Amit & Rajat, now known as the ‘Smartees’ brothers started out as simple wholesalers in Surat
They went through the same struggles faced by most wholesalers when they start out
But all that was about to change when they signed up to Meesho 💪🏼
Their sales improved almost instantly with very high predictability. They were also able to manage payments, thanks to Meesho’s super helpful dashboard.
But after a certain point they hit a glass ceiling in their business. Just like any wholesale business, acquiring scale comes with some limitations
Demand & Supply Management
Cash Flow Issues
Most of these limitations could be solved with some capital (cash to invest into the business). But acquiring capital at nominal interest rates from banks is again a mighty challenge. They explained their struggles to their Account Manager in Meesho. They spoke to her and explained how capital was their only constraint to scaling up 🚀
With their growth in mind, their Account Manager offered them a loan amount of 10 lakhs, without any documents or proof 🤯
That loan was offered only based on their current order volume and business history with Meesho. They were offered a loan based on their capabilities and the exponential growth they were capable of reaching!
With that cash investment, their orders moved from 150/ day to about 1000/day and then to 2000 orders/ day. Eventually the ‘Smartees’ brothers hit a massive 10,000 orders/ day during the diwali weekend and also fulfil it.
The loan from Meesho also allowed them to go from a small team of 4 people (that included both their wives) to a team of about 30 people
Today the Smartees brand lists more than 130 products on Meesho 😮
This is just one business that has been changed by the ex -social commerce app, Meesho. The team behind Meesho has gone on to change hundreds of businesses & lives like this.
But in the recent years they’ve gone from changing businesses & lives to changing their entire business model!
Curious to know why, read on 📖
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What is Meesho’s history and how have they grown so far?
One look at Meesho’s website and you’ll say that they’re an e-commerce company.
But Meesho didn’t start out like that.
The founders Sanjeev & Vidit started Meesho as a Fashion social commerce app in early 2015. They named it Fashneer and enabled local businesses to sell clothes online. Their original vision was to build a hyperlocal startup like Swiggy, but for fashion!
They were already seeing a lot of store owners selling their inventory over Facebook & WhatsApp groups and delivering it to their customers directly. So the founders decided to target this segment and essentially build a B2B app that could help these store owners handle everything from payment to logistics 🧘🏼
They wanted to help these store owners deliver fashion to their end customers with ease. Just like Swiggy, Fashneer only handled the logistics and payments part of the business. They did not manufacture any goods nor did they store any inventory.
Everything from the marketing to the procurement & warehousing was handled by the store owners!
JTBD → Help store owners sell more & sell easily by handling logistics & payments
What did Fashneer handle? → Logistics, Payments, Fulfilment
What didn’t Fashneer handle? → Manufacturing, Storage, Marketing
PIVOTAL INSIGHT #1 → The founders soon realized that this market wasn’t big enough 😢. But more importantly, they realised that the customers didn’t care if their fashion items were manufactured or sold locally!
The customers just wanted the best products at a nominal price.
This was not a segment like food where customers wanted their orders to be hot & fresh (which in turn constraints the food to be prepared locally).
The founders Vidit & Sanjeev also found something peculiar. Most of these business owners were not producing their own items. In fact, they were just buying it from a wholesaler/ producer and selling it for a profit.
This is where they understood the power of resellers in India 😮. While regular sellers were updating their catalogs once a month, a typical reseller was updating their catalogues every single day!
🙋🏼Who is a reseller? (Click to expand)
Here’s the wikipedia definition → A reseller can be an individual or an organisation, that purchases goods with the only intention of selling them. They never use or consume the goods that they purchase.
One good example is Imagine - One of Apple’s biggest resellers in India.
They don’t manufacture apple products. They just acquire Apple products in the inteention of selling them to consumers.
In the context of this blog, a Meesho reseller is someone who doesn’t manufacture fashion accessories. They just buy them from a wholesaler and sell them.
But that didn’t mean that resellers had an easy life. They also had to face a ton of challenges in this process. Here’s a glimpse of how life looked for a reseller before Meesho came into play 👇🏼
The founders discovered something peculiar about the buyer, after they started Fashneer.
The people who bought from these resellers were not your regular Flipkart or Amazon shoppers. They were a different kind of shopper.
PIVOTALINSIGHT#2 → People who bought from Flipkart & Amazon prioritised
convenience >> money.
But the folks who bought from resellers prioritised money >> convenience!
With this insight, they saw a market that was bigger than the ones in your numerous urban locations of India.
They saw a humongous market in the numerous Tier2+ cities & rural areas where
Internet penetration was still picking up 📈
Average earnings/ household was still low 🏦
While Amazon & Flipkart, fought over the top 100 million market who lived in Tier 1 and Top Tier 2 cities, Fashneer decided to go after a new and untested market. While the new market was much colder and had high objections to buy online, it was still lucrative. This new market had a sizing that is easily more than 10 times the size of the Flipkart & Amazon’s TAM 🤯
→ The first step to this journey was essentially rebranding to Meesho - ‘Meri E-Shop’ or ‘My Online Shop’ in translation.
