Knowing Shopee Business Model – How Shopee Makes Money

Shopee is a popular mobile platform based in Southeast Asia that originally began as a consumer-to-consumer (C2C) platform before developing into a business-to-business (B2B) marketplace serving customers throughout the region. 

Additionally, Shopee often rewards users with coins, discounts, and payback coupons, which may explain why it is so popular. But where does the Shopee income come from? How does Shopee make money? Is Shopee making profit from its sellers? Maybe this is one of your questions.

To make applications, pay the salaries of couriers, customer service, and other employees, Shopee certainly requires a lot of money. 

Related: Marketplaces in the Philippines

What is Shopee?

Shopee is an online marketplace that connects businesses by allowing their users to buy and sell products. Consumers interested in products such as electronics, fashion, appliances, pet supplies, and many more. 

Marketplace commissions, transaction fees, cost-per-click advertising on its platform, fulfillment services, and fees for payment processing and restaurant commissions is how Shopee makes money. Shopee is a market-based company. 

Purchases can be made on both the regular Shopee platform and the mall product. Shopee Mall will only list high quality, authorized brand name products.

Technically, anyone with a product inventory can start selling on Shopee. That’s how to make money on Shopee.

Shopee offers an extensive library of training materials to help your salespeople optimize their product listings. 

Also hosts a community called Shopee Pros, which allows its most successful sellers to share tips with each other while receiving dedicated help from the platform’s account managers. 

In order to attract buyers to return to the platform, Shopee has developed the so-called Shopee Coin. Users can earn coins by purchasing a product at the mall. In turn, the coins can be used to make discounted purchases on the platform. 

In addition to the shopping experience, Shopee users can also play a variety of games that give them the opportunity to win various prizes. 

The Shopee platform can be accessed by visiting the company’s website or by downloading its mobile and tablet apps (available on Android and iOS devices).

Related: How to Start an Online Business?

History of Shopee

Shopee, headquartered in the island city-state of Singapore, was launched in 2015 by game developer Garena.

Garena was founded in 2009 by Forrester Li and Gang Ye, two Chinese nationals who came to Singapore by virtue of student scholarships. The two were overseeing the development of various games.

Garena’s executives decided to expand the business away from gaming and enter the e-commerce market as well.

They recruited Chris Feng, a seasoned McKinsey consultant, former Managing Director of Rocket Internet in Southeast Asia, to lead Garena’s e-commerce arm as CEO.

Shopee was unveiled to the public in the summer of 2015. Shopee developed various social features that increased both stickiness and trust. For instance, buyers could chat with sellers, follow other users on the platform, or use hashtags to conduct their product searches.

Lastly, Shopee removed almost all its seller fees, thereby making it extremely lucrative for new sellers to offer products.

After the soft launch in mid-2015, Shopee was officially unveiled in November and December 2015. It introduced localized apps in each of the eight markets it was launching in.

Over the next year, Garena continued to pump money into Shopee in an effort to increase its awareness, which made Shopee investment also increased. To emphasize its move away from gaming, Garena eventually rebranded into Sea Limited in May 2017.

On Shopee growth, the platform also introduced Shopee Logistics Services, a fulfillment service that handles the storing and shipment of seller products.

See also: Successful Online Business Ideas 2021

How Does Shopee Make Money?

While users sell things on how to make money in Shopee, Shopee makes money from commissions on its marketplace, transaction fees, advertising fees on its platform, fulfillment services, and payment processing fees. Restaurants also pay Shopee commissions. 

Shopee operates on a marketplace paradigm, matching supply (sellers) with demand (customers). 

These transactions are enabled by implementing necessary infrastructures, such as payment, shipping, and product discovery. The following sections examine the revenue streams of the company.

Marketplace Commission 

How do Shopee make money? Most of Shopee’s income comes from the commission’s sellers pay when they sell something on the market. 

Shopee is the market operator and is responsible for both the order and the collection of payments. 

Also offers numerous features that encourage customers to shop online. For example, Shopee Feed provides consumers with product recommendations based on their previous searches and purchases. In addition, the feed provides real-time updates from friends and family and invites viewers to participate. 

Many factors determine a seller’s effective commission rate. 

The effective commission rate in the market is between 1% and 2%. Commissions on sales through the Shopee Mall can be as high as 6%.

Transaction Fees

Shopee charges a transaction fee (approximately 2%) in addition to the market commission to offset the fees from service providers’ payment gateways (such as Mastercard or Visa). 

The transaction fee applies to routine transactions and payments through the company’s fee plans.

Advertising 

Sellers can advertise their products on various platforms, such as other online marketplaces such as Amazon or eBay. 4,444 vendors advertise their products through three different channels: Product Search, Store Search, and Discovery Feed. 

Merchants can set an advertising budget before marketing their products to stay within their budget. 

A cost per click (CPC) practice then compensates Shopee each time a user clicks on the ad. 

Several factors determine the cost per click (CPC) rate, including the competitiveness of the search term. The seller is effectively bidding on the ad space, which means that your ads will appear in the space you are bidding on.

Fulfillment

With Shopee’s Dispatch by Shopee (FBS), sellers can store and transport their products directly through the platform. 

You can work with a local logistics provider (like J&T Express or NinjaVan) or use Shopee’s fleet of drivers and vehicles to deliver your order. 

Each item that sellers store and deliver is charged a fee. The fee depends on the size and weight of the package.

Payment Fees

Shopee launched its e-wallet (or e-wallet) called ShopeePay in 2019, which was previously known as the Shopee Wallet. 

Customers can use the wallet to buy products on the Shopee platform. Additionally, they can purchase goods and services from merchants who accept ShopeePay as a payment method. 

ShopeePay merchants pay Shopee a small percentage fee when a customer uses the service. Prices are not published, but it is reasonable to assume that they are around 1%.

Delivery and Restaurant Commission Fees

As previously announced, Shopee has launched a food delivery service. Hows does Shopee make money from delivery and restaurants?

The price of each order is not disclosed to Shopee, but it seems reasonable to assume that the restaurants will compensate Shopee. Commissions typically range from 20-30%. 4,444 customers pay shipping fees in addition to commissions.

Conclusion

Shopee is an online marketplace that connects businesses by allowing their users to buy and sell products. Consumers interested in products such as electronics, fashion, and many more. 

How Shopee make money is from marketplace commissions, transaction fees, cost-per-click advertising on its platform, fulfillment services, and fees for payment processing and restaurant commissions.

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