Insights: The Shopee Business Model & Revenue Model

By Ben Lim | October 25, 2017 | Business Model | 6 Comments

Updated on 25 March 2026

How Shopee Works - Shopee Business Model Analysis & Breakdown

The Shopee Business Model - Screenshot of Shopee's site

First, let me begin by saying that I initially got curious about the Shopee business model when someone told me their shipping is free (well, not all of it). How great is that for consumers! I got quite intrigued as to how they could recover this cost! So, I did a quick study on their business model from the viewpoint of an Angel Investor. Below outlines my findings, with one of my main goals being to figure if Shopee can be a sustainable business by the end of roughly 5 years...

I have to add that, I am actually very surprised how competitive the online marketplace business has become. This is the start of a new era of competitiveness - what a great time to be a consumer!

The Shopee Business Model – competitive advantages

Note: None of this information should be assumed as accurate and most of them are found online through cited sources and/or my own guesses.

Shopee Business Model - Basic Information

Parent Company - Sea Limited

Funding: Sea Limited

Shopee CEO: Chris Feng (Rocket Internet, Zalora, Lazada, Sea [Shopee])

Web Traffic3: Significantly higher today across all markets (hundreds of millions of monthly visits regionally, with Indonesia being the largest market)

What they do: Marketplace for regional sellers and buyers

Shopee Business Model - Competitive Landscape in Malaysia

Shopee has one of the most competitive business models in the market today versus their alternatives;

Carousell
Mudah
Lazada
Qoo10
11Street (now largely exited the market)
Lelong
eBay

Most of the above charge fees/commissions and listing fees while the Shopee business model initially did not. Today, Shopee has gradually introduced commissions, transaction fees, and seller service fees, similar to competitors.

The subsidised shipping is currently being done by Shopee and Lazada, although now more targeted (vouchers, minimum spend, campaigns) rather than fully subsidised. These are huge competitive advantages against the listing model (Carousell, Mudah) and the commission/fee model (Qoo10, Lelong, eBay, Lazada).

Alibaba: Lazada, Alipay & Taobao

Since the rest do not really stand a strong chance in the long-term, let me explain why Lazada is the main competitor for Shopee.

Lazada, of course, has the advantage of its buyer, Alibaba Group. Alibaba's Alipay as the main payment system is a great strategy to make Lazada profitable both directly and indirectly.

By the end of 2015, Lazada was bleeding with 30% gross margins and -100% net EBITDA margin. However, today Lazada has significantly improved its operational efficiency and monetisation strategies under Alibaba.

Still, Jack Ma is a highly respected businessman, and I do believe that his strategy of purchasing a loss-making company and placing in Alipay could prove to be one of his more sophisticated manoeuvres yet.

If you haven't noticed, Uber vs Didi Chuxing (backed by Chinese tech giants) was almost the same. Some say that Uber lost because they were not able to accept Alipay as a form of payment.

One more thing that Shopee does not have is Alibaba's logistics hub in Malaysia's digital free trade zone. This remains a clear path to lower cross-border logistics costs as an additional competitive advantage.

Shopee Business Model - Revenue Model

Shopee's Possible Revenue Streams (updated);

Advertising
Transaction fees & commissions
Seller services (logistics, fulfilment, marketing tools)
Their own payment system

Note that advertising is still one of the most important plays here. Search placement gets them initial revenues to sustain early on. It is a significant strategy because they initially forwent most other forms of revenues and relied heavily on ads, similar to early strategies by companies like Google.

Alibaba's Taobao uses this exact business model (above)- which is where Shopee probably got it from.¹

Their own payment system (ShopeePay) now occurs on every order, further sustaining the overall Sea group cash flows.

Banner/Video Ads & Search Placement Advertising Revenue

Their 83.5m monthly traffic³ is roughly 1bil views a year (or more, due to low & peak seasons). That's some decent traffic, even though they are far behind compared to Lazada who has 7x the traffic.

The Shopee Business Model - Shopee vs Lazada Traffic — Shopee Business Model vs Lazada Business Model - their traffic in Malaysia

Assuming the above is the average ratio for all countries (7x), we could say that in a few years, Shopee could have 10X the traffic they have now, or perhaps 30x if we include the e-commerce growth in Southeast Asia. The assumption that it should triple comes from below, from 2017 to 2021 (5 years).

The Shopee Business Model - southeast asia e-commerce internet growth

The average CPM (cost per thousand views) for Amazon is somewhere between $1 to $4. Usually, SEA traffic would be cheaper due to the nature of the lower cost advantage, so let's assume the average CPM by 2021E would be US$1-2 so we have some numbers to work with. This is quite validated as Amazon's ads revenue is set to hit US$5 billion by 2018!⁵. However, I am not sure what else goes into that number apart from display ads and placements.

So this 30X traffic and average CPM of US$1 will help us figure out their ads revenue by 2021E - which is:

1b views/yr * 30X growth * ($1 / 1000 views) = US$30m Revenues/yr by 2021E

If the above was at $2 CPM, it would be US$60m in Revenues from ads alone by 2021E.

Payment System Revenues

This is something Shopee has since built through ShopeePay, making it more competitive against Alibaba/Ant.

To understand how payment systems can make money, let's understand a few of Alipay's (a.k.a. Ant Financial) key offerings, as they probably have the most competitive business model on the market right now;

Escrow - money is held from both buyer and seller for 7 days unless there is a complaint.
It is free for smaller users, and it charges up to 1.2% as volume goes up

The magic of Alipay's strategy is that it enables the entire market rather than tries to make money out of everyone (unlike Paypal who charges from 3% with a $0.30 USD minimum). The net effect is that Alipay grows much faster, is adopted faster, and that it is viable for smaller value goods transactions. You would, for example, find that people might not buy or sell a $0.10 pen if the minimum transaction fee was $0.30.

As you can imagine, Alipay is a giant magnet that unifies all payment alternatives but in a cheaper & more convenient way (cashless). The huge amounts of users something like that brings in can be used to make money in other forms. One such way is Ant Financial's Yu’e Bao, currently, the world's largest money-market fund and another is the Sesame Credit, a credit rating service. I can only imagine what else will come next to bring in further forms of revenues.

Estimating revenues here would be pointless as I do not have a strong basis to work from. Any guess would be garbage in, garbage out.

Key Takeaways From This Analysis

Competition is getting tougher. No longer are the days where Startups can just set up a marketplace or e-commerce business and play by the rules of minimum shipping costs and minimum payment processing costs. Today, it takes significant capital, strong execution, and multiple revenue streams to compete.
It's quite unclear if Shopee's potential revenues alone could sustain the business in its early years. However, Shopee has since proven stronger monetisation and market leadership in Southeast Asia, especially in markets like Indonesia.
While it's clear that Shopee currently has one of the most competitive models, Lazada can still compete aggressively with the backing of Alibaba, its logistics infrastructure, and operational experience.
Will the Shopee business model work as a venture-built (funded and built internally by Sea) company? Over time, Shopee has demonstrated that this model can scale successfully, although profitability remains a continuous balancing act between growth and cost.