‘The Next Amazon’: 10 Undervalued Ecommerce Stocks with Huge Upside

Published August 19, 2021 at 4:19 pm EDT Updated September 7, 2026 at 1:32 pm EDT

In this article, we discuss the 10 undervalued ecommerce stocks with huge upside.

The ecommerce business has become one of the main drivers of the world economy in recent years. According to New York-based market research firm eMarketer, ecommerce sales across the world rose over 25% in 2020, influenced by the COVID-19 pandemic but continuing on a growth trajectory that preceded the pandemic, to more than $4 trillion. This figure is expected to climb close to 17% to reach $5 trillion this year. Amazon.com, Inc. (NASDAQ: AMZN), the largest ecommerce platform in the world, is one of the main beneficiaries of this boom.

Amazon Hitting a Plateau?

However, in earnings results for the second quarter of 2021, posted in late July, Amazon.com, Inc. missed market expectations on revenue, reporting $113 billion against consensus estimates of almost $115 billion. The revenue miss led to a number of analyst downgrades for the company. On June 30, a day after the disappointing earnings report and guidance for the third quarter, investment advisors JPMorgan, UBS, Cowen, and Oppenheimer all lowered the price targets on the stock.

Amazon.com, Inc., which, as of August 17, 2021, is trading at over $3,200 per share, has become one of the most expensive stocks on the market in recent years, mostly putting it out of reach for the average investor who wants to take advantage of the ecommerce explosion around the world. However, for those who want to avoid the stock, Sea Limited (NYSE: SE), Shopify Inc. (NYSE: SHOP), MercadoLibre, Inc. (NASDAQ: MELI), Etsy, Inc. (NASDAQ: ETSY), and JD.com, Inc. (NASDAQ: JD) could be viable alternatives.

Valuation Concerns

There have also been increased murmurings around the valuation of Amazon.com, Inc. in recent weeks, especially in context of the second quarter earnings miss. According to Aswath Damodaran, a professor at the Stern School of Business at New York University, the pricing of the stock has always been “bothersome” and has assumed increased urgency in light of slowing growth and increased competition from retail giants like Walmart. Damodaran also believes Amazon is “a company which can overshoot in both directions and distribution of value is huge”.

Amazon.com, Inc., over the past decade, has disrupted the retail sector in much the same way that fintech firms have transformed the world of finance. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

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Our Methodology

The main idea behind this article is to discuss some ecommerce stocks with long-term growth potential for those who want to invest in the lucrative ecommerce market but also want to avoid expensive and already matured names like Amazon.

We took into account business fundamentals, analyst ratings and hedge fund sentiment while choosing these stocks.

We also consulted interesting analysis for these stocks on different notable finance websites, especially Seeking Alpha.

The stocks are ranked based on the number of hedge funds having stakes in each, based on Insider Monkey’s data of 866 funds, as of the end of the first quarter.

With this context in mind, here is our list of the 10 undervalued ecommerce stocks with huge upside.

‘The Next Amazon’: Undervalued Ecommerce Stocks with Huge Upside

10. Meituan (OTC: MPNGY)

Number of Hedge Fund Holders: N/A

Meituan (OTC: MPNGY) is placed tenth on our list of 10 undervalued ecommerce stocks with huge upside. The company is based in China and operates an online platform which connects merchants with buyers. The firm is one of the largest Chinese firms listed in the US in terms of market capitalization. It aspires to be the Amazon of Services. According to finance expert Kevin Carter, the company has tremendous growth potential since it leads the food delivery, consumer products, retail services, and social commerce businesses in the massive Chinese market..

In earnings results for the first quarter, posted on May 28, Meituan reported a revenue of more than RMB37 billion, up over 121% compared to the revenue over the same period last year.

Meituan was founded in 2003 and has a market cap of over $180 billion. It posted more than $17.4 billion in revenue last year. It was previously known as Meituan Dianping but changed the name to Meituan in October 2020.

Just like Sea Limited, Shopify Inc., MercadoLibre, Inc., Etsy, Inc., and JD.com, Inc., Meituan is one of the best undervalued ecommerce stocks with huge upside for those who want to avoid Amazon.com, Inc..

