its money.

Economic slowdown in China, unpredictable Covid-19 rules, and run-ins with the administration seem to have blunted its ambitions to grow abroad for the time being.

china covid lockdown
Residential compound in Beijing under Covid lockdown, Nov. 7, 2022 / Image Credit: Reuters

This is excellent news for Sea Ltd, which is currently implementing drastic cost-cutting measures to curb losses and achieve the breakeven point in e-commerce next year.

And while Lazada has been implementing its own cost-reductions, allowing its parent to halve losses on international retail versus last year, it is clear that it’s now just a minor competitor to Shopee, perhaps one-third to a half of its size in terms of revenue (Alibaba doesn’t present specific figures per business, since its acquisition of Lazada).

Pressure makes diamonds

Unlike Alibaba, Shopee doesn’t rely on a huge domestic market and, instead, has to seek international expansion, often competing with local incumbents.

Since this is a do or die situation that its long-term survival depends on, it now has to try to marry growth with profitability since capital markets are no longer as generous as they were in 2021 — and the US$7.3 billion that Sea Ltd. has in the bank will not last very long if it keeps burning more it.

Cash reserves at Sea Ltd.
Cash reserves at Sea Ltd. have dwindled by US$4.5 billion in a year, more than a billion per quarter / Image Credit: Sea Ltd.

But while it seems it may put the ambitious upstart in a more difficult position, it may just be the case of a “resource curse” for Alibaba — a situation in which access to ample riches leads to stagnation, while pressure and scarcity pushes one to succeed.

This might be why, despite headwinds and considerably shallower pockets, Shopee keeps winning.

Featured Image Credit: Edgar Su via Reuters

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Vulcan Post aims to be the knowledge hub of Singapore and Malaysia.

© 2021 GRVTY Media Pte. Ltd.
(UEN 201431998C.)