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Sea Group targets more market share amid shifting economic tides

Written by Gideon Ng Published on   3 mins read

Sea Group faced an unexpected setback, witnessing a 22% drop in its New York-listed shares, following the announcement of an intensified focus on its e-commerce business, particularly Shopee.

In a bid to counter escalating competition from industry giants Alibaba Group and TikTok, Sea Group recently unveiled an aggressive strategy to bolster its e-commerce business, particularly the Shopee platform, which constitutes 70% of its total revenue. Forrest Li, the founder and CEO of the company, had previously announced this shift in August, emphasizing the need to prioritize market share and maintain a competitive edge. However, the repercussions of this move are evident in Sea’s third-quarter results, leading to a 22% drop in its New York-listed shares, the most significant decline since August.

Sea Group reported a 4.9% year-on-year rise in sales to reach USD 3.3 billion for the third quarter of 2023, slightly surpassing the average estimate of USD 3.2 billion. Despite this positive top-line growth, the company experienced a return to a quarterly loss of USD 144 million, signaling a departure from three consecutive profitable periods. The unexpected setback was attributed to the nearly doubling of sales and marketing costs to USD 918 million compared to the previous quarter. This decline triggered concerns among investors about the sustainability of Sea’s high-growth strategy.

Sea’s strategic shift revolves around aggressive spending to strengthen its e-commerce unit, Shopee, positioning it in direct competition with industry heavyweights including Alibaba’s Lazada and TikTok. The entry of PDD Holding’s Temu into the Southeast Asian e-commerce arena further intensifies the competition, challenging Sea Group’s dominance.

The decision to double down on e-commerce aligns with the rapidly evolving consumer landscape in Southeast Asia, where digital platforms are gaining popularity, especially among younger shoppers. Li’s declaration in August to invest more in Shopee and livestreaming, aimed at countering competitors, triggered a sell-off in Sea’s shares, reflecting the market’s response to the company’s high-risk strategy.

Compounding Sea Group’s challenges are expectations that Southeast Asia’s internet economy will log its slowest growth on record this year, a result of an economic downturn with uncertain outcomes.

Sea Group is now competing not only with industry giants Alibaba and TikTok but also with local competitors like GoTo Group, which nearly doubled its net revenue during the June quarter. The intense competition is fueled by the emergence of new players and the ever-evolving preferences of the growing online population.

Li acknowledged the challenges but reaffirmed his commitment to prioritizing investments to increase market share. With a cash reserve of about USD 8 billion, the company aims to weather the storm and emerge stronger in the long run. Despite concerns among investors about potential profit margin erosion and the risk of a price war with competitors, Li emphasized the need to invest strategically in Shopee and livestreaming as a defensive measure to protect market share.

There may also be a glimmer of hope for Sea Group’s gaming division, Garena. Despite a lack of new blockbuster titles, its popular battle royale game, Free Fire, is on the verge of making a comeback in India after being removed from the country in 2022.

Sea Group’s third-quarter results highlight the intricate dynamics of Southeast Asia’s tech landscape, marked by fierce competition and significant market shifts. While the company’s strategic pivot aligns with evolving consumer trends, the short-term financial setbacks have raised valid concerns. The coming quarters will be pivotal for Sea Group as it navigates challenges, seeks to maintain market leadership, and balances the pursuit of growth with sustainable profitability.


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