The Bengaluru-based company Meesho pioneered social commerce in India six years ago, providing a source of income for millions of homemakers. But now competition from fellow startups and e-commerce behemoths is growing. The company raised $300 million in April, in part to grow ‘Farmiso’ over the next 18 months. That Softbank-led funding round vaulted Meesho into the unicorn club with a $2.1 billion valuation, three times its value in 2019. This makes Meesho the biggest player in India’s nascent social commerce market, whose worth according to Bain & Company and Sequoia Capital India, could balloon from $1.5 billion-$2 billion today to nearly $70 billion by 2030. Not bad for a company that pioneered the social commerce trend in India when it was founded six years ago by two Indian Institute of Technology, Delhi, alumni, Vidit Aatrey and Sanjeev Barnwal.
This Company is emerging as a dark horse in the cutthroat e-commerce wars in India, which was so far dominated by Amazon and Flipkart. Softbank-backed Meesho has been clocking high order numbers as more shoppers in India get online. While it started as a social commerce platform, a large chunk of Meesho’s sales now comes from direct channels, pitting it against Flipkart and Amazon. It now derives 75 percent of its business directly from customers who come on its platform, while 25 percent comes from resellers. “Meesho is making a play for the price-over-convenience market. It is going after the next billion users in big and small cities, for customers who spend less than Rs 500.”
From a short for meri shop to targets 'tier two and three cities,' and boasts of more than 17 million resellers, 15 million of whom are women, and over 60,000 suppliers. “I come from a middle-class background and we’ve bought from small businesses all our lives. We wanted to bring them online,” says Aatrey. “In India, there are about half a billion people who use WhatsApp regularly and the number of people who are buying from e-commerce platforms is still roughly about 100 million. This means that 80% of India’s population on smartphones is still not transacting online. The opportunity to bring the next e-commerce buyers online is very large,” Aatrey says.
Their products are essentially unbranded and long-tail categories such as fashion, beauty, furnishings, and home appliances. A move into groceries was therefore natural, though the circumstances were far from ideal. “We started with grocery because last year many states stopped non-essential e-commerce and we saw an opportunity to pivot there. In the long term, we want to make sure that we’re in all categories where small businesses operate. The next big category is groceries,” says Aatrey. But the online grocery segment is not easy to crack. Deep-pocketed giants like Amazon, Reliance, Walmart-owned Flipkart, and Big Basket are already eyeing the unorganized retail market. Last year, Facebook invested $5.7 billion in Jio Platforms, the digital services arm of Reliance, which is looking to leverage the social network giant’s reach to expand its JioMart platform. Meanwhile, Flipkart intends to expand its online grocery sales to over 70 cities by this September.
The success and the market's potential have also attracted some marquee investors. Like Softbank, whose investment in Meesho is only its third bet in India’s e-commerce space after the Snap deal and Flipkart. “Video and Sanjeev have evolved an understanding of the Indian consumer and created a platform to serve the next 500 million new online shoppers. They are bringing 50 million-plus SMEs online while empowering women entrepreneurs; the success of Meesho to Facebook India.” Meesho has been successful in providing a model for entrepreneurs and small businesses to accelerate sales beyond metros. Meesho has another secret sauce—creating an easy-to-use platform, just like WhatsApp. “The goal we took internally was that we have to build something as easy as WhatsApp. The first few versions of our app used to look very similar to WhatsApp’s interface because we wanted to bring them to a more familiar place when they come online. I think that’s what worked for us,” says Aatrey. Meesho’s revenue jumped nearly to ₹307 crores in the year ended March 2020 as transactions grew. However, losses also rose to ₹315.4 crores, mainly as logistics and fulfillment costs surged. As economies of scale kick in, the bottom line will look healthier.
Aatrey says the online grocery segment is not easy to crack. Deep-pocketed giants like Amazon, Reliance, Walmart-owned Flipkart, and BigBasket are already eyeing the unorganized retail market. Last year, Facebook invested $5.7 billion in Jio Platforms, the digital services arm of Reliance, which is looking to leverage the social network giant’s reach to expand its JioMart platform. Meanwhile, Flipkart intends to expand its online grocery sales to over 70 cities by this September.
Although he is confident that Meesho will manage the competition. “Amazon and Flipkart
have been there for a long time; even before we entered, and even then we’ve been able to grow faster year on year because I think we solve a different kind of problem. There’s a difference between the kinds of customers we serve, the categories and the products are very different,” he says. Meesho, though, will also be at risk when its users become digitally savvy and start ordering on an Amazon or a Flipkart.” This very day Meesho’s customers need the trust of buying from someone they know in their community. Most of our audience is buying from small businesses,” says Aatrey. “As some of these needs evolve over the years, we’ll also tailor our product. We’re not attached to a particular format.”