9. Baozun Inc. (NASDAQ: BZUN)

Number of Hedge Fund Holders: 11

Baozun Inc. (NASDAQ: BZUN) is ranked ninth on our list of 10 undervalued ecommerce stocks with huge upside. The firm operates from Shanghai and provides ecommerce solutions to brand partners. Baozun Inc. is different from other retail chains since it also markets IT solutions, online store operations, digital marketing, customer services, warehousing, and fulfillment to partners. Nikolaos Sismanis, a market expert and the author of a book titled Wheel of Fortune, believes investors should take note of the stock that is trading at ridiculous multiples amid a broader drawdown in Chinese stocks that have forward PE ratios of between 2-10. Sismanis highlighted the robust first quarter results of the firm and underlined that the market would eventually be forced to recognize the profitability potential of stocks like Baozun Inc..

On June 9, investment advisory JPMorgan initiated coverage of Baozun Inc. stock with an Overweight rating and a price target of $45, noting that the firm was one of the leading ecommerce brands in China and had a competitive advantage to secure growth.

At the end of the first quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $41 million in Baozun Inc., down from 14 the preceding quarter worth $82 million.

In addition to Sea Limited, Shopify Inc., MercadoLibre, Inc., Etsy, Inc., and JD.com, Inc., Baozun Inc. is one of the best undervalued ecommerce stocks with huge upside for those who want to avoid Amazon.com, Inc..

8. Ozon Holdings PLC (NASDAQ: OZON)

Number of Hedge Fund Holders: 17

Ozon Holdings PLC (NASDAQ: OZON) is a Cyprus-based company that owns and runs an online retailer that markets multi-category consumer products primarily in Russia. It is placed eighth on our list of 10 undervalued ecommerce stocks with huge upside. The firm has long-term growth potential given that the ecommerce market in Russia is still in early stages and is projected to grow rapidly in the next five years. Ozon Holdings PLC is a leader of this market and looks set to sustain this growth. The company’s fintech and logistics sectors are also expected to help the company capture greater market share in the coming years.

On June 28, investment advisory HSBC reiterated a Buy rating on Ozon Holdings PLC stock and raised the price target to $73 from $65, underlining that the ecommerce business was growing in Russia and would benefit the firm.

Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Driehaus Capital is a leading shareholder in Ozon Holdings PLC with 901,074 shares worth more than $50 million.

Alongside Sea Limited, Shopify Inc., MercadoLibre, Inc., Etsy, Inc., and JD.com, Inc., Ozon Holdings PLC is one of the best undervalued ecommerce stocks with huge upside for those who want to avoid Amazon.com, Inc..

7. Qurate Retail, Inc. (NASDAQ: QRTEA)

Number of Hedge Fund Holders: 31

Qurate Retail, Inc. (NASDAQ: QRTEA) is a Colorado-based company that engages in online commerce activities. It is ranked seventh on our list of 10 undervalued ecommerce stocks with huge upside. Khaveen Investments, a hedge fund focusing on investments in technology stocks, believes the stock is underpriced by 373% and has adapted well from teleshopping to digitization. The fund cited the lean business model, low capex requirements, positive cash flows, and partnerships with emerging brands as some of the growth catalysts for the company.

In April, investment advisory Bank of America initiated coverage of Qurate Retail, Inc. stock with a Buy rating and a price target of $26. Earlier in February, DA Davidson had also mentioned several growth catalysts for the company in a ratings update.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Lyrical Asset Management is a leading shareholder in Qurate Retail, Inc. with 13.8 million shares worth more than $162 million.

Sea Limited, Shopify Inc., MercadoLibre, Inc., Etsy, Inc., and JD.com, Inc. are some of the best undervalued ecommerce stocks with huge upside for those who want to avoid Amazon.com, Inc., along with Qurate Retail, Inc.

In its Q4 2020 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and Qurate Retail, Inc. (NASDAQ: QRTEA) was one of them. Here is what the fund said:

“The strongest performance for the calendar year came from Qurate Retail. Starting from a very low valuation, shares rallied as the business’s turnaround gained traction, in turn giving management the confidence to return a substantial amount of capital to shareholders, including distributing $3 per share in special dividends (more than one-third of the start-of-year stock price).”

