In Indonesia, Sea Group’s ShopeePay aims for e-payments glory via food delivery

The Shopee app, Garena Interactive Holding Ltd.'s mobile marketplace, is displayed on the smartphone of an employee at the company's headquarters in Singapore, on Thursday, Aug. 25, 2016. Photographer: Nicky Loh/Bloomberg

E-commerce giant Shopee recently made a hushed announcement to partner a food delivery platform in Indonesia.

While, on the face of it, this seems like a mere expansion into the country’s promising food delivery space, Sea Group-owned Shopee is launching a multi-pronged, deep-pocketed battle against rivals Grab, Gojek, and Tokopedia, by doubling down on the lucrative e-payments business, as well.

While the Shopee app, launched in 2015, has always included the food category, it was in July 2020 that talks of a foray into ready-to-eat food delivery began to surface. That month, US-based Weyland Tech announced that it has partnered with an unnamed “NYSE-traded global consumer internet company” to offer its AtozGo food and grocery delivery service in Jakarta.

The following month, it confirmed that the partner was ShopeePay, the New York-listed Sea Group’s e-wallet platform.

Shopee has yet to officially launch the service, but it has provided information on a programme resembling an early attempt at food delivery on its website, under the “Di Rumah Aja Bareng ShopeePay” (At home with ShopeePay) campaign.

The programme, which started on September 15 with cashbacks starting at 30 per cent, has roped in 19 F&B merchants as partners. Customers can place orders directly from the merchants through a WhatsApp message. The merchants then make the deliveries. The payments, though, must necessarily be made using ShopeePay.

Meanwhile, AtozGo’s platform, which is likely to be integrated into the Shopee app, is a full-fledged food delivery app. It claims to have over 1,000 delivery personnel, and over 35,000 boarded on its platform. The company calls itself as a “short-range food delivery service” with couriers that “do not need to own a motorbike” and carry out delivery by walking or electric bikes.

“The AtozGo integration also represents ShopeePay’s entry into the last-mile food and grocery delivery market in Southeast Asia,” WeylandTech’s announcement stated.

ShopeePay has remained tight-lipped on the new service. However, it has been aggressive in its preparation for the roll-out, DealStreetAsia has learned.

ShopeePay has also recruited several former Gojek-owned GoFood employees over the past year, according to an industry source. A quick search on Linkedin shows as many as 18 former Gojek employees moving to ShopeePay in the last 12 months.

“If you poach people with experience and potentially existing customer relationships, it will make your growth faster. J&T is doing the same in China, and they are growing at crazy speeds,” said Jianggan Li, founder and CEO of Singapore-based venture builder and investment consultant Momentum Works.

A payments play?

While this will be Sea Group’s first venture into food delivery in Indonesia, the company is no novice in the sector.

Sea is the company behind Vietnamese food delivery platform Now, after quietly acquiring its parent firm, Foody, for $64 million in 2017, DealStreetAsia had reported. Similar to the plans with AtozGo, Now has been integrated into the Shopee app, while also connecting it with Sea’s mobile e-wallet in Vietnam, Airpay.

M2 Insights, a Southeast Asia-focused research and consulting firm which tracks the performance of Sea Group and had hinted at Shopee’s partnership with Weyland before it was confirmed, reasoned the potential benefits of a food delivery play.

In July, the firm suggested that having food delivery on the Shopee platform would generate more frequent visits, usage, and purchases on the platform.

“Every e-commerce marketplace wants its users to visit its platform and purchase products more frequently. Average Amazon consumers may shop once or twice a month, but Uber Eats consumers may order several times a week,” the report states.

The fact that the food delivery initiative is undertaken by ShopeePay, instead of Shopee directly, indicates that the new service is Sea’s latest bet to diversify the use case for ShopeePay, and cut a bigger slice of the payment market share. “Food delivery is just one area where they seem to be experimenting to ramp up Shopeepay penetration,” said M2 Insights senior researcher Michael Hijanto.

The expansion into food delivery comes as ShopeePay, which obtained Indonesia e-money licence in late 2018, has started to gain ground in the market. As recently as 2019, ShopeePay trailed behind local powerhouses GoPay, the payment arm of decacorn Gojek, and Grab-backed OVO.

