Shopee’s efforts to grow its in-house logistics arm appear to be bearing fruit, with the ecommerce platform boasting efficiency gains in its delivery and fulfillment in its latest earnings. This came on the back of a record high in quarterly revenue for the firm.

But the battle is far from over. Investors will need to watch if Shopee can defend its in-house logistics advantage against rival Lazada and new challenger TikTok Shop.

SPX Express delivery / Photo credit: Wikipedia

Shopee, owned by New York-listed Sea, recently posted US$2.7 billion in revenue for the first quarter ended March 31. This marked an all-time high and also accounted for the bulk of Sea’s US$3.7 billion revenue in Q1.

Seasonality was partly a factor, with both Chinese New Year and Ramadan falling within Q1 this year. But a more pertinent growth driver was Shopee’s expansion of its in-house logistics arm, SPX Express.

SPX Express now delivers more than half of Shopee’s orders in Asia. In Brazil, Shopee’s other key market, this figure is about 70%.

“We have put a lot of hard work into SPX Express, and today, it is one of the fastest and the most intensive logistics operators in our market,” said Sea CEO Forrest Li during the company’s latest earnings call.

Taking its logistics in-house has enabled Shopee to deliver orders more swiftly and efficiently. In Q1, about 70% of SPX Express orders in Asia were delivered within three days of order placements, Li said.

Shopee now also directly manages the return and refund process, which has cut down resolution times and improved customer experience.

Leading position

SPX Express is seen as a considerable advantage for the company.

“We consider Shopee’s industry-unique in-house logistics as a key competitive moat and differentiator, which has been underappreciated by investors, in our view,” said Barclays analysts Jiong Shao, Lian Xiu Duan, and Song Xinyao in a May 15 report.

“This in-house capability helps Shopee to… have the lowest delivery cost among (its) peers, plus to provide much better customer purchase and return experiences,” they added. Barclays has an “overweight” call on Sea, with a price target of US$87.

Other observers echoed this sentiment. Having in-house logistics has allowed Shopee to be “structurally defensible, while at the same time optimizing delivery and fulfillment costs,” said Li Jianggan, CEO of consultancy firm Momentum Works.

SPX Express also helps Shopee stand out. “Better delivery times and overall customer experience help companies differentiate (themselves from their) peers, who might otherwise be competing on pricing,” said Roshan Raj, a partner at Redseer Strategy Consultants.

Defending the moat