Today, Meesho is valued at over $4.9 billion backed by several high-profile investors. This social e-commerce startup  boasts 100M+ App downloads and 65M+ active customers.

This is a detailed case study of:

  • How Meesho got started
  • How it works for customers, resellers and suppliers
  • What Meesho's addressable market looks like
  • How does Meesho's stats compare to it's competitors
  • Meesho's revenue and spending numbers
  • How much funds has Meesho raised
  • How Meesho markets to its potential users
  • Business challenges Meesho faces
  • How Meesho plans to grow in the future

How Meesho Got Started

Meesho was founded by batchmates and IIT Delhi graduates, Vidit Aatrey and Sanjeev Barnwal in 2015, after quitting their Job at InMobi.

The duo started a startup named Fashnear, a hyper-local shopping app for fashion curating inventory from nearby fashion stores. Prospects could choose three items from nearby fashion shops/boutiques and a delivery person would fulfil that order. The customer could pick the ones they want, pay for them, and return the rest.

Yet, Fashnear didn't work out well because:

  • The founders failed to cope up with the demand for instant delivery.
  • Low-profit margins as Fashnear sold unbranded items.

This failure left founders with market insights from their interactions with shop owners.

Fashnear pivoted to enable small, unorganised sellers to open their online shops. The duo named their new company "Meesho".

The name was inspired by “Meri E-Shop”, translated to "my online shop" with an idea to serve as a shop for everyone in the country.


How does Meesho work?

Meesho is a social eCommerce startup helping customers to get access to products ranging from apparel, electronics and jewellery at a cheaper price. Over 70% of customers come from Tier 2/3+ cities. These customers are generally price conscious by nature yet willing to buy quality products.

"My first order from Meesho was nice and was cheaper than e-commerce Websites like Flipkart and Amazon" ~ says Kusum, a frequent Meesho's customer.

The products listed by the sellers or suppliers are being pushed by resellers, which helps the Meesho model to scale rapidly.

Consider the reseller as affiliate marketer that helps suppliers find buyers for their products while charging a commission over the top. These resellers are usually housewives or fashion influencers who operate WhatsApp and Facebook groups, with hundreds of potential buyers looking for something to buy.

These resellers already have the trust and loyalty of their group members which they utilise to acquire customers.

So, how does Meesho fit in this seller-reseller model?

Earlier, the reseller had to deal with things like the packaging of a product, delivery, payments etc., once they order something from the seller.

Meesho made this whole process of product distribution easier for the reseller.

Now, the reseller can easily suggest products to her audience from the curated digital catalogue on the app. Meaning, the best reseller won't run out of items to sell.

Once a buyer shows an interest in a specific product, the reseller just needs to enter the buyer address & add his/her margin and the product would be shipped by the Meesho logistic partners from the seller's place.

The majority of Meesho resellers are Indian housewives who were looking to earn money or start their own business but couldn't do so before because of a lack of capital requirements. With Meesho, these housewives get all the necessary tools, resources and guidance to start their own online business from the comfort of their homes.


Meesho's Market Overview

Social commerce is effectively is a subgroup of e-commerce that take advantage of social networks, & digital media to assist in buying and selling various products & services.

According to a report by management consulting firm Bain & Company, Indian social commerce in the market is expected to reach $16-20 billion by 2025 and $60-70 billion by 2030 in size. Whereas, the share of social commerce in India’s e-commerce market is expected to experience a compound annual growth rate (CAGR) of 65% between 2020-25.

In just a few years, social commerce has made E-commerce accessible to the majority of age & income groups across the country. Let's understand what makes it so attractive among customers:

Trust & Personalization: Customers from tier-2 & beyond are not that comfortable shopping online because of complicated UI, fear of a defective product, and the frustration of not having a human connection to solve queries.

Even The Bain & Company report states that 75% of purchases are being made from a known entity. Social e-commerce helps to induce this trust factor to smoothen the shopping experience of buyer's from tier 2,3 cities & towns.

The resellers or affiliates curate products that fit the taste and price preferences of their social resellers. The customer sees a highly personalised product, unlike traditional e-commerce where they go through overwhelming listings to discover relevant products.

