Meesho 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 out 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.
Moneycontrol reported recently that Flipkart has set up a war room with 20-30 employees to monitor what Meesho is doing. It has also sounded out third-party logistics providers who work with Meesho such as Delhivery, Shadowfax, XpressBees and Ecom Express to reduce their commitments to Meesho.
Meesho raised $300 million and $570 million in two rounds this year and is now in talks to raise $1 billion at a valuation of $8 billion.
In an interview with Moneycontrol, a candid Vidit Aatrey, founder and CEO of Meesho, spoke about the intensifying competition, concerns over the quality of products, the product return percentage, and its latest numbers. Edited excerpts:
How is social commerce evolving, with others entering the fray?
People use the word social commerce for us. But internally, we don’t use this because our vision is: How do we become a single shopping destination for a billion consumers in India? For us, leveraging social platforms was the first important step to get to consumers who had never come online. But that was just one element of it. Today we have innovated a lot on how we build shopping experiences, a discovery-first, image-search first and so on to make the product so simple that people who have never bought online before are able to come online and buy. The majority of our commerce now happens when people come on a platform directly and buy from us. There is no social platform involved.
We have been blessed with two big tailwinds – with Jio data being very cheap, a lot of people came online for the first time, especially in very small towns. Then the pandemic forced people to start using mobile phones a lot more because they couldn’t go out.
We have been able to ride these two big tailwinds really fast and execute well, in going out and building a very simple-to-use innovative platform for the larger Indian population to buy all the products they want. We started with fashion and over time expanded to non-fashion, lifestyle, beauty, personal electronics and recently also launched grocery, which is doing really well.
What is the breakup between social commerce and direct sales?
We don’t share specific numbers. But today, most of our business, which is more than 50 percent of our business, is direct, consumers who are coming onto our platform and buying for themselves.
Take us through the competitive landscape from the likes of Amazon and Flipkart?
I know a lot of them are trying to do reactive stuff. Like you mentioned, the app (Shopsy) is a copycat of what we had built. It is a good validation of everything we’ve done so far. When you innovate on a large market, a lot of people want to come and follow you. And that’s happening more and more.
We don’t look at what competition is doing. And I think as we keep innovating, you will see more and more people will follow us again. What they are doing is never going to influence us.
Also Read: Flipkart vs Meesho | A new war in Indian e-commerce
Shopee has entered India. They are also focusing on the non-branded segment. What will be Meesho’s strategy against Shopee?
Everything that we do comes from our vision and that’s what we keep doing. So far, we have reached where we are today by looking at this. There’s no need for us to change direction. More and more people will try to come and do what they can. I don’t think we will ever decide our strategy or decide our vision based on what some of the other people are doing.
We learnt that Flipkart has asked third-party logistics partners to cut down their commitments to Meesho. Do you plan to start an in-house logistics arm? Won’t it help you hedge yourself?
Right now, we have no plans. And to be very frank, we have very, very strong relationships and partnerships… People will try to do whatever they want to do or think they can do to hurt our growth. To some extent, a lot of people are threatened by our growth, which is quite expected. We will maintain a strong relationship with all our partners and I don’t see any risk in terms of any of these guys not working with us.
For the longest time, Meesho has been dominant in the fashion category. And that is also one of the reasons we’ve seen that the return rates have been quite high—to the tune of 40 to 50 percent. How do you plan to bring this number down?
Our return numbers are less than 15 percent. If you look at other fashion players in the ecosystem, I can tell you that we have the lowest return percentages among all the fashion brands, which tells us that we have a much more evolved system in terms of giving the right product to the right customer. We take action whenever there are any quality issues and so on. So I won’t say that’s the problem.
During the festival season, a lot of brands told us that marketplaces went very high on discounting. Are we back to deep discounts, especially in the fashion category?
This was a very, very successful festive season for us. We enabled more than a lakh small businesses just in the last month to make income across the country. Today we have close to 4 lakh small businesses on our platform. There was a very strong demand. I think the recovery in the economy is already happening.
But overall do you think discounts are back?
As a platform, we don’t believe in discounting to be the biggest lever to attract customers. We attract customers because we have a great proposition, very honest and affordable pricing, a large selection for the kind of products we have, and everything else that is required for a great experience. And we’ve continued to get better at them. And they’ve seen the people come back to us.
We’ve been told that Meesho clocks 2 million orders daily. Can you confirm that? Secondly, if you could confirm whether the bulk of these orders are going to B2B channels (wholesalers who have tie-ups with Meesho). What is the breakup between wholesale and retail buyers?
None of the wholesalers out there come and buy anything from us. So all our volume is to consumers. Most of it today happens directly when customers come and buy and some of it happens to these women entrepreneurs. They connect with their audience, but all of them are consumer audiences so we don’t have any wholesaler buying anything on a platform, I think that is very, very important to put aside.
We did north of 80 million orders just in October. This is an average of 3 million orders per day. The peak order that we did is much, much higher.
What is the average ticket size?
We don’t share these numbers. But we have a horizontal platform. People come and buy everything from fashion to home to kitchen to personal care, beauty. Everything is selling on the platform.
Now that you are aggressive to expand beyond some of the key verticals, what will be your strategy to control quality, especially from third-party resellers or sellers?
This is reflected in our return. The reason we have the best return percentages in the industry is that we have built a very, very strong system around quality. We prioritise the discovery of sellers who are really doing a good job of quality and who have high quality in the practices like high ratings and reviews so that buyers are able to see a lot of content before making a decision. You can see a number of videos and photographs before making a purchase. We have built a lot of systems to solve this problem really well through technology. So quality is not the biggest problem.
For how long can you sustain a zero-commission model?
I don’t think it’s about sustaining or not. Our economics have been positive since we started the company and continue to be stronger every single month. Our business model is not like some of the other players. We monetise through advertising on the platform. Our sellers come back and invest more and more to grow on the platform.
We never did zero percent commission as a short-term hack, like some of the other people in the ecosystem have tried once in a while. This is aligned with our mission of democratising e-commerce. We want to make sure that everyone is able to come online and sell anything. A lot of small businesses before us never came online because the commission levels used to be impossible. If you don’t have those margins, you can’t come online and essentially break down those barriers. And now I have enabled so many such small sellers in the country to come online and sell because there’s no commission charged.
We understand the current burn rate of the company is around $50 million on a monthly basis. Any plans to bring this number down?
First of all, I can tell you that the numbers are much smaller than this. And secondly… when we get aggressive and when not, it is purely opportunistic. For instance, during the pandemic, many people wanted to come online. They would want to invest and reach out to more people. So we let them know about the product. But when the same situation is not there, we will go down.
While the burn rate number is much smaller than this, I think some of these things get hyped. And I don’t know why but we have been the most capital efficient e-commerce company so far in the ecosystem. We have been able to get to this kind of large scale with a very small amount of capital as compared to others before us. People have invested billions of dollars to get where they are, but we have been able to get here by investing a much smaller fraction of that number. We have solid unit economics and they keep getting better. We would be the most capital efficient, e-commerce company there.
You entered into the grocery space this year. While you said Meesho will never be interested in 10-minute delivery, have your thoughts changed?
We are a very customer-first company. So the day our customers say that, hey, I will pay a premium for getting a product in 10 minutes, we will do it. As long as they don’t want it, we are not going to.
All of these big commerce models so far are coming in large cities, where people want to pay for that convenience. If you look at the larger part, a lot of people don't want stuff in five to 10 minutes if it comes at a certain cost. They would still take more affordable options.