6. Chewy, Inc. (NYSE: CHWY)

Number of Hedge Fund Holders: 32

Chewy, Inc. (NYSE: CHWY) is placed sixth on our list of 10 undervalued ecommerce stocks with huge upside. The firm is headquartered in Florida and operates an online marketplace for pet products. It markets more than 70,000 products from around 2,500 partner brands. Michael Wiggins De Oliveira, a market expert and author of Deep Value Returns, has outlined that the company is continuing to make positive strides and improving overall profitability. He underlined how the stock was priced at 4x sales, making the argument that it was a competitive entry point for investors who wanted to consider owning it.

On August 4, investment advisory Credit Suisse initiated coverage of Chewy, Inc. stock with an Outperform rating and a price target of $121. Katie Tryhane, an analyst at the firm, issued the ratings update.

Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Chewy, Inc. with 1.3 million shares worth more than $113 million.

In its Q4 2020 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Chewy, Inc. (NYSE: CHWY) was one of them. Here is what the fund said:

“One of our investment themes over the last several years has been the “humanization of pets,” which refers to the increasing amount of time and money that people are devoting to their animals. This theme has become even more evident during the pandemic, as many families and individuals have adopted pets while spending more time at home. Today, more than 85 million US households have pets. In 2015, roughly 7% of pet products in the U.S. were bought online. By 2019, that number had increased to 22%. Moreover, the pandemic has caused pet parents, new and experienced alike, to sign up for delivery of pet supplies in order to avoid trips to physical stores. 72% of pet owners made at least one online purchase for their pets in the past 12 months and 39% of those were subscription-based purchases.

Chewy (tkr: CHWY) is the largest pure-play pet “e-tailer” in the world, offering “the personalized service of a neighborhood pet store combined with the convenience and speed of e-commerce.” The company was founded in 2011 and was bought by PetSmart in 2017, for $3 billion. In June, 2019, Chewy went public. All of its sales are currently U.S.-based. The company has co-headquarters with one facility in Dania Beach, Florida and one in Boston, Massachusetts, and employs about 12,000 people. Chewy offers a selection of high-quality pet food, treats, supplies, and pet healthcare products.

In addition to one-time sales, Chewy is creating a recurring revenue model through its “autoship” program. This is essentially a subscription service for products that are sent at intervals specified by customers and includes such items as food and medicine. Customers are more profitable the longer they stay with the company, as their “lifetime value” grows. The company is organized around providing an exceptional customer experience. Chewy has 10 fulfillment centers scattered across the US, which enable cost-efficient overnight shipments to about 80% of the U.S. population and cost-efficient two-day shipments to nearly 100%. This allows Chewy to provide excellent service to the company’s more than 12.7 million active users.

Chewy’s ability operate profitably in the future hinges on two key variables: growing its customer base and more efficiently managing its fulfillment costs through automation of its fulfillment centers, thereby decreasing labor costs. Chewy has a smart, experienced management team and the company is expected to become profitable at the end of this fiscal year.”

5. Etsy, Inc. (NASDAQ: ETSY)

Number of Hedge Fund Holders: 53

Etsy, Inc. is ranked fifth on our list of 10 undervalued ecommerce stocks with huge upside. The firm is headquartered in New York and operates online marketplaces that connect sellers with buyers. These include Etsy and Reverb. The firm markets 85 million items through different retailers on the platforms. According to Jonathan Weber, a market expert and author at Cash Flow Kingdom, the company has grown to a sizable business in the niche market it operates, returning more than 1,200% to investors over the past five years and outperforming the broader market. Weber further noted how the company was not overvalued at 54x expected net profits, compared to other ecommerce players in the market.

On July 7, investment advisory Needham initiated coverage of Etsy, Inc. stock with a Buy rating and a price target of $250, underlining that the firm was one of the best growth ideas in the coverage with long-term sales growth expected.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Etsy, Inc. with 2.3 million shares worth more than $465 million.

In its Q1 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Etsy, Inc. (NASDAQ: ETSY) was one of them. Here is what the fund said:

“Etsy continued to be a top contributor in the Portfolio during the first quarter. Etsy experienced record levels of demand in 2020. Throughout the beginning of this year, the business has continued to see accelerated growth trends. The company’s recently announced fourth quarter results provided numerous data points that highlight Etsy’s success in both broadening and deepening the relationship it has with buyers and sellers on its platform. In fact, Etsy now stands as the fourth largest e commerce site in the U.S. Repeat buyers have grown nearly 100% year-over-year, despite mask sales, which grew rapidly at the onset of the pandemic, shrinking to less than 5% of sales.

