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SUPERVISOR’S REMARKS
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Ho Chi Minh City, April, 2019
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TABLE OF CONTENTS
EXECUTIVE SUMMARY .......................................................................................................... 1
CHAPTER 1: INTRODUCTION TO SEA LIMITED COMPANY AND E-COMMERCE
PLATFORM SHOPEE ................................................................................................................ 2
1.1. SEA Limited ....................................................................................................................... 2
1.2. Shopee e-commerce platform............................................................................................ 2
CHAPTER 2: ANALYSIS AND EVALUATION OF SHOPEE’S STRATEGY IN
VIETNAM ..................................................................................................................................... 4
2.1. Shopee’s strategy in Vietnam ............................................................................................ 4
2.1.1. External Analysis .......................................................................................................... 4
2.1.2. Internal Analysis: .......................................................................................................... 8
2.1.3. SWOT analysis and Shopee’s general business model ............................................... 11
2.2. Evaluation of Shopee’s strategy ...................................................................................... 12
CHAPTER 3: PROPOSED STRATEGIES FOR SHOPEE VIETNAM IN 5 YEARS ....... 15
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TABLE OF FIGURES
LIST OF ABBREVIATIONS
Abbreviation Meaning
PC Personal Computer
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EXECUTIVE SUMMARY
This report provides an analysis and evaluation into the strategy of Shopee Vietnam as well as a
suggestion of objectives to develop in the next five years. This is achieved through analyses of the
business-level strategy of Shopee through the PESTEL, Five forces models, value chain and
SWOT analysis.
Results found that even though the growth of the Vietnamese e-commerce industry is high and
Shopee has the strength and resources as one of the leaders, the business still recorded massive
loss in 2018, due to intensive investment in marketing and sales in an attempt to catch up with the
key players, such as Lazada, Tiki or Sendo who have infiltrated the industry much earlier.
The report finds that Shopee’s current strategy is quite solid and able to help it become a major
force in the e-commerce industry in just a few years. However, there are still issues which need to
be addressed if Shopee wants to remain at the top in the long-term.
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CHAPTER 1: INTRODUCTION TO SEA LIMITED COMPANY AND E-COMMERCE
PLATFORM SHOPEE
Some of the group’s most notable products consist of Garena, a digital entertainment platform for
users to access mobile and PC online games as well as participate in eSport events; Shopee e-
commerce platform, a mobile-centric marketplace that offers integrated payment and logistics
infrastructure and seller services and digital financial services to both individuals and businesses,
including e-wallet and payment services through AirPay, etc.
The group’s name, SEA, is inspired by its home region of South East Asia and symbolizes the vast
sea that connects the entire region together.
SEA’s vision is “Connecting the dots”. With this, the company aims to establish connections
between Internet users all across its home region with its products: connecting online game players
through Garena, connecting buyers and sellers through Shopee and enabling payment process
through AirPay, which also fits perfectly with the group’s name.
In accordance with its vision, the mission SEA has taken upon itself is “to better the lives of the
consumers and small businesses of Greater Southeast Asia with technology.” So far, the company
has carried out this mission successfully with two of its products, Shopee and Garena, being well-
received across the Southeast Asia region.
In October 2017, SEA is publicly listed on the New York Stock Exchange, with price ranging from
21,50 to 24,65 USD within the month of March 2019.
With a wide selection of product categories ranging from consumer electronics to home & living,
health & beauty, baby & toys, fashion and fitness equipment, Shopee aims to continually enhance
its platform and become the region’s e-commerce destination of choice.
Shopee’s vision is to continuously enhance its platform to deliver a seamless and enjoyable
shopping experience for all users and be the region’s e-commerce platform of choice. In order to
do so, it set a mission to create a simple and secure mobile marketplace for everyone to buy and
sell, anytime, anywhere.
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Figure 1.2.1. Basic statistics of Shopee as of August 2016
By the end of 2018, in a ranking of e-commerce businesses based on their average quarterly traffic,
Shopee was the top e-commerce platform in the Vietnamese market and was generally placed
among the top three in other Southeast Asia countries.
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CHAPTER 2: ANALYSIS AND EVALUATION OF SHOPEE’S STRATEGY IN
VIETNAM
Besides that, Vietnam is also a member of WTO and ASEAN as well as having established trade
relationship with more than 200 countries and being member of more than 8 FTA by the end of
2016.
