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Sea Limited Is Moving Into MercadoLibre's Backyard. Will the Reverse Happen?

By Brian Withers and Brian Stoffel - Mar 27, 2021 at 7:42AM

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The answer is pretty clear.

Until recently, Sea Limited and MercadoLibre (MELI -7.71%) have stuck to serving their home regions. But in the last several years, the Southeast Asian e-commerce and gaming operator started up e-commerce operations in Brazil. That seems to be a bold move. Will the Latin American e-commerce leader respond and put a foothold in Sea Limited's backyard? On a Fool Live episode recorded on March 12, Fool contributors Brian Stoffel and Brian Withers discuss Sea Limited's move and why it's likely that MercadoLibre will stay focused on its home region.

Brian Withers: [Reading a viewer question] Sea Limited is actively expanding their markets into MercadoLibre's territory in South America. Is MercadoLibre on the offense in Southeast Asia too? If so, how are they fairing in Sea Limited's backyard?

Just to be clear, Sea Limited started gaming operations in Brazil, and that's a very small portion of their revenue. What Sea Limited likes to do is get in for a gaming business first where they don't have to have a physical footprint in the country. The idea is, they're going to learn a little bit about the marketplace, learn a little bit about doing business there, and then they can expand into e-commerce operations over time. I am pretty sure that Sea Limited has e-commerce operations in Brazil. You know who else has e-commerce operations in Brazil? Yeah, big Amazon. They've been there, I want to say at least two decades. Amazon's been in MercadoLibre's backyard for a long time.

Back to Matt's question, is MercadoLibre also playing in Southeast Asia? No, and I don't think they will. They're very focused on their region. There's plenty of growth. There's three countries in MercadoLibre, Brazil, Argentina, and Mexico that make up 95 percent of the revenue. They service 18 countries in the region and only three make up 90 plus percent of the revenue. There's plenty of room for them to continue to expand in South America. Is there anything you want to add to that, Brian?

Brian Stoffel: No, I think you covered it. I mean, I think if they move into gaming in Brazil, that's fine. What you've got to remember with e-commerce is that e-commerce is not tech, e-commerce is fulfillment. I want to say that again because there's so many things. I'm a SaaS investor, software as a SaaS investor, where you're sending out code. That's what's going on, you're sending out code. Look, e-commerce might be one of the most real-world businesses that are big growth businesses because it's about delivery trucks, it's about ships, it's about planes, it's about buildings where you can get things shipped off to the next good place. It's not easy to move into new territories with stuff like that.

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Stocks Mentioned

Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
MELI
$714.61 (-7.71%) $-59.69
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$2,072.50 (-3.66%) $-78.64
Sea Limited Stock Quote
Sea Limited
SE
$73.81 (-4.45%) $-3.44

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