Forget Alibaba, Shopee is about to meet its toughest competitor yet… in Poland

About a month ago, Polish business news sites broke a story about Shopee making its European debut in the Eastern EU’s largest country and that it is actively recruiting sellers to join the platform.

Following the news, the site has since been launched last week.

So far, Shopee has had a long, successful run in developing markets in Southeast Asia (including Singapore) and in Latin America, having recently launched in Mexico, Chile and Colombia (in addition to Brazil in 2019), where it is already topping popularity rankings among mobile users.

In Poland, however, it is about to face a much stiffer competition; even if we consider its success fighting off the mighty Alibaba in SEA.

The reason its current experiences might be incomparable with what it’s about to face is that it lacked seasoned competitors thus far. Its chief regional rival — Alibaba-backed Lazada — had been in the market for a few years before Shoppe launched, and it was (and in many ways remains) an unsophisticated, buggy app with clunky UI that is full of not always reliable sellers.

Even today, e-commerce in Asia and Latin America is largely fraught with risks, checkered customer service and unreliable delivery times.

Most of the markets are still in their nascent stages, with millions of new users coming online every year who — in the absence of big names like Amazon — are less demanding than customers in the developed world.

This is not so in Europe, even in its eastern parts.

Allegro

In Poland, Shopee will have to try and steal some market share from Allegro, the country’s oldest and largest e-commerce and auctions platform. To succeed at that, the Singaporean entrant would have to compete on both price and sophistication.

Allegro was founded 22 years ago, in 1999, as a local clone of eBay. Like its American model, it has been built around auctions, and people and companies would post on the site.

Unlike eBay however, which has stagnated and failed to evolve beyond its original model, Allegro has become an all-encompassing e-commerce domestic giant worth about US$20 billion, owned by a consortium of foreign investors including Cinven, Permira and Mid Europa Partners.

In the early days, low barriers of entry and low costs made it an instant hit, with the site reaching a million users within three years.

Today, it offers personal and company listings side by side in a clean, user-friendly UI with robust search allowing you to find what you’re looking for — and for the best price available. It’s as if Amazon and eBay had a baby that inherited some of the best features of both parents.

Whatever you want to buy or sell, you go through it. Can Shopee make a dent in its near-monopoly?

Thus far, Sea Ltd. has competed in fairly underdeveloped and quickly growing markets, where millions of customers are quite new to e-commerce.

In Poland however, despite relatively lower market value than in Western Europe or the US, not only are people quite accustomed to buying online, but the domestic platforms have gone through several cycles of evolution since the early 2000s.

As a result, they are far better integrated with a multitude of complimentary services that not only enable people to find the best deals and have them shipped quickly and securely anywhere in the country (typically within one to two days), but have also managed to build a considerable brand loyalty that the Singaporean centicorn is now going to have to erode a bit.

Challenges

As an e-commerce platform, Allegro is the absolute leader in Poland.

Its main site, allegro.pl, records 212 million visits each month (in a country of just 38 million people), but the company also owns the country’s largest price comparison and product discovery service: ceneo.pl. It clocks an additional 50 million visits per month.

On top of the two, recent spin-off site Allegro Lokalnie (Local), which is dedicated to classifieds, is visited about 13 million times per month.

All in all, this adds up to 275 million visits to Allegro-owned sites every single month, placing it among the top 10 to 15 (depending on rankings) most visited e-commerce platforms in the world.

To understand the scale of the challenge, Amazon.pl — which was launched as Amazon’s national site in Poland in March this year — is so far recording just five million visits per month and isn’t showing a substantial growth trajectory either.

In addition to Allegro, another major player is OLX, a Dutch arm of a South African giant, and Allegro’s former owner Napsters.

OLX.pl is a classifieds directory that attracts over 100 million people monthly, who are typically looking to buy and sell things privately, in a market that Allegro has a foot in, but has moved away from it in favour of high value e-commerce.

Other than the above, there’s a number of larger and smaller online stores specialising in specific products (like computer parts, electronics, furniture and so on), but all of them have additional presence on Allegro or Ceneo — or both — regardless of their own sites and mobile apps.

There’s also Alibaba with its AliExpress attracting 10 million visitors — though still considerably short of the domestic giant, even after a few years of trying.

In other words, Allegro isn’t just a shopping platform. Much like Amazon is in the US, it is a product discovery service as well. Nothing happens outside of its radar. And therein lies Shopee’s biggest challenge.

While it is valued eight to nine times higher than Allegro (at US$175 billion) and is raising billions to burn in pursuit of market share (so it can pay for advertising or subsidise generous promotions and free delivery), whatever it does in Poland, is still going to go through Allegro in some way.

If Shopee wants to be discovered for its low prices, then it has to be featured on Ceneo — alarming Allegro to any attempt at undercutting it by the new entrant.

Millions of people habitually making price comparisons between innumerable private and corporate sellers on Allegro itself will not even know of Shopee’s existence, particularly if its own product discovery search engine is not up to the task.

Unlike in other markets (e.g. Latin America), Sea Ltd. doesn’t even have a strong gaming presence in the market through its Garena arm — which has typically allowed it access to millions of users, directing them to Shopee upon its launch.

And because the market is already highly sophisticated, there doesn’t seem to be a service that Shopee could offer which would be a genuine competitive advantage — unless it wants to roll out its in-app games earning people rewards and see if the system sticks in Europe, as few seem to be doing it there.

Data is Allegro’s biggest advantage, and a tall fortification.

It knows pretty much everything about any product in the Polish market — who’s selling it, whether you can buy it new or used, and what its prices and availability are. As such, any new entrant is dependent on one of Allegro’s companies to sell anything.

In fact, in anticipation of Shopee’s entry, Allegro has already begun offering better deals on its Smart program, which is really something a’la Amazon Prime subscription, where for $20 per year, you get free deliveries on all orders above a minimum value of $10.

It has now expanded the offer so that you can share your account with family too, effectively giving everyone free deliveries — while keeping people bound to it, by the sheer fact of purchasing a relatively inexpensive subscription.

The company is also actively rolling out its own parcel delivery lockers — a system immensely popularised in the country by another domestic upstart InPost. Today thousands of lockers dot the country and you can pick up any parcel you order within one or two working days from ordering, usually metres from your home.

It’s no surprise that Shopee has already signed an agreement with InPost — nothing in e-commerce happens without the company these days. But through it, it is merely matching Allegro’s existing service offer, not outcompeting it.

Competition between platforms is, of course, great for both the sellers and buyers, as it surely is going to mean more discounts and other offers. But at this point, it’s hard to imagine that Shopee could wow the Polish buyers with something that the local leader is incapable of responding to.

While the Polish market still has some way to go in terms of value as the economy is growing wealthier, it is already far more mature than the “Wild West” in the developing world, where the growing wave of new buyers is lifting all boats at the same time, giving new entrants hope of gaining considerable market share on this basis alone.

As a result, everybody in the e-commerce space is sure to pay close attention to how Shopee fares outside of its comfort zone, and what it bodes for its possible expansion into even more developed markets in the West, as it is encroaching on Amazon’s territory.

Will the Singaporean company be able to be the first to offer some meaningful competition to American giant? Or is it going to discover its limits and settle for a dominant role in less developed countries?

We’re about to find that out by how it performs in an unexpected battleground in Eastern Europe.

Featured Image Credit: Michael Petraeus via Vulcan Post