Economic factor
According to Global Edge, Vietnam had the following statistics up to 2017:
GDP, PPP (current international): $647.4 billion, in which the service sector composed of
40.92% of the total.
GDP per capita, PPP (current international): $6,776
GDP growth rate (annual %): 6.8%
It also spotted an unemployment rate of 2.1%, inflation rate of 3.5%, real interest rate of 3.1% and
FDI inflow of $14.1 billion in the same year.
Socio-cultural factor
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By 2017, Vietnam was estimated to have 95.5 million people, in which approximately 70% were
within the working age group. This is considered as a major strength for the industrialization and
modernization of the country, if the abundant labor force could be fully utilized.
Concerning cultural aspects, Vietnam is a collectivist society in which the needs of the group are
often placed over the individual. Family and community concerns will almost always come before
business or individual needs. In addition, they employ a hierarchical structure based on age and
status in which the eldest person is always respected and possesses the most influence. Moreover,
Vietnam is a high-context communication culture so they will depend heavily on non-verbal clues
to assess meaning.
Furthermore, education is considered as one of the most important issues to which the country has
to pay great attention. In fact, the literacy rate of the total population had reached 94.5% of the
total population by 2015, increasing by more than 4% in comparison with the year of 1999.
Nevertheless, there still existed the problem of the degradation in social ethics of students, due to
weak emphasis on the teaching of humanities, which can be proved by many cases of students or
young people committed violent crimes.
Last but not least, Vietnamese consumers have a tendency to prefer foreign brands to domestic
ones, and in recent year, they also gain a preference for healthy products or “green” products that
protect the environment. As for payment method, cash-on-delivery is still the dominant solution
with approximately 88% of Vietnamese do this in 2017.
Technological factor
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By 2018, the number of Internet users in Vietnam has reached 64 million people, accounting for
approximately 67% of the total population. And this number is predicted to continue increasing
sharply in the coming years.
Mobile, especially smartphones, has also become an intergral part of Vietnam’s society with 72%
of people reported that they owned at least one smartphone, in which 64% of them actively
connected to the Internet through their mobiles.
In terms of development, there is already a project running in Vietnam which will serve to narrow
the scientific and technological gap between Vietnam and the rest of the world in some key fields
by 2020. According to the project, the Government will focus on scientific and technological
renovation to sharpen the competitive edge of local products and assisting businesses to purchase
patents in some prioritized areas: biotechnology, information technology, new materials
technology - nano technology , manufacturing technology and automation.
Environmental factor
Viet Nam is blessed by nature, with a great ecological and hydrological diversity. The country is
made up of equatorial lowlands, high, temperate plateaus and cooler mountainous areas. It also
has a diverse wildlife, with rare and precious fauna such as elephants, rhinoceros, tiger, leopard,
black bear, snub-nosed monkey, crocodile and turtle. Forest area accounts for 2% of total forests
in East Asia and Pacific. Fish catch is among the 10 highest countries in the world, with 1,451,800
tons per year.
On the other hand, Vietnam is also among the countries that can be seriously affected by climate
change and natural disasters. Total value of damage caused by natural disasters in 2011 was
estimated at over 10 trillion VND.
Moreover, the rapid development and urbanization has caused significant pressure for its own
environment, according to a report by the World Bank. In fact, air pollution has become a huge
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concern for Vietnamese people as more than 60,000 deaths in 2016 in Vietnam were linked to air
pollution, according to WHO. In an effort to counter this, locals have begun to invest in rooftop
solar panels in increasing numbers. The issues with motorbikes and cars are also being slowly
addressed with subway constructions and emission standard enforcement being two suggested
solutions.
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Brands are always trying to earn a competitive advantage through low prices, better quality of
products or through a better overall customer experience.
Threat of substitutes
There are two main threats in terms of substitutes for e-commerce brands: competing e-retail
businesses and physical retailers. The customers have relatively no switching costs and they can
easily switch from one e-retailer to another or from e-commerce to physical retail, so the threat of
substitutes is quite high.
