For the past several years, Singapore-owned Shopee has been the island’s largest e-commerce platform. But as pandemic-induced surges in online shopping subside and local competitors catch up, Shopee may struggle to retain its stronghold in the market.
Owned by Singapore’s Sea Group and headquartered in the city-state, Shopee is essentially a foreign company operating in Taiwan. Yet despite its outsider status, it has been the most popular online shopping platform among Taiwanese consumers since it burst onto the island’s e-commerce scene in 2015.
This is a remarkable feat considering circumstances that should have put the company at a disadvantage. First, native managers and advertising executives usually have a much better understanding of Taiwanese consumers’ idiosyncratic cultural preferences for products and advertisements than foreigners do. Second, analysts consider Taiwan’s e-commerce market to be more mature than Singapore’s.
Herbert Yum, a research manager for market research provider Euromonitor International, notes that in 2019, before the onset of the pandemic, Taiwan’s e-commerce penetration stood at 11.16%. While this was well below China’s 22.46% and South Korea’s 28.84%, it was slightly higher than Singapore’s 9.19% – and the level is expected to rise exponentially. Yum predicts that Taiwan’s e-commerce market will keep growing at a compound annual growth rate of 10.8% to reach a value of NT$956 billion by 2026.
A survey conducted this May by the Market Intelligence and Consulting Institute (MIC) testifies to Shopee Taiwan’s continuing popularity. Polling Taiwanese consumers’ preferences for business-to-consumer (B2C) platforms, MIC found that 61% of respondents preferred Shopee Taiwan, with Taiwan’s Momo slightly behind at 59% and PChome 24h coming in third at 43%.
The reasons for Shopee’s success in Taiwan are manifold. Unlike Taiwan’s local players, Shopee from its inception focused on the use of mobile apps as the entry-point interface for consumers. In 2015, when Shopee entered Taiwan and various Southeast Asian nations, it used mobile applications across all of these markets.
“We came to Taiwan at a really good time, when mobile phones and smartphones were becoming widespread,” says William Liang, executive director at Shopee Taiwan.
At that time, Taiwanese consumers’ preferences for electronics were changing from personal computers to mobile electronic gadgets, but Taiwan’s own e-commerce players were slow to take note and update their virtual gateways. Instead, they remained focused on using their old websites, which were more suited for laptop and desktop computers, as entry points for consumers.
Pioneering interactivity
Taiwan-made e-commerce companies did not always lag behind in terms of internet trends. PChome, for one, was a pioneer in the online shopping field. Established in 1996 as a web portal, it launched its e-commerce business in 2000. The company claims on its website to be the first internet business listed on the Taiwan Stock Exchange (in 2005), and it went on to launch one of the world’s first 24-hour delivery services in 2007.
But by 2015, PChome and other Taiwanese e-commerce platforms had failed to keep up with the times. Their browser-based approach was not only less convenient for consumers than mobile apps, but also seemed outdated. This gave Shopee room to attract young Taiwanese consumers with spending power, according to Yum.
“The sluggish growth before the COVID-19 pandemic gave e-commerce players in Taiwan little motivation to invest in product and services development, resulting in old-fashioned user interfaces,” he notes.
Taiwan companies were soon forced to copy Shopee’s strategy and develop their own mobile apps. But despite these developments, MIC’s recent survey found that a majority of Taiwanese consumers (64%) still prefer Shopee’s mobile app, with 40% preferring Momo’s and 24% preferring PChome’s.
Yum notes that Shopee entered Taiwan under favorable conditions, when the logistics infrastructure for e-commerce in Taiwan was already well-established and consumers were used to the ease of picking up deliveries from nearby convenience stores. He adds that Shopee’s mobile app was also more user-friendly than its competitors’ web-based portals. Shopee Taiwan’s Liang agrees that with his company’s app, “it was easier to find what you were looking for all in the one place.”
As an example, Yum cites Shopee’s consumer-to-consumer (C2C) business model, which allows netizens to sell each other goods. While other platforms in Taiwan, such as Ruten and Yahoo! Auctions, launched similar models before Shopee’s arrival, their brand images and landing pages seemed dated to young consumers. Shopee’s C2C function was easier to find and use on the app, which helped the company capture consumers. “Fewer steps taken by users to sell and purchase products via Shopee are what differentiates it from its competitors,” notes Yum.
