SE Asia shows high cost of fast growth

With China’s technology giants facing a plethora of struggles, Southeast Asia was supposed to be the hip new market that offered a well of fast-growth companies. That’s coming at a heavy cost.
Earnings reports from e-commerce and gaming provider Sea Ltd as well as food and deliveries giant Grab Holdings Ltd are a stark reminder that years of break-neck speeds have been largely driven by subsidies and marketing. That wasn’t a problem when deep-pocketed venture capitalists like SoftBank Group Corp and Temasek Holdings Pte were pumping money in during their startup phases.
But now they need to walk on their own. And they’re stumbling.
Sea last year posted a 127% increase in sales driven by its Shopee online retail platform. Grab posted a less-impressive 44% rise as it continues to battle pandemic lockdowns. Crucially, though, losses widened for both Singapore-based companies.
Although sales in Sea’s e-commerce division more than doubled in 2021, its cost of revenue for that sector also doubled, as did corporate-level marketing expenditure. The result is a widening of its net loss to more than $2 billion. Grab, which listed on the Nasdaq via a SPAC merger in December, saw its loss expand 30% to $3.6 billion.
Grab’s numbers are dramatic. While the company cut base incentives — the amount paid to merchants and drivers in commissions and fees — it drastically increased the total doled out to suppliers as well as to consumers (in the form of discounts and promotions).

—Bloomberg