Operations
Shopee is a mobile-focused business which acts as an intermediary information marketplace in
order to match the sellers and buyers of common interests. The main operation of Shopee is the
gathering and organizing information of sellers and distributing of said information to buyers
through its mobile application in order to initiate transactions. It also allows for interactive
shopping through the form of online chat in case both parties wish to negotiate on their own prices
and terms of sales.
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Shopee is particularly talented at following latest trends. For example, it invited Son Tung MTP,
the most famous singer in Vietnam, to become its brand ambassador; cooperated with the hit-
singer Bao Anh and Bui Tien Dung of U23 fame to participate in the video clip with the catchy
song “Baby Shark”, or most recently, Shopee celebrated its birthday with the Korean band
Blackpink… and many other viral marketing activities that had left an impact in its customers.
In contrast, SEO management of Shopee is not very good. A brief check on several SEO checking
tools yielded an average score of approximately 50.
Regarding sales, according to SEA’s annual report in 2018, Shopee has achieved a total of $3.4
billion of gross merchant value and 206.9 million gross orders, earning SEA an adjusted revenue
of $126.9 million, increasing by 1262% in comparison to 2017. It has also recorded more than 80
million downloads by 2017, wherein Vietnam comprised of more than 5 million.
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On the other hand, due to heavy investment made by SEA on Shopee, the group has reported a
record loss of $700 in 2018. The cause for this was cited to be due to intensive investment in
marketing and sales as well as promotions, especially subsidies for shipping for Shopee users.
Service
The core value Shopee provides its customers is an easy, secure and fast online shopping
experience through strong payment and logistical support. Augmenting that core is a variety of
additional values, including:
Support activities
Infrastructure
According to reviews on Glassdoor, Shopee has a dynamic, fast-paced working environment with
plenty of opportunities for learning. Its slogan is said to be “We empower each other” and the
overall theme is to connect among employees with friendly colleagues. However, it is stated that
the management is relatively top-down and work can be demanding at times.
As for facility, Shopee possesses one of the most beautiful and modern offices in Vietnam, locating
on the 17th and 18th floors of the Saigon Center Building. Its primary color is orange, a optimistic
and energetic color, which is said to convey the message of “We always find a way.”
Moreover, Shopee is always trying to scout out talents among the local prestigious universities
such as Ho Chi Minh University of Economics, Foreign Trade University, RMIT,…through
promotion and career fairs to add to its growing list of employees. In addition, Shopee also
organizes its own exclusive Global Leaders Program, a highly selective 2-year program,
comprising four 6-month rotations in different business functions in order to search for young
talents in Vietnam.
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Training new employees is mostly carried out by senior executives in the same department.
Management team from Vietnam will also have the opportunity to participate in training program
organized in the parent company located in Singapore.
Technology
Shopee is one of the largest and fastest mobile content delivery networks in Southeast Asia region.
The technology underlying Shopee accelerates the loading of millions of product photographs and
descriptions on web pages delivered to millions of users and offers them a fast and smooth mobile
shopping experience.
Shopee’s proprietary database management system is one of the largest database systems for
mobile online transaction processing in the region. It runs on servers and can be scaled up to
hundreds of nodes to achieve scalability. Moreover, it plays a critical role in supporting transaction
processing in the marketplaces in a cost-efficient manner.
On the other hand, Shopee Vietnam’s process of setting up a shops for sellers is still rather simple
and does not require any verification of bank accounts or identities, which is a factor that
counterfeits and frauds can take advantage of.
Procurement
Shopee has more than 800 thousand suppliers, which are also its customers, selling a variety of
products from fashion, cosmetics to electronic devices through its platform ranging between
quality and reliability. Due to this, management of sellers is rather difficult.
Furthermore, Shopee also established contracts with three of the top delivery companies in
Vietnam by 2018, which are Vietnam Post, Giaohangnhanh, Viettel Post.
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- Large database management system.
Opportunities Threats
- E-commerce is one of the fast growing - Relatively high inflation rate.
industries of Vietnam. - Education is still limited, especially
- Number of Internet mobile users is high on humanities subjects.
and has the tendency to increase in the - Technological development is not as
future. advanced as some other countries in
- Political stability, few restrictions on FDI the same region.
and relatively low taxation. - Natural disasters can severely affect
- High GDP growth rate and increase in daily life.
consumer demand. - Highly competitive e-commerce
- Abundant labor force. industry with many big players.
