There are reports that TikTok Shop has held meetings with five e-commerce companies, including Tokopedia, Blibli, and Bukalapak. Momentum Works, a venture builder based in Singapore, reveals that Shopee's parent company, Sea Group, is preparing to face intensified competition.

Sea Group recorded a loss of US$ 144 million or around IDR 2.2 trillion, a surprising turn considering the Singaporean company had previously reported profits for three consecutive quarters.

"Most of the losses come from Shopee," said Momentum Works CEO Jianggan Li in a press statement on Thursday (16/11).

Jianggan Li highlights the growth of Shopee's Gross Merchandise Value (GMV), which only reached 5% annually (year on year/YoY) and 11.2% quarterly (quarter to quarter/QtQ), reaching US$ 20.1 billion or around IDR 311 trillion during Q3.

Sea Group increased the budget for Shopee's sales and marketing by 49.7% YoY to US$ 862 million or approximately IDR 13.4 trillion during Q3. This move was taken even though the company had previously reduced these costs in the preceding quarters.

Momentum Works estimates that the closure of TikTok Shop in Indonesia on October 4 will not have a significant impact on Shopee, considering Indonesia only contributes one-third of TikTok Shop's total transactions in Southeast Asia. Additionally, TikTok Shop recorded nearly three orders per day before its closure in Indonesia.

"Recovering the lost transaction volume will be challenging for anyone," says Momentum Works. "Shopee may have prepared itself for the possibility of TikTok Shop returning, sooner or later."

Sea Group CEO Forrest Li stated that the company is committed to boosting the e-commerce business's growth, namely Shopee, to maximize long-term profitability.

"This is done to provide the greatest return on investment for long-term shareholders," said Forrest Li in a press statement on Tuesday night (14/11). "To achieve long-term profitability, a strong market scale and leadership are necessary."

To achieve these long-term goals, Sea Group will consider three main operational factors: growth, current profitability, and market share improvement.

"During this period, we will focus on business investments to increase market share and strengthen market leadership," said Forrest Li.

Li also stated that profits over three consecutive quarters have significantly increased cash reserves and operational efficiency. Therefore, Sea Group sees a good opportunity to efficiently build an e-commerce content ecosystem, especially related to live streaming.

"We are committed to maintaining a strong cash position, not relying on external funding, and investing according to our chosen time and pace. At the same time, considering the low penetration of e-commerce in most markets, we feel responsible for supporting the growth of the entire e-commerce ecosystem," he concluded.