We continue to believe Etsy remains in the early stages of growing out its platform.

We remain confident in its ability to compound its value for shareholders at an attractive rate going forward.”

4. MercadoLibre, Inc. (NASDAQ: MELI)

Number of Hedge Fund Holders: 69

MercadoLibre, Inc. is an Argentina-based firm that owns and runs online commerce platforms. It is placed fourth on our list of 10 undervalued ecommerce stocks with huge upside. According to Keyanoush Razavidinani, a business analytics expert, the company is poised to grow as internet penetration and digital payments increase in Latin America. Razavidinani believes the company is ahead of competitors like Amazon and Sea Limited in Latin America because it operates in an ecosystem that it is familiar with, given the political uncertainty in the region and the market share it presently commands. He also underlined how the website of the company was the 10th most visited in Brazil, the largest market in Latin America, behind only social media applications.

On August 5, investment advisory Credit Suisse maintained an Outperform rating on MercadoLibre, Inc. stock and raised the price target to $2,100 from $2,050, noting that the pandemic tailwinds for the firm were persisting.

At the end of the first quarter of 2021, 69 hedge funds in the database of Insider Monkey held stakes worth $5.2 billion in MercadoLibre, Inc., down from 79 in the previous quarter worth $8.7 billion.

Baron Funds, in its Q1 2021 investor letter, mentioned MercadoLibre, Inc. (NASDAQ: MELI). Here is what the fund has to say in its letter:

“MercadoLibre, Inc., a Latin American e-commerce and FinTech platform, declined in the quarter despite reporting very strong fourth quarter results. MercadoLibre falls into a category of businesses that were net beneficiaries of last year’s lockdowns and reduced consumer gatherings that fell out of favor this quarter as investors looked toward economic reopening and normalization. We are confident in MercadoLibre’s ability to create substantial long-term value as it grows into a regional powerhouse across e-commerce and financial services.”

3. JD.com, Inc. (NASDAQ: JD)

Number of Hedge Fund Holders: 75

JD.com, Inc. is a China-based ecommerce operator and retail infrastructure provider. It is ranked third on our list of 10 undervalued ecommerce stocks with huge upside. According to Steven Fiorillo, a finance expert focused on growth portfolios, the company is the ‘Amazon of China’ and one of the best plays for the expanding Chinese economy. The expert underlined the explosive growth potential of the firm in coming years evidenced by the running of 1,000 warehouses and the recent shattering of the $100 billion revenue mark.

On July 27, investment advisory Mizuho maintained a Buy rating on JD.com, Inc. stock and affirmed that a crackdown in China on online education firms was unlikely to affect other sectors of the market.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in the firm with 51.6 million shares worth more than $4.3 billion.

In its Q1 2021 investor letter, Arisaig Partners, an asset management firm, highlighted a few stocks and JD.com, Inc. (NASDAQ: JD) was one of them. Here is what the fund said:

“Our largest holding as a firm, JD.com, we expect to grow earnings at an annualised rate of 30% over the next five years, implying it will trade on an EV / EBITDA of 7.5x at the end of this period. Is this a growth stock or a value stock? Does anyone care? Do these labels really matter?

For the Asia Fund, with a higher pre-existing allocation to our core FMCG holdings coming into the year, we took advantage of capital market volatility to further concentrate on our highest conviction names. JD.com has been the main destination for our limited reallocations as evidence continues to emerge supporting our thesis that the company has a strong right-to-win in the large and highly fragmented USD1.8th Chinese grocery market. We have also been encouraged by the fact that after years of persistence, the company is beginning to engage with us on ESG issues (we have specifically discussed data protection, climate change and the circular economy). ESG is now being considered at the board level, and specific sustainability reporting should follow in the coming months. Having long displayed a healthy obsession with customer service, we interpret these latest conversations as a sign that JD is beginning to develop a more sophisticated understanding of its impact on all stakeholders.”

2. Shopify Inc. (NYSE: SHOP)

Number of Hedge Fund Holders: 91

Shopify Inc. is placed second on our list of 10 undervalued ecommerce stocks with huge upside. The firm owns and runs an ecommerce platform and is headquartered in China. Eric Sprague, a market expert, underlined a bullish thesis for the company last week, noting that the gross profits for the firm were growing rapidly and the company was poised for revenue growth based on a plan to better host underserved merchants. He also noted how the company was second to Amazon in terms of overall ecommerce market share in the US with 8.6% stake in the internet retail sector.

