Taiwan’s e-commerce market has been growing steadily in recent years, buoyed by the pandemic-induced boom in online shopping but also due to rising trade ties between Taiwan and Southeast Asia. Per a research report commissioned by Amazon, the B2C segment is forecast estimated to grow 9% annually from 2021 to 2025, reaching NT$683 billion (US$23.2 billion). Companies including Taiwan’s own PChome and Momo as well as Shopee and Rakuten are all keen to tap into related market opportunities.
In recent years, Shopee’s expansion in Taiwan has pressured e-commerce incumbents to look for new avenues of growth. Compared to its local competitors as well as Rakuten, Shopee is more aggressive. It has sought to build a comprehensive ecosystem, firmly centred on its mobile app, to serve the Taiwanese market, and was the first e-commerce provider to set up a network of physical stores in Taiwan.
Because of its heavy fintech investments and international network, Shopee arguably has an edge over the competition when it comes to cross-border payments in e-commerce. However, it faces some regulatory problems in Taiwan because of the loss of its electronic payments license in August 2021. In a nutshell, Taiwan’s regulation of third-party payment providers is onerous due to suspicion of tech companies operating in what regulators still see as the territory of banks and credit card giants. Shopee’s daily transaction size exceeds what regulations permit without a specific license – but regulators also refuse to grant that license to Shopee.
For now, Shopee Taiwan Private Ltd (a separate company) is handling Shopee Pay’s cash flow, but the Financial Supervisory Commission (FSC) has only authorized that arrangement through July 1, 2024. After that date, it is unclear if Shopee will be required to seek a new electronic payments license or face an interruption to its services in Taiwan.
In the meantime, Shopee’s competitors are also seeking to build moats around their ecosystems and are stepping up cross-border business. For instance, in 2019, Rakuten and PChome entered into a strategic alliance under which the Taiwanese firm sells Japanese products from Rakuten Ichiba merchants – that are shipped directly from Japan – on its own e-commerce platform and promotes some related reward programs. PChome can leverage Rakuten’s strong digital payments offerings as part of this partnership.
It remains to be seen if the two companies can leverage Rakuten’s digital bank in Taiwan, Rakuten International Commercial Bank (RICB) which is one of three online lenders formed from tech giants operating in the market. Thus far, RICB has a partnership with PChome’s Pi Wallet. Pi Mobile, the PChome subsidiary that owns Pi Wallet, says that it has more than 1 million users and that more than 350,000 stores accept the payment tool – though most of those are in Taiwan.
Looking ahead, there are likely to be significant synergies for PChome and Rakuten due to the linkages of their respective ecosystems and their respective strengths in Taiwan and Japan. We expect they will continue to cultivate a significant niche market of Taiwanese online shoppers that favour Japanese goods as well as small Japanese businesses that sell to the Taiwan market.
However, Southeast Asia could prove to be a more challenging market for PChome due to the intensely competitive nature of the market and the fact that PChome cannot leverage any logistical advantages like it can back home in Taiwan. With that in mind, in March, the company shut down its Southeast Asia arm PChomeSEA to trim costs following a net loss of NT$53 million in 2022.