Cost-effective: Prices are generally lower than traditional e-commerce because social reselling apps work on the asset-light model i.e No fixed costs such as space, manpower or dead inventory. Savings from these zero overheads can be easily passed on to the end customer.

The social first model is also a good alternative for small & medium size unorganised businesses for getting an online presence.

Getting visibility on major E-commerce platforms can be difficult for a small seller. In fact, The Bain & Company report states that small sellers make up 85% of all social commerce players, enabling them to reach consumers in other parts of the country.

The success of e-commerce after the Covid-19 outbreak has removed any investor concerns about the social commerce sector's potential.

One of the most tempting elements for investors in this sector is the lower cost of customer acquisition. Since the social commerce model uses existing social media platforms that already have a significant user base that brings down this cost significantly.

As of July 2021, social e-commerce startups have raised $554 million in funding, This is a 7x increase from the previous year and the highest ever since 2015.

Apart from funding, the sector has seen a couple of acquisitions too in 2021. This includes the Acquisition of video shopping app Simsim by Google & InMobi Glance acquiring Shop101 to launch its own influencer-led commerce platform.


What makes Meesho different from its peers?

Meesho was one of the first players to enter the Indian social e-commerce space, but in the last couple of years, we've seen startups like Bulbul, Simsim, Citymall, Glowroad capture a good share in the market.

Recently, Flipkart also launched its social e-commerce platform Shopsy app to empower aspiring local entrepreneurs to set up their own online shop.

Moreover, Shopsy has a zero-commission model (similar to Meesho) making a no brainer for the suppliers in Tier-2 and beyond to sell their products on the platform.

So, what's Meesho secret sauce to tackle heavy competition in the market?

It's Meesho Logistics Network. Let's understand this together.

As we know, Meesho primarily targets tier-2/3+ buyers, which usually orders cheaper products. Which is why Meesho's average order value (AOV) is Rs 400-500.

That means Meesho is catching up with its competitors (& large e-commerce platforms) on large daily order volumes offering their logistic partners high utilisation.

With this, Meesho is able to reduce its logistic cost and save money at the same time. These savings get passed on to suppliers making the platform a "supplier-friendly" place to sell.

This kind of unique proposition is a bit challenging for the competitors to crack within a short span of time.


Meesho's Revenue Model & Financials

Meesho revenue model is somewhat similar to any other social E-commerce business. Earlier, their primary source of revenue was commission but from August, the platform stopped charging any commission becoming among few marketplaces to offer 0% commission.

At present, The major source of income for Meesho is through Ads & Rank push. Just like Amazon & Flipkart, Meesho also allows its suppliers to run ads and showcase their products to a wider set of users. The best part is, seller would only be charged only if a customer clicks on its ad.

The other 2 Potential sources for Meesho to earns its revenue from:

  • Selling of data: Meesho holds a good amount of user data a part of which it might sells to its partner companies. These partner companies can use this data to further understand user needs & motivation to grow their business. However, Meesho claims to keep the sensitive data of its user safe with them.
  • Logistics: Meesho have tied up with multiple Logistics Partners for delivery fulfilment. Once a product is delivered, Meesho has potential to earn a small share of delivery charges passing on the rest to its delivery partners.

Meesho recorded a revenue of Rs 341.6 Cr for FY20, seeing a 4X surge from Rs 84 Cr during FY19. Around 90% of the company’s revenue came through its operations in FY2020, while the rest 10% from other sources.

In terms of the spending, its expenses grew 3.5X to Rs 657 Cr, leading to a hefty loss of Rs 315.4 Cr. The company spent about 38% of its income on logistics, as it's expanded to 700 towns and cities in India.


Meesho's Funding

At present Meesho is valued $4.9 billion, Thanks to its growing number of high-profile investors backing the social commerce startup experiencing hyper-growth despite the setback during a pandemic.

Meesho has already raised three rounds of funding in 2021. In April, it raised $300 million in a round led by SoftBank Vision Fund 2 followed by a $570 million funding round led by Fidelity and B Capital in September'21.

Recently, it closed a $1 billion funding round that will slingshot its valuation to $8 billion. Meesho has raised a total of $1.1B in funding over 11 rounds.


