Investor Presentaiton
Unit Economics - Hope vs. Reality
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The big issue is that Shopee is currently “buying revenues". They're subsidizing shipping costs, with no commissions in most of
its countries. They're essentially "pumping up the ecosystem" with external funding, trying to attract a diversity of sellers &
buyers.
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Due to this, they lose money on every customer they acquire - not just on the initial CAC, but also on a recurring basis.
The more their customers order, the more they lose.
Since there's no profits on a per customer level today, its almost impossible to do a valuation or IRR on customer
acquisition spend. Such an analysis involves too many moving parts, and estimates on future take-rates and timing.
Competition is fierce, so the ability to suffer / being able to withstand more pain than your competitors / having access to
funding can be a differentiator in winning.
Shopee thinks they can break-even by 2020, and achieve the unit economics highlighted below. However this will depend upon
the actions of the competitors, and there is a level of game theory involved.
Hopeful Unit Economics
Based on Nick Nash, January 2018 CNBC interview (LINK)
Profit per Customer - Hopeful
Basket Size
× Order Frequency per Month
= Monthly Transaction Value
x Shopee Take Rate
= Shopee Monthly Customer Revenue
x Op Margin
= Shopee Op Profit, per Customer per Month
x 12 months
x Retention Ratio
Customer Acq Cost
= Year 1, Return on CAC
memo: Payback Period (months)
$ 17.38
3.6x
$62.59
1000+
Today's Unit Economics
Hayden Capital estimates
Profit per Customer - Today
Basket Size
x Order Frequency per Month
= Monthly Transaction Value
x Shopee Take Rate
5.0%
$3.13
=
Shopee Monthly Customer Revenue
40.0%
$1.25
x Op Margin
x 12 months
100.0%
x Retention Ratio
/ Customer Acq Cost
$ 17.38
= Shopee Op Profit, per Customer per Month
3.6x
$ 62.59
(6.2)%
$ (3.89)
(48.3)%
$ (5.77)
12
30.0%
$ 8.00
(359.5)%
N/A
$ 6.00
150.3%
4.8
= Year 1, Return on CAC
memo: Payback Period (months)
HAYDEN CAPITAL
Fred Liu, CFA | [email protected]
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