Sea Ltd. Prioritized Market Share Over Profitability

Sea Ltd. operates one of the leading eCommerce marketplaces in Southeast Asia, Shopee. The company’s financial development reflects its struggle to achieve profitability in an environment where Alibaba’s Lazada and ByteDance’s TikTok Shop strive to gain the upper hand. Since Sea Ltd.’s inception in 2009, the company wrote black numbers for the first time recently, in 2023.

Tracking Sea Ltd.’s financial performance with the help of the Financials section in the ECDB Tool shows the company’s development in detail.

Negative Net Income and Operating Profit Reflect High Costs

Three financial indicators are of particular interest here: gross profit, operating profit and net income. Together, they show how much profit is left after various costs are taken into account.

Gross profit subtracts production costs, and operating profit subtracts operating expenses such as logistics, warehousing, and marketing. In the present case of Sea Ltd., the operating expenses are high due to the company’s in-house logistics.

As a result, net income, the bottom line remaining after accounting for fixed and variable costs, has been negative for Sea Ltd. for decades. The cost of battling for market share with competitive prices, customer-friendly services like collection points and proprietary delivery, as well as a pleasant user interface hampered profitability.

In the long run, forgoing profitability for the continued relevance of Shopee in Southeast Asia can be seen as an investment, paying off in due time.

Intense Competition in Markets of Operation Leads to Clear Prioritization

Southeast Asia, Shopee’s primary region of operation (although it is also available in parts of South America), is highly competitive. The marketplace model is most common in eCommerce, as it allows for a wider variety of products through multiple sellers offering their goods.

Shopee’s closest competitors are all backed by large Chinese conglomerates: Lazada is a subsidiary of Alibaba, and Alibaba’s two main platforms, Taobao and Tmall, have their audience in Southeast Asia as well. TikTok Shop is also prevalent in the region, having launched in Indonesia in 2022.

Taobao and Tmall are subsidiaries of Alibaba and TikTok Shop of ByteDance. These are large conglomerates with a stable financial footing. They can keep prices low by having competitive seller fees and emphasizing the customer experience – to compete, Sea Ltd. prioritized these aspects over black numbers on the balance sheet.

The competition doesn’t sleep, but to keep business afloat, Sea Ltd. dabbles in other ventures to ensure income.

Sea Ltd. Only Reached Profitability in 2023

So, how did Sea Ltd. become profitable eventually? The amount is still nascent, as Sea Ltd.’s net income was US$162.7 million in 2023 and US$447.8 million in 2024. But eCommerce has not entirely been responsible for the upswing. Sea Ltd. also operates gaming platform Garena and financial services Sea Money, which have helped offset losses from high operating costs.

With Shopee’s increasing penetration in Southeast Asia and beyond, however, the black numbers are expected to become a habit for Sea Ltd. Having been one of the platforms that built the region’s eCommerce acceleration is sure to remain a competitive factor for the years to come.