SINGAPORE: The rapid expansion of Sea Ltd’s Shopee e-commerce platform in Brazil has emerged as the latest threat for the country’s retailers, posing a risk to any recovery in their battered shares.

       Retailers Americanas SA, Magazine Luiza SA and Via SA have all extended losses this year after slumping at least 58% in 2021, while an MSCI index for consumer-discretionary company shares trades near the lowest since 2004.

       The weakness has been driven by tepid economic growth prospects in Brazil, anticipation of a slowdown in earnings and mounting fears over the competitive landscape.

       Investors have been particularly interested in Shopee, which started its operations in Brazil in 2019, focused on low-ticket items. Its e-commerce market share in the country is estimated by Goldman Sachs Group Inc to be in the high single-digits.

       Competition from the South-East Asia giant became “a key topic” last year, Goldman analysts led by Irma Sgarz wrote in a report dated Jan 12, adding that the firm’s market share could rise to 20% by 2025.

       “We expect it to remain relevant in 2022 as it continues to build out its presence and service offering.”

       Shopee’s local operations in Latin America have been gaining traction and the company was mentioned as a top-three e-commerce purchase destination by 37% of consumers last year, up from 6% in 2020, Morgan Stanley analysts including Mark Goodridge and Andrew Ruben said, citing data from the bank’s Alphawise survey.

       According to Morgan Stanley, the rise of Shopee adds to the risks for the margins of local retailers at a moment when these companies are already struggling with rising input costs.

       MercadoLibre Inc the Buenos Aires-based e-commerce giant that counts Brazil as its largest market, has lost about US$43bil (RM180bil) of its market value since peaking in January 2021, also hurt by a rotation away from high-growth, tech stocks amid rising rates.

       Magazine Luiza, Via and Shopee declined to comment, while Americanas and MercadoLibre didn’t immediately reply to a message seeking comments.

       To be sure, Shopee isn’t the only international player that has been trying to lure Brazilian consumers.

       Amazon.com Inc entered Brazil in 2012 and has been scaling up its operations since then, opening over 10 distribution centres.

       At a first, the Seattle-based giant’s expansion was enough to spark a selloff in the sector, but investor concern has somewhat eased over time. — Bloomberg