On July 29, investment advisory Morgan Stanley reiterated an Equal Weight rating on Shopify Inc. stock and raised the price target to $1,500 from $1,400, noting that the firm was slated for growth amid strong positioning and expanding solutions.

Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Shopify Inc. with 1.7 million shares worth more than $1.8 billion.

In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE: SHOP) was one of them. Here is what the fund said:

“While we are pleased with the results of these specific purchases, we made a huge mistake of omission at that time. This mistake will likely be one of the biggest we ever make in our careers. Specifically, we did deep work on Shopify and loved everything about the business qualitatively. Unfortunately, we ultimately found ourselves unable to get comfortable with the numbers.

We built our model up from the key performance indicators (KPIs) that drive revenues. Our last save of the model dated 8/3/2016 looked as follows: (Page 2). These numbers seemed right from everything we understood about the company. While we tend not to rely on sell-side consensus estimates before finishing our own workup of the business, we do give them a look once we feel comfortable with how we have approached our analysis as it is often helpful to get a sense of what the average participant in the market expects the business to do. With Shopify, the sell-side consensus was so far from where our numbers were shaking out, it seemed almost impossible that we were basing our analysis on the same underlying information. Our natural next step was thus to take the sell-side consensus data and work backwards to figure out the implied expectations on each of the key revenue drivers. Here is what the sell-side consensus looked like as at the time: (Page 2).

Shopify’s actual revenues for 2016-2018 ended up being $389m, $673m and $1,073m. In other words, not only were we justifiably far more optimistic than the consensus estimate, but we also were far too conservative in terms of how the company actually performed.

The nature of our job as securities analysts is to take calculated risks, in an uncertain world where the “true” answer is inherently unknowable before the fact. We operate in what many call an “efficient market” and subscribe to the belief that for the most part, markets are generally pretty efficient and it requires differentiated analysis to find a return above what the market can offer. So why did we pass on Shopify despite 1) deeply believing in the qualitative elements of the business; and, 2) seeing a meaningful gap between what we expected and the consensus expected? The answer is unfortunate but simple: we lacked confidence in ourselves. It was the first time we truly experienced such a stark divergence between our expectation and the consensus and the result was the inclination was to pound ourselves over the head with how dumb we must be, rather than the other way around. We also learned that the truly great companies use their strong business advantages, smart management and execution to raise the bar every step along the way. Obviously this is a cycle which cannot continue ad infinitum, but especially in instances where our qualitative work identifies the inherent strengths in the business and the numbers shake out to be quite fair, the consistent “raising of the bar” can be a potent driver for the stock.

Please do not judge us too harshly for our mistake on Shopify, for we have from the very beginning made one commitment above all else to both our clients and ourselves: that we will be better today than we were yesterday, and better tomorrow than we are today. While this mistake was quite costly, it ended up being a key confidence and process builder.”

1. Sea Limited (NYSE: SE)

Number of Hedge Fund Holders: 98

Sea Limited is ranked first on our list of 10 undervalued ecommerce stocks with huge upside. The company operates from Singapore and owns and runs an ecommerce platform named Shopee. According to Nick Cox, a Singapore-based market expert, the stock is one of the best to buy and hold. Cox noted how the company had increased revenue by 101% last year and forecast a 90% growth for this year. He also highlighted how the company controlled a large marketplace that was home to around 614 million, making it one of the most lucrative ecommerce companies in the world. The region, according to the Asia Development Bank, generates 32% of the world’s GDP and is projected to increase this share to over 50% by 2050. The firm also has a large institutional investor base, shielding it from possible volatility associated with other growth offerings.

On August 16, investment advisory Cowen maintained an Outperform rating on Sea Limited stock and raised the price target to $345 from $280, noting that the firm was expanding into South America and had strong growth forecasts despite tough competition.

At the end of the first quarter of 2021, 98 hedge funds in the database of Insider Monkey held stakes worth $10.4 billion in Sea Limited, down from 115 the preceding quarter worth $10.8 billion.

In its Q4 2020 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Sea Limited (NYSE: SE) was one of them. Here is what the fund said:

“Sea Ltd (SE): When I wrote our Q4 2019 letter about Shopee launching a Brazilian business, it seemed very few investors or competitors knew or cared.

