How Shopee Overtook Lazada in the Philippines: A Deep Dive into the E-Commerce Battle
The Philippine e-commerce market has been a fascinating space to watch over the past decade. While Lazada was the early pioneer, Shopee, despite entering later, quickly rose to dominate the local scene. But what really happened behind the scenes? Why did Shopee manage to overtake Lazada, and what challenges do both platforms face today? Let’s unpack this story with some inside insights.
Lazada’s Early Advantage and Growing Pains
Lazada started operations in the Philippines in 2012, making it the first big e-commerce platform to enter the market. Backed by Alibaba Group since 2016, Lazada had strong technological and logistical support from one of the world’s largest e-commerce ecosystems. This helped it build a large product assortment and attract sellers and buyers early on.
However, Lazada’s logistics system started showing cracks over time—especially for sellers.
The Logistics Bottleneck
A significant challenge for Lazada was its logistics, particularly the first-mile delivery process. Sellers with fewer than 10 orders per day had to personally drop off their packages at specific centers, which posed a big obstacle for many small to medium-sized sellers who found it difficult to reach that threshold.
Also, Lazada’s first-mile logistics heavily relied on LEX (Lazada Express) for pickups and deliveries. While LEX worked well at times, many sellers, including those with expensive or large items, reported lost parcels, delayed deliveries, and inconsistent service quality. For large or bulky products, sellers often had to re-ship items via other courier services like J&T or Flash, which caused delays of 1-2 days or more.
This complicated, seller-unfriendly logistics process discouraged many local entrepreneurs. Lazada has yet to implement a fully individual pickup system, like what Shopee and TikTok Shop use, where couriers pick up packages directly from sellers regardless of volume.
Shopee’s Winning Strategy: Mobile-First and Seller-Centric
Shopee entered the Philippine market in 2015, three years after Lazada, but quickly found its footing by understanding what Filipino buyers and sellers really wanted.
What Shopee Did Differently
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Mobile-first experience: Shopee’s app was optimized for mobile devices and low internet bandwidth, which matched the Filipino online behavior perfectly.
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Aggressive promotions: Huge sales, free shipping, and flash deals made Shopee the exciting place to shop.
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Integrated logistics: Shopee’s all-pickup system means couriers come straight to sellers’ doorsteps, solving the first-mile headache.
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Seller empowerment: Through programs like Shopee University, the platform trained and onboarded thousands of small sellers.
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Cash on Delivery (COD): The preferred payment method for many Filipinos was seamless on Shopee, building buyer trust.
Because of these smart moves, Shopee overtook Lazada in 2018-2019 in terms of app downloads, active users, and gross merchandise value in the Philippines.
Current Challenges: Shopee, Lazada, and New Entrants
While Shopee leads the market, it’s not without problems.
Shopee and TikTok’s ITA Policy
Both Shopee and TikTok Shop now require sellers and forcing to comply with the Importer of Record and Tax Authority (ITA) requirements on a selected product, which many small to medium sellers struggle with. This has led to many products being banned or deleted, causing frustration and income loss for sellers.
What does this mean for Shopee? It means you’re giving Lazada and TEMU the opportunity to gain an advantage. For Shopee and TikTok, the best way to address the issue is to stay compliant with government regulations. As a seller, that’s what matters most—focus on knowing what needs improvement, without having to spell it out here.
Also, Shopee’s seller fees have increased to about 6%, higher than Lazada and TikTok, which is a big shift from their earlier, more competitive pricing.
Lazada’s Logistics Still Need Improvement
Lazada’s drop-off system and LEX’s inconsistent service remain problematic. Sellers still face hassles with large box shipments, delays, and occasional lost parcels. Until Lazada adopts a more flexible, individual pickup system like Shopee’s, it risks losing more sellers.
The Temu Disruption: A New Challenger
Adding to the competition is Temu, a Chinese-based e-commerce platform launched in the Philippines in 2023. Temu offers extremely low prices (promos up to 50% off), sourced directly from manufacturers and large suppliers in China.
This aggressive pricing model has:
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Put pressure on local online and mall sellers, who struggle to compete.
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Caused concerns over the economic impact on Philippine businesses.
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Created a taxation challenge, as cross-border sellers often benefit from weaker tax enforcement, affecting government revenue.
Many believe the government should investigate Temu’s impact and consider policies to protect local industries.
Final Thoughts
Shopee’s mobile-first design, seller-friendly logistics, and marketing savvy helped it leapfrog Lazada in the Philippines within just a few years. Lazada’s heavy reliance on drop-off logistics and LEX’s inconsistent service gave Shopee a crucial advantage.
However, Shopee’s recent policy changes around seller compliance and fees show the evolving challenges of sustaining leadership.
Meanwhile, Temu’s entrance is shaking things up, highlighting the need for regulatory oversight to protect local sellers and the economy.
For Lazada to regain momentum, adopting flexible logistics like Shopee’s individual pickup and addressing seller pain points is critical.