Technology: E-commerce Players Raise Commissions; A Potential Positive Implications for GOTO (OVERWEIGHIT)

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Technology

E-commerce Players Raise Commissions; A Potential Positive Implications for GOTO

Shopee, TTS/Tokped, and Lazada are raising seller fees by 105-154/65/ 154bps in Sep24, with new rates expected to enhance market dynamics.
The fee hikes may increase merchant costs, but the additional revenue can be reinvested in technology enhancements and driving more sales.
Capitalizing on market trends, GOTO is well-positioned as the frontrunner to be TikTok’s key partner; we reiterate Buy rating with TP of Rp90.

E-commerce platforms to increase seller fees starting Sep24

All three e-commerce players namely Shopee, TTS/Tokped & Lazada will increase merchant fees in Sep24 through hiking both the lower and upper end of their price range. Previously, Shopee and Lazada last adjusted their fees back in Dec23, while TTS/Tokped last made fee increases in May24.

TTS/Tokped: Marketplace fees will increase to 1.0%-8.0% after applying a 20% discount on the upper limit (prev. 1.0%-6.5%, effective since May24). This new fee range will apply to all products starting Sep.16th. Additionally, commission fees for Mall stores will differ from those for Marketplace sellers from Sep24, (prev. at same fee).
Shopee: The fee range for Star/Star+ Sellers vary by product category, starting at 4.25% for D products (prev. 4.0%) and increasing to 8.0% for A products (mostly household items) after a 20% disc. on the original 10% fee (prev. 6.50%, after disc. on 8.13%). Similarly, Non-Star Sellers' fees will rise to 4.25%-8.0% after the 20% disc. (previously 3.5%-7.5%).
Lazada: Lazada will increase total fees to range of 4.25%-8.0% (prev. 3.5%-6.0%), aligning with the new rates on TTS/Tokped and Shopee.

The offered discounts may be temporary, implying potential further hikes.

Unified fee increases signals positive market dynamics and GTV growth

The simultaneous fee increases suggest a positive dynamic among the platforms. The fee hikes will indeed increase costs for merchants, but the platforms are expected to offset this burden by offering broader market access, improved logistics and analytics to boost merchant sales. Hence, we believe the ecommerce space is still poised for growth, inline with the projections outlined in Google-Temasek 2023 research. The steady fee escalations mean players are solidifying their market position. This stability makes it less likely for a new player, such as PDD-Temu, to enter the market, particularly given PDD's guidance for lower growth.

GOTO’s strategy in sync with market dynamics

For TTS/Tokped, this marks the 3^rd fee increase since 2023, raising fees by ~108bps on aggregate. These adjustments align with GOTO's guidance, to achieve its estimated fee/EBITDA target of USD40mn-Rp610bn in our forecast for FY24F (Rp284bn achieved in 1H24). We also anticipate that TikTok will continue to outsource fintech services and is likely to utilize ODS for its Local Life services. Data.AI suggests that GOTO maintains its strong position in ODS while making significant inroads into the fintech space with GOPAY. This combination makes it increasingly plausible that GOTO will become one of TikTok's primary service providers. We reaffirm our Buy rating on GOTO with TP of Rp90 for its attractive, diversified growth.

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