Meesho

Hey guys!

Long-time no see.

But we are back, and in this series of decoding startups, we’ll explore the making of Meesho and how it reimagined Indian Social Commerce.

Meesho

Meesho is India’s first startup to receive investment from Facebook and one of the three Indian startups to be selected for Y Combinator in 2016. This startup is now part of the coveted unicorn club and emerged as a lucrative platform for micro and women entrepreneurs.

But how it all started?

Humble Beginnings

Meesho started its journey with FashNear, think of a hyper-local platform like Zomato in the fashion industry, started by two young professionals Vidit Aatrey and Sanjeev Barnwal from IIT Delhi, who quit their jobs to venture into the startup world at the age of 24. For Fashnear, they used to visit various cloth merchants, and there they observed that merchants are selling goods through WhatsApp, which marked the beginning of Meesho, a platform that enables small businesses and individuals to start their online stores via social channels such as WhatsApp, Facebook, Instagram.

Pivots – Product Market Fit

Meesho started for small businesses, but since the app was free, six months down the line, it came out that half of the users of Meesho were housewives. The founders started two chains – Meesho for small businesses and Meesho Supply for housewives and other similar individuals looking to create their own identity and make money. Meesho Supply started growing exponentially, which led to the discontinuance of Meesho and the renaming of Meesho Supply as Meesho. And why Meesho, because as the name itself calls out “meri shop” or apni dukaan.

Currently, 90% of the Meesho users are women, and 80% of them are from tier 1 and tier 2 cities.

They broadly cater to the following consumer personas through their platform.

Those who have their stores offline also used WhatsApp to attract only a few regular customers and increase sales to some extent.
Those who are home-based entrepreneurs and only used to sell one single product category in their neighborhood.
Those who are passionate about starting some business but do not have the sufficient capital required.
Those housewives who want to engage in some part-time activity can generate additional income for the family.

The Business Sense – Social selling and Social resellers

On Meesho, social resellers engage in social selling and grow their social store. Before you come and say enough of the word social :P, to put it simply, the platform allows people to resell products using their social networks and offers a specific commission rate on every transaction. See how hard we tried, but we could not escape the word social.

Social selling is one of the buzzwords these days, but what is social selling. Isn’t selling has always been social? I mean, we can’t sell and buy in isolation, right?

Well, that’s true. If you keenly observe your buying behavior, it involves multiple parties. It’s not only you and the seller but also your friends, family, neighbors, social media who possibly influence your buying decisions.

Therefore, the concept of social selling and social resellers is essential.

Social selling is a lead-generation technique where salespeople directly interact with their prospects on social media platforms. Social resellers do not sell their own products or services but instead curate lists and recommend products from existing brands and merchants. And that’s what the Meesho platform facilitates.

Problems – Meesho offers solutions!

No capital investment required: Through the online platform created by Meesho, there is no need for substantial capital investments to rent a shop, and through the social media platforms, the re-sellers can reach a much larger audience.

Zero inventory: Since the re-sellers can place the order with suppliers once they receive the demands from the end buyers in bulk, the cost of maintaining inventories has become zero. This adds a lot of benefits for the small entrepreneurs, improving their working cycle management.

No worries about Logistics: Once the order is placed on the platform, it is the responsibility of Meesho to ensure that the products are delivered in time. Hence, the re-sellers can trace the orders placed, and the transportation takes place smoothly.

Payment issues resolved: This was a concern mainly for suppliers as resellers used to take more than 30 days to pay back. But now, with no inventory to maintain, everything is on a cash basis, and it helps all the stakeholders in the ecosystem function efficiently.

Increased product line: Meesho allows many cross-selling opportunities, thereby increasing the customer base, but having multiple product categories creates lots of value for the resellers.

Meesho: Revenue and Cost

Though the significant revenue stream for Meesho is the commission it charges on every transaction from both resellers and suppliers, it has some other emerging sources of revenue.

Logistics – Meesho handles the delivery of orders to the end consumers and charges delivery fee.

Search results optimization - The way Google optimizes the link that appears on the top, Meesho can also optimise which sellers and products appear on top of search results and add another revenue stream.

Data - And data, like every tech company Meesho, collects all the data starting from product portfolio decision of resellers and delivering goods to end consumers and can capitalize on the same.

Now deep-diving into the cost structure, Meesho has spent 38% on logistics, including transportation and distribution, in FY 2020. The promotional spending, including advertising, is around 33%, and the employee benefits take up 16% of the total fiscal costs for the previous year.

Meesho has increased its advertisement expenditure 4.3 times compared to 3 times increase in employee benefit expenses - the reason being aggressive expansion strategy employed by Meesho and the reach widening to 5000 cities and towns in India.

Though the founders believe it's just the beginning.

Meesho is looking to diversify its business model and adding items like grocery, FMCG, and many more in its portfolio, tapping small and micro business people. This calls for a cut-throat competition against big, established online retail platforms like Amazon, Big Basket, and Flipkart. It will be exciting to see the future of Meesho's working model, one of its kind.