SINGAPORE – As Amazon celebrated its 25th anniversary as a public company in 2019, its founder Jeff Bezos reflected on the online retailer’s humble beginnings as a small startup selling books over the internet. Few could have predicted that the fledgling e-commerce site would grow into one of the world’s most valuable companies, dominating industries from cloud computing to streaming entertainment.
Now a new e-commerce powerhouse is emerging from Asia that bears striking similarities to Amazon’s early days. Meet Sea Limited, the Singapore-based technology company that has rapidly grown its Shopee platform into a leading online marketplace across Southeast Asia. While Shopee currently drives the majority of Sea’s revenue through e-commerce, the company has ambitions to replicate Amazon’s success by aggressively expanding into digital finance, gaming and other tech verticals.
“Sea Limited represents the same kind of opportunity that Amazon offered investors back in the early 2000s,” said Tushar Gupta, an analyst at Manhattan Venture Partners. It is tapping into powerful consumer technology trends like e-commerce and mobile payments that are just starting to take off across large, populous markets in Southeast Asia.”
From Books to Global Behemoth
When Jeff Bezos founded Amazon in 1994, selling books online was a radical and unproven idea. Traditional brick-and-mortar bookstores dominated, while the internet remained a niche novelty product used by few consumers. However, Bezos recognized the internet’s transformative potential to reshape the retail landscape by offering unmatched convenience, selection and pricing compared to physical stores.
Over the next 25 years, Amazon’s business model and relentless focus on reinventing core operations like logistics and supply chain management allowed it to systematically disrupt one consumer industry after another. From books, Amazon expanded into products like electronics, home goods and apparel before launching successful parallel businesses in areas like cloud computing, digital advertising, entertainment streaming and more.
Today, Amazon is one of the world’s most valuable public companies with a market capitalization over $1 trillion. Its Prime subscription service has over 200 million members, while its e-commerce marketplace gets over 197 million visitors per month. The Seattle-based tech giant generated $469 billion in revenue during 2022 alone.
Southeast Asia’s Awakening Digital Consumer
While Amazon was reshaping retail in the West, Southeast Asia remained in the internet’s early innings. The region’s over 650 million consumers had relatively low levels of internet penetration, online spending and adoption of digital services like mobile payments, gaming and e-commerce throughout the 2000s. However, rising incomes, improved connectivity, and an increasingly tech-savvy middle class have unlocked huge potential across this market in recent years.
Enter Sea Limited, a company founded in 2009 by Forrest Li, an entrepreneur who previously launched websites for gamers. Sea initially started as a gaming studio, launching successful mobile game franchises like Free Fire. But the real catalyst for its growth was the launch of the Shopee e-commerce platform in 2015, tapping into Southeast Asia’s nascent digital economy.
Shopee gained rapid popularity as one of the region’s first user-friendly, mobile-first apps targeting price-sensitive consumers. It blended elements of e-commerce marketplaces like Amazon with social media-style features that made online shopping feel more communal.
“The Southeast Asian market represents an immense growth opportunity for companies like Sea,” said Xiaomeng Lee, Senior Lecturer at the National University of Singapore Business School. “E-commerce is still in the very early innings, while digital payments, entertainment streaming and other internet services are quickly being adopted by a young, mobile-first population.”
Shopee’s Meteoric Rise
Sea was an early mover in Southeast Asia, and Shopee capitalized by becoming the region’s most popular e-commerce app. The platform gained a first-mover advantage and established itself as the dominant player for both consumer-to-consumer and business-to-consumer transactions.
Shopee’s rise has been meteoric. The app has been downloaded over 1 billion times and serves over 90% of the region’s internet user base across markets like Indonesia, Vietnam, Thailand, Malaysia and more. As of Q4 2023, Shopee reported over 1.2 billion orders on its platform for the year, while gross merchandise value (GMV) increased 25% annually to $71 billion.
This success has fueled Sea’s own exponential revenue growth. The company generated $13.1 billion in total revenue for 2023, representing a compound annual growth rate of 171% since its IPO in 2017. E-commerce remained its largest segment at $10.1 billion in sales last year, up 24% year-over-year.
Amazon Deja Vu
Having established e-commerce dominance across Southeast Asia, Sea has begun aggressively reinvesting to replicate Amazon’s strategy of building an integrated technology ecosystem encompassing logistics, cloud computing, gaming and digital finance.
Sea has doubled-down on improving its e-commerce logistics capabilities through automation, faster delivery times and lower costs in order to gain a competitive edge. It spent over $1 billion in 2021 alone on advanced logistics systems like parcel sorting machines and automated trucks.
“We are investing heavily to create a seamless, integrated experience for Shopee users from the moment they discover a product to having it arrive at their doorstep,” Sea’s Chief Financial Officer Tony Hou said on a recent earnings call. “Our goal is to deliver anywhere in the region within 24-48 hours.”
The company has also expanded into adjacent verticals like digital entertainment through game development studio Garena, which creates hit mobile titles like Free Fire that have been downloaded over 1 billion times. While gaming growth has slowed since the pandemic, Sea remains committed to building a defensible gaming franchise alongside its core e-commerce business similar to Amazon’s investments in areas like Prime Video and Twitch.
Perhaps Sea’s biggest growth opportunity mirrors Amazon’s foray into cloud computing via Amazon Web Services (AWS), the company’s most profitable segment and largest growth catalyst. Sea has rapidly grown SeaMoney, its fintech arm which offers mobile wallets, digital banking services and buy-now, pay-later options for both consumers and merchants on Shopee. With $1.8 billion in revenue last year, SeaMoney recorded 44% annual growth and is quickly catching up to Garena’s gaming unit in overall sales.
Betting on Long-Term Growth
While Sea remains unprofitable on a GAAP basis, the company reported its first ever positive operating income in 2023 of $162.7 million as it reined in expenses and focused on prudent cost controls, a pivot mirroring Amazon’s transition towards profitability.
Critics argue Sea is being valued at an unjustifiably lofty $33.5 billion market capitalization today given its still-unproven long-term prospects. However, proponents counter that the Southeast Asian digital pioneer is simply following in Amazon’s footsteps, methodically building out key capabilities and enduring short-term losses for the promise of long-term dominance in one of the world’s fastest-growing internet markets.
“The parallels to Amazon are quite clear when you look under the hood,” Gupta said. “Sea is prioritizing market share over margin to rapidly scale its ecosystem before competitors can catch up. If they can successfully execute this playbook, the payoff could be massive down the road.”
Sea’s frothy valuation metrics of over 30X price-to-sales on just $13.1 billion of trailing revenue may give some investors pause. But for those who missed out on Amazon’s staggering rise from a $438 million revenue company in 1998 to e-commerce colossus, Sea may present a unique opportunity to capitalize on parallel digital shifts happening today across the markets of Southeast Asia.
Only time will tell if Sea has what it takes to fulfill comparisons to Amazon and become the dominant technology conglomerate of its region. But the strategic roadmap being executed by CEO Forrest Li and his team through building out integrated services from e-commerce to fintech and beyond certainly draws an intriguing blueprint for Sea to create its own trillion-dollar success story in the mold of its pioneering American counterpart.
