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Shopee is set to enter the Indonesian food delivery battle, but can it win?

Written by Khamila Mulia, Ursula Florene Published on     4 mins read

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ShopeeFood is recruiting driver-partners and has already on-boarded more than 500 merchants.

Andini Karunia (not her real name) is a GrabFood driver-partner who has been working with the firm for nearly a year. In the last few months, her friends in the driver community have been talking a lot about a new delivery platform, ShopeeFood, so Karunia decided to sign up in January. By joining ShopeeFood, she is looking for an additional income source, although she’s not sure if the company will allow driver-partners to work for multiple apps at once.

“Shopee is very famous and many people use it, including me, so I believe their existing customers will want to order food from it too,” Karunia said. “It also offers an attractive commission scheme and we can get a bonus if we meet certain targets.” She heard from her manager that ShopeeFood’s operating area will be limited to Jakarta and that the service will start on March 1, although KrASIA wasn’t able to confirm this.

The news about Shopee’s move into food delivery has been circulating in the media for a while. A ShopeeFood page has been available on the e-commerce platform since April and Shopee has been promoting the new feature on its social media channels in recent months.

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In July, ShopeePay teamed up with AtozGo, a short-distance food delivery service that’s available in selected office buildings, residential areas, and malls in Jakarta. It marked ShopeePay’s first entry into the last mile food and grocery delivery. A ShopeeFood driver app can already be downloaded from the Google Play store and has been installed more than 50,000 times. A page titled “Driver ShopeeFood” was just updated on January 15, listing recruitment offices and required documents. It is currently unclear whether Shopee plans to launch a separate app for its food delivery service. Shopee’s parent Sea Group declined to comment on the matter.

Indonesia had the largest food delivery service market in Southeast Asia in 2020 in terms of the gross merchandise value (GMV), according to a report by Momentum Works. Two players dominate the space—GrabFood and GoFood. However, the country is big enough to offer Shopee a good opportunity to snatch a sizeable slice of the food delivery pie.

“Food delivery in Indonesia and Southeast Asia is incredibly competitive at the moment, but the market is far from settled,” said Zennon Kapron of research and consulting firm Kapronasia. “ShopeeFood will need to be ready to invest heavily with subsidies for both merchants and users, but given Sea’s stock performance, the required capital shouldn’t be a challenge.”

More data, more payments

He believes that moving into this segment would give Sea the opportunity to target a completely new set of customers and—more importantly—capture all of the data on the back-end. “In many ways, the technology and operational footprint that you need for e-commerce are not entirely different from food-delivery, so most of the infrastructure would already be there and just needs to be tweaked,” Kapron said.

It is also possible that Shopee’s entrance into food delivery aims to boost its payment service. MomentumWorks reported that food delivery in Southeast Asia grew 183% in 2020, and consumption will continue to grow in the years to come. Sea Group has been dabbling in the space since at least 2017. It reportedly acquired a 82% stake in Vietnam’s Foody Corporation, which runs the site Now.vn. Now generates 42% of the food delivery GMV in Vietnam, followed closely by Grab with 40%.

More orders on the delivery platform translate into more ShopeePay transactions. “Nearly all large tech players in Southeast Asia are pushing towards financial services because of the market opportunity and margins,” said Kapron. “With so many of Indonesia’s consumers and merchants underbanked, there is a huge opportunity to serve this market. Payments are typically the entry-point as companies build out their financial products and services.”

Already the leading site

Competition is set to get even tighter if Gojek and Tokopedia will merge, as this would provide GoFood access to a large base of new consumers and merchants. Shopee was the most visited e-commerce site in Indonesia in the fourth quarter of 2020 with over 129 million monthly web visits, according to iPrice. Tokopedia came second, followed by Bukalapak and Lazada.

There have been earlier attempts to uplift sales and users numbers with food delivery services. Tokopedia launched its Nyam! campaign in July 2020, while Bukalapak introduced Bukafood in the same year. For the last mile, however, the firms still relied on third parties, namely Gojek, Grab, or other express couriers.

Until October, ShopeeFood already boarded more than 500 merchants, according to local media Katadata.co.id. The company said that sales increased fourfold during the pandemic.

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