MercadoLibre (MELI) has significantly ramped up its competitive efforts in Brazil’s e-commerce market during the second quarter of 2025, directly targeting the low Average Selling Price (ASP) segment where Shopee currently holds a strong position. This aggressive strategy, however, has come at a near-term cost to MELI’s profitability, according to a recent report by Maybank Investment Bank Group (IBG).
In 2Q25, MELI implemented several strategic initiatives to solidify its market dominance. These included a substantial ~40% fee cut for items priced between BRL79 and BRL200, alongside a reduction in the free shipping threshold from BRL79 to BRL19. Coupled with a 47% year-on-year (YoY) increase in sales and marketing spend across Brazil, Mexico, and Argentina, these moves have driven a sharp surge in buyer activity. Brazil alone saw items sold grow by 34% YoY in June, a notable acceleration from approximately 22% in April-May 2025.
Despite the impressive growth in user engagement, these initiatives impacted MELI’s bottom line, with 2Q25 earnings falling 2% YoY and missing street expectations by 14%. This indicates that MELI is currently prioritising user growth and platform engagement over immediate profitability.
MELI’s strategic expansion directly challenges Shopee in its core low-ticket categories. However, Maybank IBG believes that Shopee’s value proposition in Brazil remains highly competitive, particularly in terms of total product cost and seller take-rate. Comparisons indicate that products on Shopee are, on average, 11% cheaper than on MELI, often accompanied by faster delivery timelines. Additionally, Shopee sellers benefit from lower take-rates, especially for low-ticket items, even after factoring in shipping subsidies.
Nonetheless, early indicators from MELI’s results suggest its push into the low-value segment is gaining strong traction, with items sold in Brazil rising 12% month-on-month (MoM) in June, significantly above its typical 2% run rate. While MELI attributes this momentum to improving logistics scale and growing offline-to-online adoption, Maybank IBG suggests this strategic expansion could exert pressure on Shopee’s growth in Brazil.
While MELI expands into Shopee’s core low-value segment, Shopee is simultaneously moving upmarket by onboarding over 800 major brands and increasing investments in logistics and fulfillment. Although Shopee’s Brazil business is currently EBITDA-positive, Maybank IBG would not be surprised to see it return to losses as management continues to prioritise growth over profitability in this competitive landscape.
Despite these concerns, the report estimates that the downside risk for Shopee is limited to around 8% in a worst-case scenario, given that Shopee Brazil accounts for only approximately 9% of Sea Limited’s (Shopee’s parent company) Sum-of-the-Parts (SOTP) valuation. Furthermore, Shopee’s Asia business, along with its fintech and gaming segments, remains in a much stronger position, potentially offsetting any risks emanating from the Brazilian market.