Shopee’s young and fresh appeal was encouraged by its particular focus on mixing online shopping activities with entertainment, a strategy designed to keep consumers engaged with the company’s app and online platform, Shopee’s Liang notes. “We didn’t want people to come to Shopee just to shop – we wanted them to have fun in the process,” he says.
Shopee Taiwan has its roots in online gaming. Parent company Sea Group also owns Garena, a leading online games developer with a presence across more than 130 markets. “Entertainment is probably in the DNA of the company,” says Liang. He notes that while other Taiwanese e-commerce platforms also include games, they are offered on a smaller scale. Shopee app users, however, can play a wide array of mobile games, including Shopee Pets, where players can care for a virtual pet and eventually win a prize, and Shopee Candy, which is similar to the game Candy Crush, where users can match and clear candies to win virtual Shopee coins.
In Liang’s analysis, Shopee has brought more creativity to the Taiwan market than local e-commerce companies and has successfully leveraged social media platforms, such as Facebook. But the company does not adopt the same creative ideas universally across Asian markets, he says. Instead, Shopee makes a point of creating diverse marketing campaigns tailored to the local audience. Shopee Taiwan’s staff includes many creative Taiwanese who design campaigns aimed at domestic consumers, says Liang.
For example, when China in March last year banned imports of Taiwanese pineapples, Shopee Taiwan snapped up 45,000 pineapples and launched various promotions to attract Taiwan consumers angered by the ban. Pineapples became prizes as part of Shopee Farm, a game where players can plant their own virtual seeds and water them for prizes.
Shopee Taiwan is also noted for its aggressive brick-and-mortar promotions. Euromonitor’s Yum says Shopee’s offer of free delivery charges when it entered the Taiwan market spurred its growth and encouraged local peers to follow. “We introduced free shipping campaigns, and this became the emphasis of other players as well,” Shopee Taiwan’s Liang adds.
On December 12, 2020, Taipei’s Mass Rapid Transit (MRT) system saw its turnstiles covered in Shopee’s trademark red-orange color scheme and S-shaped logo. For half an hour that morning, holders of one of Taiwan’s four electronic tickets or wallets – EasyCard, iPass, iCash, or HappyCash – could get free transport between any two stations on the Taipei MRT. When they swiped their cards, the turnstiles did not give off their usual beep, instead squeaking, “Shopee free shipping!”
The company has also enlisted celebrities for promotions, such as Jeanie Hsieh, a Kaohsiung-born singer and actress. In mid-2022, Shopee released a video of Hsieh singing about the advantages of Shopee. In the video, she performed in front of scantily clad young women dancing and wearing headgear printed with the Shopee “S.” Liang says the company also offers regularly occurring special promotions to encourage consumers to make a habit of checking Shopee monthly.
Trials ahead
Despite its success in Taiwan, Shopee now faces several challenges that could threaten its market dominance. To begin, local e-commerce companies are playing catch-up.
“Since 2020, the threat from Shopee, as well as the uncertainty brought on by COVID-19, has triggered Taiwan’s domestic e-commerce players to take action,” says Yum. He adds that in general, Taiwan’s native e-commerce companies have improved their user interfaces by simplifying their landing page layouts with more visual imagery of products and less wordy designs. They have also expanded payment options and rolled out eye-catching flash sales items on the top of their pages.
Unlike neighboring markets such as China and Japan, where e-commerce was boosted by the outbreak of the pandemic, e-commerce logistics in Taiwan remained more or less steady until mid-2021, when a surge in COVID-19 cases and subsequent social distancing and lockdowns resulted in increased demand for e-commerce products, says Yum. This prompted local players such as Momo to improve the efficiency of their logistics.
According to Yum, Momo hired over 700 people to expand product development, warehousing, and other internet technology operations. It built 30 new warehouses in 2020 and last year announced plans to build 10 more. Momo also set up a new logistics subsidiary, Fu Sheng Logistics, to help the company operate same-day deliveries in major cities like Taipei, New Taipei, Kaohsiung, and Tainan.
