SEA Ltd.’s Shopee took just two years to become Brazil’s most downloaded shopping app, winning users to its low-cost marketplace with its game-changing approach to e-commerce: in-app mini-games offering coupons to winning users.

The Singapore-based company has combined online shopping with the gaming nous of its separate mobile game arm Garena – creator of “Free Fire,” Brazil’s most-downloaded title for eight consecutive quarters – to generate sales analysts estimated at almost a third of local champion Magazine Luiza SA.

Back home, Shopee only needed five years to become Southeast Asia’s most-visited e-commerce website, overtaking the likes of Lazada, backed by China’s Alibaba Group Holding Ltd., and Tokopedia, backed by Japan’s SoftBank Group Corp.

“Shopee has a track record in Southeast Asia of coming into the market late, looking at how others have solved existing problems and then building a system to leapfrog those issues,” said analyst Jianggan Li at advisory firm Momentum Works.

Shopee’s early surge highlights the space left for foreign entrants to grow in a sector once dominated by regional firms like Magazine Luiza and Argentina’s MercadoLibre Inc.

To be sure, the startup’s timing was fortuitous, launching in Brazil just as the COVID-19 pandemic drove consumers away from physical stores, pushing up 2020 e-commerce sales by 44 percent to US$42 billion, showed data from Brazilian payments company EBANX.

Shopee – akin to Alibaba’s AliExpress, carrying Chinese-made knick-knacks – emerged as Brazil’s top app by downloads and time spent in use, showed data from analytics platform App Annie.

Yet, in pursuit of growth, Shopee is still losing money, propped up by Sea’s profitable gaming division. In the second quarter of this year, Garena posted an adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of US$740.9 million even as the e-commerce arm lost US$579.8 million.

“Money being generated by one side of the business, which is a cash cow, is being reinvested aggressively in Brazilian e-commerce – with success,” said Itau BBA analyst Thiago Macruz.

Sea’s Brazil foray is just one element of its global ambition. Investment arm Sea Capital is also considering putting money into startups in Latin America and beyond, said a person with knowledge of the matter.

The firm has also taken Shopee to Chile, Colombia and Mexico where, unlike Brazil, it has no locally based staff and so has partnered social media influencers to increase brand awareness, said two people familiar with the matter.

The firm has disclosed little data about Shopee Brazil, but Itau BBA analysts estimated the value of goods and services sold on the platform last year hit 12 billion reais (US$2.27 billion).

The average price on its marketplace is 40 reais, other estimates showed, less than a third that of e-commerce leader MercadoLibre, which often carries higher-value branded products.

Sea’s biggest challenge for Shopee Brazil is delivery in such a vast country.

(SD-Agencies)