A year ago, I wrote: “This is the first test for the ecommerce marketplace outside of its Southeast Asia home base. Will the platform’s fun and addicting features overcome a lack of local knowledge and presence? It’s hard to predict consumer behavior and how accepting users will be to a platform – especially one that’s a foreign culture and 10,000 miles away. The only way to know is to experiment and watch the results closely.

Empirically though, it seems that what consumers find entertaining in Asia, generally translates well to Brazil (and Shopee really is as much an entertainment platform, as an ecommerce one).

For example, just look at the top 10 free apps in Brazil. Two are utility messaging apps, so we’ll ignore those (WhatsApp and

Facebook Messenger). But among the remaining eight apps, they’re all entertainment based and overwhelmingly Asian. Four are from China (Kwai, TikTok, VStatus, TikTok Lite), two from Singapore (Free Fire and Shopee, both Sea Ltd apps), and one from the US (Instagram). The commonality is that all these apps are experts at creating addictive habits, as evidenced by their personalized recommendations, avg usage time, number of logins per day per user, etc.” (LINK)

I distinctly remember having conversations with several Brazilian hedge funds as recently as last summer who were investors in Sea Ltd. When the topic of Brazil came up, many of them didn’t even know Shopee was operating in their own backyard!

Part of this stems from the fact that Shopee tends to enter markets with a bottoms-up approach. Instead of going after urban, high disposable income users first (of which these hedge fund professionals were certainly part of), they tend to initially go after those with only a few hundred or thousand USD of annual disposable income. These users tend to reside outside of major cities, have fewer choices for recreational pastime (thus turning to gaming, short-form videos, or online shopping for entertainment), can’t afford “branded” items and thus are willing to take a chance on cheaper (but still good quality) un-branded goods, and are willing to wait several weeks for it to be shipped from Asian factories.

Anyone who has studied Pinduoduo (Nasdaq: PDD) in China, will recognize this strategy and just how large of a market these consumers can be. As Shopee gains popularity in a market, they will then start to slowly move “up-market”, and cater to more urban and higher-income consumers. They’ve already followed this exact strategy in Southeast Asia, and this is the point they’ve reached in Brazil over the past year.

Shopee made its first big social push last fall, hiring over a dozen influencers with 1M+ followers to promote Shopee’s Black Friday sale (LINK). In addition, they also released their first Brazilian TV commercial last year.

It seems these initiatives are working. Shopee now consistently ranks in Brazil’s top 5 apps (while sister app Free Fire, is also the #1 grossing app). In addition, Shopee also moved Pine Kyaw (LINK), one of their key lieutenants in Vietnam who successfully helped Shopee fight off competitors (Tiki, Lazada, Sendo), to Brazil last May.

For the past year, the company has insisted publicly that the Brazil initiative is still a “test” initiated by the cross-border team. While this may have been true at first, it’s clear this is no longer a “test”, but rather a strategic focus for Shopee and posed to be the next battleground. It’s likely the company has chosen to remain tight-lipped so as to not tip off competitors, while they quietly “position the troops” to prepare for a larger assault.

For example, Shopee is also starting to allow local sellers to join the platform and list their local inventory (LINK). By definition, this is no longer a cross-border initiative (i.e. allowing their Southeast Asian sellers to sell to Brazilian consumers, and then shipping the goods directly from Asia. This is the model Aliexpress follows.).

This is the start of a localized marketplace. And similar to their early days in Southeast Asia, the goal is to reach the “tipping point” at which the marketplace becomes self-sustainable (this concept is discussed in our Q1 2019 letter; LINK). The weapons of choice in reaching critical mass: social media influencers to drive rust & awareness, free shipping & discounts to acquire / convert these new customers, and gamification of shopping to drive continued engagement, habit building, and repeat purchases.

Given all of this, and the strong (but early) traction in the local Shopee Brazil marketplace, investors need to keep an eye on this development. It is the smallest GMV contribution among Shopee’s countries currently, but a large inherent call option in the valuation. Something that so far, seems greatly underappreciated. I suspect at some point in the near future, Shopee’s management team will disclose more on the initiative, and at which point investors will be surprised by how Shopee managed to quietly build one of the largest marketplaces in Brazil.”

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