Meesho is social e-commerce platform that provides a marketplace for suppliers, resellers and customers. Now you might be thinking what’s social e-commerce ? Social e-commerce is the buying and selling of goods and services directly within social media platforms. Example: Selling stuff using Facebook or Instagram. Now we will talk about this reseller business in depth in this blog post and also about how does meesho make money.
Now guys I hope you would agree with me that e-commerce is really a cut-throat sector. Its really difficult for new e-commerce startups to survive in front of giants like Amazon, Flipkart (which is now a Walmart owned company), JioMart etc. But the surprising fact is Meesho has started in 2015 and survived for more than 9 years and has managed to become profitable.
In this blog post we will find out how does Meesho make money ? What strategies Meesho adopted to fight big e-commerce giants ? And what are Meesho’s future plans ?
On 7th August 2023, Meesho CEO Vidit Aatrey, took to his twitter account and announced that Meesho had turned profitable profitable for the first time on a consolidated profit after tax (PAT) level in July.
Table Of Contents
2. Meesho - Vission and Mission
3. How does Meesho Work? - Decoding "Social Commerce"
3.1 Is Meesho still a Social Commerce App? - The Dark Side
4. What's Meesho's target Market?
5. How Does Meesho Make Money ?
5.1 1. Shipping Fees/Logistics Fees
5.2 2. Advertisements & Promotion
5.3 3. Charging Penalties
6. Meesho Future Plans
7. Meesho Funding Details and Its Investors
About Meesho and How It all Started ?
Meesho was started by IIT Delhi batchmates Vidit Atrei and Sanjeev Bernwal in December of 2015. Vidit and Sanjeev were batchmates as well as hostel mates at IIT Delhi before going their separate ways after graduating.
While Vidit worked at ITC and InMobi. Sanjeev worked with Sony in Japan for three years.
A phone call between the two changed their destiny and they would go on to start Meesho.
Snajeev was planning to join a startup in Bengaluru and on phone call asked for Vidit’s opinion about joining the stratup ?
Vidit replied, “Why not we start something”, and within a week both Vidit and Sanjeev decided to quit their jobs and this was how eesho was born.
Today the two are among India’s top founders and active angel investors.
Meesho - Vission and Mission
Meesho was born like with a very simple vision which is to bring India’s small businesses online. India is primarily a small business economy almost 85 percent of all retail in India is small business led and before that all of online e-commerce was primarily branded commerce so Meesho founders knew that they have a large opportunity out there a very hard problem that no one is solving.
How does Meesho Work? - Decoding "Social Commerce"
You might have heard this a lot everywhere -“Meesho is Social e-Commerce Company” BUT what exactly is social e-commerce? Lets find it out.
As compared to other e-commerce platforms like Amazon and Flipkart, where sellers directly sell via Amazon’s platform to customers. Meesho is quite different. Meesho’s products may or may not be directly sold to the customers. For example, say you want to sell some goods to make a living out of it, say watches, then what you would do?
Answer is simple, you would go to a wholesale shop buy some watches at bulk at cheap prices, and then sell them at higher price to your customers.
Similarly Meesho has a lot of small businesses that are mostly manufacturers or whole sale sellers selling products at cheap prices. But here’s the different part, unlike offline world where you need to first items in bulk from wholesaler and then sell to customers, with Meesho as a reseller you don’t have to invest anything.
What you need to do you just register yourself as Meesho reseller creating a reseller account. Then you can promote the the products on Meesho via whatsapp, facebook and other social platforms to get customers.
Say a product on Meesho is being sold for Rs. 100 you can add your own margin of Rs. 50 and sell it for Rs. 150 making Rs. 50 as profit. The best part is that you don’t have to take our delivering the product to the customer. Meesho will take care delivering the product to the customer and Meesho doesn’t add there name anywhere on packaging or even Bill so that your customer don’t come to know that you are actually not a direct seller.
So you can think of it as Meesho just simplified the concept of dropshipping.
Is Meesho still a Social Commerce App? - The Dark Side
Meesho has grown very famous over the last few years. Now almost everyone knows what Meesho is. This means that the resellers which were reselling with Meesho now won’t get enough customers to sell and even if they got any customer and if he/she would come to know that the product could be bought directly from Meesho then its a shameful situation for resellers as they mostly promote products to their family and friends.
According to enTrackr various resellers have faced this problem after Meesho became quite famous.
As of 2023 Meesho now gets more than 80% of orders directly from the the customers.
What's Meesho's target Market?
Meesho’s target market are the customers who don’t have high Average Order Value, i.e customers who spend even less than 500 bucks on shopping, AND this is the category which almost 90% of Indian population consists of.
Meesho targets customers in both big and small cities, who don’t spend much and don’t buy branded items. Thus full filling a major market gap.
So, Meesho focuses on, “PRICE OVER CONVENIENCE AND BRAND. Meesho wants to sell products at affordable prices to a large Indian population.