- Relatively high barrier of entries. - Relatively no switching costs for
customers.
Business model
Shopee Vietnam utilizes a differentiation business model, evident in the various services it offers
the customers for the best shopping experience such as Shopee Mall for the most reliable, top-
quality vendors on Shopee or Shopee 24H for a fast shipment that will reach customers within the
day with no additional charges.
One example of their effort to differentiate is that Shopee realizes shipping fee is a hurdle to
overcome in order to convince buyers to switch to online shopping. Consequently, it tries to
capitalize on this by supporting sellers in setting up their own shipping discounts with a view to
attracting more buyers.
Another instance of this is the gamification of customer experiences in the form of Shopee Coin.
Users can participate in social activities on the app to win these coins and use them to offset the
costs with sellers on the platform.
2.2.1. Shopee has a very viral marketing strategy through the use of hot trends and celebrities.
However, it seems to have neglected its SEO management.
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Shopee spends a majority of its expense on marketing. This is not inappropriate considering the
highly competitive nature of the e-commerce market and the fact that Shopee itself is still a
relatively young player in the field, comparing to other big names like Lazada, Tiki or Sendo.
While it is quite successful in its viral marketing by staying on top of the trends and cooperating
with celebrities to advertise its image, Shopee does not seem to do that well regarding its SEO
management. In fact, its own site rarely comes up as the top result in Google when keywords
regarding e-commerce or online shopping are used, and only about 26.4% of Shopee’s site total
visits are linked to search engine.
2.2.2. Shopee already has its own shipping force in Giaohangtietkiem and established contracts
with other big delivery names. However, it appears to not consider Now (formerly DeliveryNow)
as a possible partner.
Shipping cost is an important problem that Shopee has to take into consideration. In 2018, sales
and marketing expenses, in particular subsidies for shipping for Shopee users, equaled 85.3% of
SEA’s total revenue. Shipping cost alone contributed to approximately 30% of Shopee’s total
expenses, forcing Shopee to put a limit on its policy of free shipping in order to cut down on costs.
Due to this, having Giaohangtietkiem as part of Shopee’s own workforce has contributed to
keeping expenses down. However, in order to satisfy customers with a variety of shipping choices,
Shopee still formed contracts with several outside delivery companies. Despite this, it does not
appear to make any move to cooperate with Now’s delivery team which, as part of the same parent
company, will be relatively cheaper than outsourcing.
2.2.3. The problem of counterfeit products and fraud remain a major concern since Shopee still
relies mainly on customer’s reports or reviews to detect.
Currently, Shopee does not apply any in-depth verification of sellers regarding bank accounts or
identities. This allows Shopee to boast a very large and varied selections of online shops; however,
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this also makes it one of the main targets for counterfeit products and fraud. This problem is offset
partially through the review and report functions but these are not viable solutions in the long-run
as Shopee’s brand name will be seriously affected.
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CHAPTER 3: PROPOSED STRATEGIES FOR SHOPEE VIETNAM IN 5 YEARS
Based on the evaluation observed in Chapter 2, a strategy plan for Shopee Vietnam for the next 5
years has been proposed as follows, in which there are three key suggestions being discussed:
create a better SEO management, cooperate with the delivery force of Now to reduce costs and
install a verification system in order to better screen out counterfeits and frauds.
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Reasons To manage the products being sold on Shopee’s platform,
and minimizing the risks of counterfeits and frauds, preserving the
Purposes brand image of Shopee.
- Integrate a ver- - Continue to per- - Continue to per-
ification method form a check on es- form a check on es-
into shop registra- tablished shops to tablished shops to
tion step to screen pinpoint counter- pinpoint counter-
out potential fraud- feits and frauds, at feits and frauds, at
Management sters. least 50% of sellers least 65% of sellers
measures - Perform a check must be verified. must be verified.
installment on established - Number of cou- - Number of cou-
Indication
to reduce shops to pinpoint nterfeits and frauds nterfeits and frauds
of success
counterfeits counterfeits and reported reduce by reported reduce by
and frauds frauds, at least 30% at least 30% at least 40%
of sellers must be
verified.
- Number of cou-
nterfeits and frauds
reported reduce by
at least 15%
% of sellers having their accounts verified, % of counterfeits and
KPIs
frauds reported
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REFERRENCES