For a company that raised US$300 million in its latest funding round, from Japanese conglomerate SoftBank no less, Meesho’s numbers aren’t what one would expect them to be. According to data from Indian research from Tracxn, the social commerce company reported operating revenue of Rs 80 crore (US$11 million) and a loss of Rs 100.42 crore (US$13.5 million) for the year ended March 2019. While its topline increased nearly 4X to Rs 307 crore (US$41 million), its losses also shot up more than 3X to Rs 315.4 crore (US$42 million) for the year ended March 2020.
Relative to major e-commerce platforms such as Flipkart and Amazon, which have annual toplines in billions of dollars, these numbers seem like rounding errors. But it is not just in the absolute numbers that Meesho is a laggard. The high losses relative to the topline demonstrate that the company has not witnessed any economies of scale yet.
Which is, again, odd, if you look into what Meesho does.
Founded in 2015 by Vidit Aatrey and Sanjeev Barnwal, Meesho offers a fashion-focussed marketplace—specifically, women’s clothing and accessories. This choice of products is deliberate on not one but two counts.
One, the company doesn’t target buyers directly. Instead, it attempts to empanel women entrepreneurs—typically homemakers looking to supplement their family income—as vendors/resellers on its platform. These resellers find customers amongst their social groups.
Long before the advent of fashion boutiques and online sales, a lot of Indian homemakers were micro-entrepreneurs, offering tailoring services and selling apparel from their homes. Typically from the middle- or lower-middle class, they weren’t afforded opportunities to go out and work. Curating, embellishing, and selling clothes in their neighbourhood provided both a source of income and a path to self-respect. The likes of Meesho tapped into this dynamic, upgrading it to the Internet era.
With Meesho, women entrepreneurs could access and resell a wide inventory of fashion products provided by empanelled suppliers through social channels such as Facebook and WhatsApp.
Second, the business model. The micro-entrepreneurs on the platform select products from the Meesho catalogue and socialise them within their networks. Hence, social commerce. The price is also left to their discretion—they can add any margin they can manage on top of the price payable to the original supplier.