On the other side or the seller side who sell their products on Meesho. Meesho focuses on small businesses of India who sell unbranded stuff at affordable prices. Let me tell you guys that these small businesses make up around 80% of our economy, the “SMALL AND MEDIUM ENTERPRISES (SMEs)” are the backbone of Indian Economy. So Meesho has done a great job here by uplifting the SMEs.
Unlike Amazon and Flipkart, Meesho don’t even charge a commission from its sellers then how does Meesho make money ? Lets find it out, just keep scrolling…
How Does Meesho Make Money ?
Now we will finally discuss how does Meesho make money ? First of all – “LET ME MAKE IT VERY CLEAR” that MEESHO unlike other e-commerce giants DOESN’T EARN EVEN a Single dollar with the following ways mention below:
- No Commissions From Sellers: Unlike other e-commerce players like Amazon and Flipkart who charge commission as high as 30% on the products being sold. Meesho is just opposite, it doesn’t charge any commission on the products sold by sellers on its platform. Reason: Meesho’s mission to empower small businesses in India, charging them commissions would decrease their profits, and other thing is that if Meesho would charge commissions on products then sellers would gradually increase the prices which again goes against Meesho purpose of providing affordable products to its buyers.
- No penalty for order cancellation: Meesho doesn’t charge its buyers order cancellation fees, this helps Meesho to gain trust and win hearts of customers who have less purchasing capacity.
No listing fees: Meesho allow its sellers to list their products on Meesho’s marketplace for free. They do not charge any listing fees from the sellers.
It’s quite suprising right! Meesho is just so different as an e-commerce company. Now lets checkout how does Meesho make money ? What are its actual revenue streams
Exploring Meesho Revenue Streams - How does meesho make money ?
Meesho makes money via following ways:
1. Shipping Fees/Logistics Fees
Meesho earns majority, around 80% of its revenue (source: Economic Times) by providing logistics-related services. It charges shipment fees from both sellers and buyers.
The shippment fees is based on conditions like:
- Weight of the package
- Height and Width, i.e. dimension of the package.
- Distance of delivery area
2. Advertisements & Promotion:
Another ways via which Meesho earns makes money is by allowing sellers to run ADS on its platform which helps to boost visibility and increase their sale. The advertising expenses are deducted weekly from the seller payouts.
3. Charging Penalties:
The company charges the seller a shipping fee for returned products. Additionally, the company penalizes sellers who choose “Next Day Delivery” but fail to deliver on time by 2.5% of the order value per day.
The company also charges a number of other seller penalties if the seller violates the terms of its supplier agreement.
So, Meesho is buliding logistics services for both big and small cities. Especially for people living in tier-2, tier-3 and even in tier-4 cities. This really appreciable that Meesho is trying to reach the people in small cities and focusing to provide services to people with less purchasing power. This has helped many small Indian businesses and customers.
Meesho Future Plans
Now as we have discussed how does Meesho make money. Lets quickly checkout some of Meesho’s future plans.
1. Meesho Plans to Add More than 10 Million small Businesses:
Meesho is very focused and ambitious about its vision and mission of empowering small businesses in India. It plans to add more than 10 million customers in various categories by 2027. (source: Times Of India).
2. You May See Meeesho IPO in 2024 or in the Early 2025
Meesho’s Chief Financial officer Dhiresh Bansal has said Meesho would come out its IPO in 2024 or 2025. (source: Economic Times)
3. No More Cash Burn
Meesho has decided to burn no more cash. This decision was decided after the Funding Winter hit in India. Rather Meesho now aims to be profitable and grow sustainably maintaining a healthy balance sheet.
Meesho Funding Details and Its Investors
Meesho has raised 11 funding rounds and has more than 35 investors which includes big names like Fidelity, Softbank, Prosus, B Capital Group, Sequoia India and Meta(Facebook).
Investopad, Rajul Garg, Venture Highway AND Y Combinator were its initial investors. Some major funding rounds were:
| Date | Round | Amount | Investors |
|---|---|---|---|
| Mar 1, 2016 | Angel Round | $180K | Investopad, Rajul Garg, Venture Highway |
| Aug 18, 2016 | Seed Round | $120K | Y Combinator |
| Oct 12, 2017 | Series A | $3.4M | Elevation Capital |
| Jun 7, 2018 | Series B | $11.5M | Sequoia Capital India |
| Nov 5, 2018 | Series C | $50M | DST Partners, RPS Ventures, Shunwei Capital |
| Jun 14, 2019 | Corporate Round | $25M | Meta (FaceBook) |
| Aug 12, 2019 | Series D | $125M | Prosus & Naspers |
| Apr 5, 2021 | Series E | $300M | SoftBank Vision Fund |
| Sep 30, 2021 | Series F | $570M | B Capital Group, Fidelity Management and Research Company |
| Oct 20, 2021 | Debt Financing | Undisclosed | Trifecta Capital Advisors |