Source: M2 Insights

Luring through cashback

Since it first opened the Shopee platform for transactions beyond e-commerce (like online payments in physical stores) in 2019, Shopee has gone on an aggressive merchant and customer acquisition onslaught. This, like its strategy with e-commerce, was driven by its ability to offer huge promotions, cashbacks, and subsidies.

It can afford to do so.

With over $3 billion in cash, according to its August financial results, largely driven by its gaming business Garena, and a market cap of almost $70 billion, it is safe to say that Sea has money to burn, in abundance.

What’s more, all of its VC-backed competitors have applied the brakes on subsidies, due to the emphasis on sustainability amid the COVID-19 pandemic. ShopeePay has been the only payment company still going strong with promotions and cashbacks.

This seems to have proven successful.

A MarkPlus survey carried out in June-August on 502 respondents this year showed that ShopeePay accounted for 26 per cent of all payment transactions in Indonesia, more than competitors OVO (24 per cent), GoPay (23 per cent), DANA (19 per cent), and LinkAja (8 per cent).

“ShopeePay has the highest number of transactions because it is able to offer more attractive promotions (38 per cent) compared to other e-wallets,” MarkPlus said.

Clash of titans

Judging from the way Shopee has rolled out its pilot food delivery service — using third-party apps for orders, and deliveries, but its very own e-wallet for payment — it does seem that food delivery is merely a strategy to build up a promising use case to acquire and maintain consumers and merchants. For now, at least.

Given the success Gojek and Grab have been enjoying in the space (Gojek’s GoFood, for example, reportedly raked in $2 billion in annual transactions value last year), it would not be a surprise if cash-loaded Sea may end up wanting a significant piece of the pie in food delivery and go all out in the long haul.

“I think food delivery space has long-term potential. I am not sure if Shopee is immediately forking out millions in the markets they are operating food. The delivery is provided by merchants, which means Shopee focuses on traffic for now. In the long run, will they run their own delivery fleet? That might be the way to go, as Grab has demonstrated,” says Momentum Works’ Li, who is a former managing director at food delivery startup FoodPanda.

Fueled by their immense firepower, Grab and Gojek, are by far and away the two most dominant players in Indonesia’s food delivery market, which has enormous room to grow. The market accounts for just 1.3 per cent of the total food market, compared with 8 per cent in the US and about 12 per cent in China, according to data from Euromonitor.

The large number of users on Grab and Gojek’s platform, as well as the large number of motorcycle taxi drivers in their ecosystem, makes GrabFood and GoFood the ideal ordering and delivery partner for food merchants. In return for their services, the companies take a commission ranging between 20-25 per cent per order.

Over the past year, both GrabFood and GoFood have claimed to be the leading players in the race, using different third-party studies to back their claims.

By aggressively roping in former GoFood employees who come with experience, expertise, and customer relationships, Sea will know that it will have a good chance of staying afloat should it choose to jump into the deep end of food delivery.

Challenges

One big handicap, though, would be Shopee’s inferior delivery fleet compared to those of the two ride-hailing giants.

While Shopee does have a logistic fleet for its e-commerce last-mile deliveries, Li believes transforming it into a food delivery force, would be easier said than done. Food delivery, he said, requires on-demand logistics, which is harder to manage and coordinate. “I think if they want to do food delivery as a three-side marketplace with delivery workforce, it would take quite a good amount of effort to do it well to the scale of GrabFood or GoFood,” added Li.

Despite having different core business focuses, Li thinks it was inevitable that their expansive strategy would bring the e-commerce powerhouses and local service platforms into each other’s orbits.

While the likes of Tokopedia and JD.ID have decided to team up with Grab and Gojek, respectively, Shopee’s stride may see it follow that taken by Chinese peer Alibaba, which has chosen to take on delivery company Meituan, by acquiring local food delivery player Ele.me. So far, it has not proven an easy ride for Alibaba.

“There is synergy (and value add to consumers) between food and its existing e-commerce business but success should not be taken for granted. Alibaba has tried hard to beat Meituan, so far not very successfully,” Li said.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.