How Does Shopee Make Money?

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Ever wonder how Shopee makes money? Unlike traditional ecommerce platforms like Lazada and Amazon, Shopee doesn’t charge merchants a commission on sales. So what’s the secret to their success? Let’s take a look at how they make money and some of the ways they’re evolving their business model.

Shopee is a two-sided platform that provides its users the ability to both buy and sell products. It will attract customers to visit the site, engage with ads, purchase products available for sale, register accounts and make transactions. For every transaction made on Shopee’s platform, it receives commissions from providers or sellers of goods/services.

What is Shopee?

Shopee, which was established in 2015, has become Southeast Asia’s largest online marketplace. By 2021, Shopee had already generated $1.78 billion in sales.

Shopee is an online marketplace where vendors and consumers get connected to each other for their interests such as electronics or fashion.

Shopee earns money through marketplace commissions, transaction fees, cost per click advertising on its platform, fulfilment services, and payment processing charges, as well as restaurant commissions.

How Does Shopee Work?

Shopee acts as a facilitator between sellers and buyers. Shopee earns revenue by selling advertisements for products, services, or new vendors that want to gain exposure on its platform. Shopee also receives commissions when transactions are made within the marketplace.

According to Asean Briefing , Shopee is part of the Alibaba Group which is China’s largest ecommerce company. Alibaba Group is also an investor in Southeast Asian marketplaces, including Lazada and Tokopedia.

How Does Shopee Make Money?

There are different revenue models that Shopee, an online marketplace follows.

Advertising Commission of Shopee

One of the largest sources of revenue for Shopee is advertising commission. It charges merchants a percentage fee for displaying their advertisement to customers who are searching for products or services via search engines. 

Marketplace Commission of Shopee

Shopee also charges merchants a percentage fee when their products or services are sold in the marketplace, which is similar to how Amazon makes money. This revenue model can charge up to 4% on each purchase of goods and services from its vendors

Fulfillment

Sellers may now sell on Shopee through the Shopee Fulfilled by Shopee (FBS) platform, which allows them to store and transport their items directly.

Moreover, it is advisable either to list the services of a local logistics company or use the services of drivers and vehicles for your order delivery.

Transaction Fees of Shopee

Shopee charges around 2% of a transaction along with the marketplace commission to cover service providers’ payment gateway expenses.

They charge this transaction fee on the routine transactions and payment made through EMI or Instalment plans.

Commission From Restaurant & Delivery Fees

Shopee also charges a commission from the restaurant and delivery fees.

For example, if you order a burger from Burger King via Shopee, it gets a fee for facilitating this transaction.

Payment Fees of Shopee

Shopee previously operated an e-wallet (or electronic wallet, or Shopee Wallet) under the name Shopee Wallet.

Customers may use the wallet to shop on Shopee’s marketplace. They can also make purchases from companies who accept ShopeePay as a payment method.

Shopee will take a small proportion of the sale price from each purchase made by ShopeePay merchants. Rates are not published, but it’s safe to assume they’re around 1%.

Conclusion

Shopee has a business model that is similar to other large ecommerce companies such as Amazon and Alibaba. It charges merchants and advertisers for using its platform, as well as taking a cut from every transaction made within the marketplace.

It was also reported by Asean Briefing in 2018 that Shopee turned over $1 billion between 2015-2017 and is set to expand its operations to more than 20 markets in Singapore, Indonesia, Thailand, Vietnam, Malaysia and Philippines.

Shopee also has the most number of users compared with other players such as Carousell and Qoo10 .

So what do you think about Shopee? Share your opinions in the comment section below.