Meesho's Distribution Strategy

Meesho began with the ethnic fashion category, targeting housewives and women who were running their boutiques or were already reselling on WhatsApp. So, the platform collated buyer & seller WhatsApp/Facebook groups for them.

It also onboarded micro-influencers to pitch the app to their dedicated audience in their respective areas.

Once the startup achieved product-market fit, Meesho scaled its market efforts both on TVC & digital mediums.

It started partnering with popular Youtube influencers from the Beauty and Lifestyle niche to promote the repository of products available that spread over 200 different categories. These influencers combined their videos by displaying products & exhibiting ease-of-use of the Meesho app to earn money by reselling products.

Source: https://youtu.be/PvbJM14hAx0 | https://youtu.be/RDwrehffEvk | https://youtu.be/udryk9TNZEM

Being a majority of its sellers and buyers are women, the startup communication usually centres around women empowerment & how Meesho helps women to achieve financial freedom.

Even its first TVC was focused on an unstated need of a woman i.e her own identity. The ad celebrated the unstoppable spirit of women who overcome both the social and economic stigma from being a homemaker to becoming a Meesho Entrepreneur.

While promoting its flagship festival sale event held in October, Meesho leveraged content creators from platforms such as Sharechat, Moj, MX TakaTak etc. and RVCJ Media for moment and meme marketing.


Business Challenges with Meesho

No doubt, Meesho is growing extremely well with its reseller model yet replicating the transaction of unbranded goods from offline to online comes with its own execution challenges.

  • High distribution cost: The distribution costs hits hard on Meesho financials. Acquiring & retaining the users who are price conscious needs constant burning of cash. Furthermore, Meesho distribution climbed even higher than usual during COVID. The lockdown measures have seen consumers turning to fulfil essential items for home delivery which hampered the Meesho growth. Although, the Meesho team handles this situation well by selling masks, personal care, sanitisers, and grocery to the end-user.
  • Inconsistent Product quality: During our research, multiple Meesho buyers mentioned degrading the quality of merchandise being delivered to them.
"At times, the ordered product with 6 months warranty gets damaged within 10 days of delivery" Said, Pratishtha, an avid user of Meesho.

Poor product quality results in a high number of returns and suppliers need to         need to pay some penalty to Meesho. A Meesho supplier named Ajit Kumar               spoke about high penalties charged by the platform on order cancellation and           returns. A problem like this might be difficult for Meesho to cope with.

  • Late delivery & slow customer service: Multiple customers told us that sometimes the products are not delivered on time. Once the product is delayed, customers gravitate towards "customer service" to know the status of their order.
"Customer service takes at least 1 week to resolve the issue with my order", mentions Somya, a Loyal user of the platform.

The customer support team is key to building trust and delivering a great     customer experience. However, If the delivery/order related problem ends up           needing weeks to resolve (especially for Tier-2 & beyond), you can only imagine       the frustration level of these consumers.


Meesho's Growth Plans

Founder Vidit Aatrey said in an interview acknowledged the plan to triple the tech and product team over the next 12 to 18 months. From a broader perspective, Meesho eyes to get 100 million monthly transacting customers on its platform by the end of 2020.

Meesho has also started accepting orders directly from consumers, a new entrant to the e-commerce club in certain categories. The resellers on Meesho are undoubtedly unhappy with the company’s decision as it hurts their ability to earn money.

According to The-Ken:

"Meesho plans to revamp the app to make it easier for direct customers to shop, according to the executives. It’s also planning to experiment with influencer-led video streaming and affiliate marketing."

Besides, the platform expanded into grocery vertical Farmiso (an attempt to drive business during the lockdown), which it plans to grow aggressively in the coming year.


Wrapping up

Meesho began with a focus on social commerce, but its direct-to-consumer share has already been increasing, pitting it against big players such as Flipkart and Amazon. It now gets 75% of its revenue directly from its customers, while the remaining 25% comes from resellers.

Buying directly from the sellers would help customers to get the same product cheaper as compared to a reseller, enhancing customer experience. It would be interesting to see how Meesho tries to improve its relationship with the resellers who are the backbone of its whole social commerce model.