E-commerce company Meesho which is most liked by customers for its products at a comparatively lower price, has its losses increase by 550% in the financial year 2022. The start-up, which is backed by tech behemoth Meta has marked its total expenses in the year rising to INR 6607 crore, which is calculated to be around 394% from INR 1337 crore spent in the financial year 2021.
Approximately half of these expenditures may be attributed to logistics and centers for fulfillment, which total INR 2829 crore, a 347% increase from INR 632 crore in the fiscal year 2021.
It should be highlighted that such a high expense is attributed to advertising and kinds of promotional activities. The Bengaluru-based startup spent a whopping Rs.2579 crore last year, compared to Rs.424 crore in the fiscal year 2021. This gain might be equivalent to a 508% rise.
Now when you compare all these figures from the unicorn’s operating revenue, it climbed to 308%, amounting to Rs.3232 crore in the financial year 2022, whereas, in the financial year 2021, it was around Rs.793 crore.
Why is the business so successful by selling products at such a lower price?
A kurta, which is Rs.1000 in another E-commerce platform, can be purchased for just at Rs. 500 from Meesho! How? How is that possible that Meesho can sell the same product at half or a comparatively lower price? The answer to this question is the ‘Zero commission model’ of the E-commerce player.
This model collects money directly from sellers and eventually aids the platform to hold a market share in Tier 2 and beyond territories, where people are more sceptical about purchasing expensive products and would move to a platform that has a lower price for the same item. These Tier 2 and beyond cities give 70% of business to Meesho.
The game of advertisements.
The company earns good revenue by running promotions and advertisements on the home page. That concentration on non-metro cities has, however created a halt on Meesho’s success and resulted in the company’s low average order value (AOV). The SoftBank-backed startup’s AOV fall and marked around at approximately Rs 400, which when compared with Flipkart’s, is severely low, the latter’s roughly around Rs 3,000, according to several analysts.
Further, when the topic revolves around gross merchandise value (GMV) Meesho stood at about $5 billion, which is again very low as to Flipkart, having $23 billion, and Amazon marking $20 billion, as per several analysts.
In late 2021, Meesho transitioned from a basic social-commerce platform to an e-commerce portal. The Vidit Aatrey-led company today gets around 70% of its revenue from selling to consumers (B2C), with the rest coming from selling to resellers, who then ship to customers.
The figures for funding.
Till now, Meesho has raised over $1 billion and is valued at around $5 billion, according to Tracxn data. The company also intends to release an IPO and aims to go public, and has also marked its name in the list of layoffs by terminating the employment of about 450 employees in 2022 as it closes the shutter of its grocery division.
Meesho has reported it cut its monthly cash burn by 90% to $4 million in January, which is estimated to be down 90% from the $40 million it was burning earlier as it moves closer to profitability.
What exactly is the company?
Meesho, which began as a social commerce platform, is now a full-fledged e-commerce platform serving the retail requirements of India’s neglected regions and communities.
Why is the business focused on Tier II and beyond territories?
When they first began, it was observed that the key goals of many e-commerce firms in India were the mid-to-high-income sectors and metros. It’s also one of the reasons they weren’t able to entice more than 100 million people to use the digital purchase experience. Meesho changed that, and all of our product efforts are now geared around growing tier II/III and other smaller cities, as well as the middle to lower-income groups.
Even in major cities, they allow lower and middle-income people to shop online. The overall number of transactional users was almost 140 million as of December 1, 2022. It is steadfast in keeping to its marketplace business and ad-driven income strategy, with 85 million goods over 30 categories.
With over eight lakh vendors on the site, most of them are located in supply centres of India like Khesar, Panipat, Surat, Tirupur, and Rajkot, tier II/III cities that mostly contribute to 80% of orders, while tier IV and smaller cities contribute for 60% at times.
Finally, why has it gained momentum in recent times?
The firm has lately made headlines for expressing a desire to become profitable over the next few years to fulfill its IPO target. Following this strategy, it is in an attempt to expand its product capabilities.
Edited by Prakriti Arora