“Taiwanese players’ ability to speed up deliveries will be one of their key advantages when facing challenges from foreign players such as Shopee,” notes Robin Hu, a senior industry analyst at MIC. Hu adds that Taiwan’s top local e-commerce players Momo, PChome, and ETMall all enjoyed double-digit revenue growth in 2021, mainly due to the pandemic.
PChome has also instituted various changes since Shopee Taiwan entered the market. Yum notes that the company has boosted its popularity with Generation Z by introducing Pi Wallet, a mobile payment platform created by Pi Mobile Technology, which merged with PChome Pay in 2020. PChome in 2021 also launched PChome (Fresh) to sell and deliver fresh food. Simultaneously, PChome is expanding in Southeast Asian markets and is the only native Taiwanese e-commerce player engaging in a thriving cross-border trade.
Sam Tsai, CEO of PChome Thai, says that the company launched a platform in March this year for Taiwanese to buy products directly from Thailand, often at a lower price than similar goods from Taiwan. Meanwhile, PChomeSEA is dedicated to expanding the company’s presence in Southeast Asia’s e-commerce market. Tsai notes that rather than competing with big e-commerce players in Southeast Asia and selling a wide variety of products from across the globe, PChomeSEA has decided to hone its comparative advantage. Subsequently, the company has adopted a strategy of marketing only distinctly Taiwanese products, such as high-quality oolong tea and pineapple cakes, to Southeast Asian consumers.
Another problem Shopee Taiwan faces, says MIC’s Hu, is a high number of consumer disputes. According to statistics from the Executive Yuan’s Consumer Protection Committee, Shopee was the e-commerce platform in Taiwan with the most consumer disputes in 2020 – 2,029, an increase of 65% from the year before. In 2021, the Criminal Investigation Bureau under the National Police Agency ranked Shopee third among Taiwan’s top-five high-risk online e-commerce platforms. Shopee’s Liang responds that it is normal for the company to have more consumer disputes as it has a higher number of transactions than other companies.
“While customers may sometimes have bad experiences on our platform, we always strive to learn from these to improve future experiences,” he says. But, Liang adds, Shopee Taiwan began offering new service provisions regarding refunds and purchases in mid-2021. After the service was extended to all Shopee sellers in March this year, the average return processing time fell by 20% within two months.
Some of Shopee Taiwan’s other future plans include reaching out to domestic brick-and-mortar businesses that are not already on e-commerce platforms and encouraging them to sell their products with Shopee Taiwan, Liang says. The company will also increase corporate social responsibility (CSR) activities and engage more with customers. Liang notes that Shopee Taiwan is rolling out a scheme for eco-friendly delivery boxes that can be recycled at Shopee Xpress service points. Customers take a bag to the store to pick up their delivery and no longer bring the box home.
MIC’s Hu warns that Shopee Taiwan could also be affected by its parent company operations. Shopee is facing several macro headwinds, including rising global inflation and interest rates, as well as an increasing number of Asian nations emerging from pandemic restrictions, all of which may dampen appetites for e-commerce.
“Although Shopee Taiwan has stated that its operations and services will not be affected, the operation of its parent company is still a threat to the development of Shopee Taiwan in the future,” Hu says, pointing to reports from several Asian news outlets about layoffs in other markets. A report from Channel News Asia, for example, says the e-commerce giant plans to lay off employees in its food delivery service ShopeeFood and online payment ShopeePay teams in Southeast Asia. It will also cut staff in Mexico, Argentina, and Chile, as well as a cross-border team supporting the Spanish market.
Yum, meanwhile, stresses that while Taiwan’s e-commerce market is still expected to be fast-growing, “competition will be intensive, where user experience, timely delivery, and brand-building strategy are three critical battlegrounds for the e-commerce market in the future.”
Published monthly by the American Chamber of Commerce in Taiwan, Taiwan Business TOPICS is a source of balanced, reliable, and insightful news and analysis on issues of concern to Taiwan’s business community.
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