Since the tier 2+ market still bought from resellers, Meesho’s acquisition strategy was also heavily dependant on getting more resellers to their platform. They wanted to make the life of resellers easy as can be.
Here’s how the life of a reseller looked after Meesho’s unique business model came into play 👇🏼
Now Meesho was officially in the reseller game. They were no more the Swiggy for fashion & accessories. They were the social commerce platform that was placing big bets on its resellers.
Their collection grew along with the number of resellers on their platform. Their bets on resellers were so big that one of their core metrics was to increase the GMV of each reseller who used Meesho.
Meesho did anything and everything to make sure that the income for each reseller/ month kept going up 🔝
Loans without any paperwork or proof 📒
As we mentioned in the intro, Meesho made sure that capital wasn’t a constraint for their resellers. So they decided to offer loans to resellers to help them increase their no of orders/month. They also offered loans to their best resellers without a ton of formality or paperwork.
The green light was mostly given based on their relationship with the vendor, order history and potential for growth in the future ❇️
0% Commissions on all orders 🤔
They also made sure these supply wasn’t a constraint for their resellers. Hence they also introduced 0% commission fees for suppliers who are selling on Meesho. This number was totally independent of their order volume or AOV!
📌 To give you some context, Amazon & Flipkart charge an average of 15% commission for each sale independent of AOV or Order Volume!
The Decision 🔥
The team behind Meesho was hellbent on breaking into the large tier 2+ market, backed by these 3 unique insights
India is a trust deficit economy and folks in the tier 2+ market are still discovering e-commerce
They prefer buying from people they know rather than buying online
They were also putting money >>> convenience because their average earnings/household was still on the lower side compared to the urban market.
They discovered one more insight which would completely change their marketing pitch.
PIVOTAL INSIGHT #3 → More than 80% of their resellers were women and they didn’t have an offline shop.
📌 Takeaway for Startups operating in a new market (click to expand)
They found all these insights, thanks to a culture that was obsessed with talking to the customers frequently.
Now that’s a hard lesson for anyone venturing out into a new market ➡️ talk to customers frequently.
With these nuances in mind, Meesho wasn’t just going to help existing resellers, it was now positioned to create new resellers and help them sell big. These were people who didn’t own an offline shop. They were mostly comprised of homemakers with a small subset of college students and retirees 👇🏼
Their north star metric still stayed the same → Increasing average income of each reseller/ month!
So one of the founders, Vidit Aatrey had a very simple question in mind. “What are the ways to help my reseller sell more inventory?”
From a founder’s mindset here are some of the blockers he must have seen for these resellers!
1.Finding more customers:
The Meesho team identified that finding customers is a training/ education problem. So the Meesho team geared up to provide their resellers with all the knowledge and technical training.
Their reseller university and mentorship programs helped resellers understand how to sell more. It helped them break mental boundaries and helped them scale their average income/ month 🔝.
For the ones who are strapped for time, or voluntarily decided to not scale up, it’s a different issues
Finding New Products to sell:
But finding new products to sell was a whole different issue. It was an issue that couldn’t just be solved with education/ training. It genuinely required a lot of effort to find a new supplier, negotiate terms and select products.
This is also a major blocker if you’re trying to enable a new reseller. Finding the first product is always one of the biggest challenges.
To solve this problem, they took a bold bet and divided Meesho’s team into two -
Tea 1 → Meesho
Team 2 → Meesho Supply
Meesho supply was set to solve for the supplier side of things. It would improve the avg income/ month of each reseller as well as help new resellers find relevant products quickly!
The primary objective of Meesho supply was to talk to more suppliers and connect them with resellers 💪🏼
With Meesho Supply they were able to kill two birds with one stone:
Help new resellers choose their first product and make a sale
Help existing resellers diversify their product offerings and increase average income/ month
The team behind Meesho pivoted one more time to also created a seller portal. While initially skeptical, the team saw a natural pull on the Meesho supply. It was a natural fit 💪🏼
Meesho already had this huge army of resellers who were selling at good margins. Now the team came in and added an sizeable amount of rocketfuel to this ship. Meesho had reached escape velocity because there was a vicious loop at play.
Their bet had paid off handsomely 🚀
While earlier, resellers had to find their own wholesalers, the dynamic now completely shifted. Meesho wasn’t just enabling existing resellers, it was creating new resellers with it’s ever-growing seller marketplace.
“We went so deep that we ended up creating a huge supply chain from mass manufacturers like China. Just for our resellers to choose & sell from” said founder Vidit Aatrey in an interview with YCombinator!
They finally completed the pivot, absorbing Meesho Supply into Meesho as a whole. Maybe this was the final nail in the coffin, that led to Meesho’s complete transformation as a B2C company 😳
But more on that later!
Empowered with the new supplier marketplace and the $125 Million funding from Prosus & Naspers, Meesho started moving crazy fast:
They added mutiple categories like home & kitchen accessories, jewellery, bags, footwear and even electronics
Created a new vertical for the FMCG space named ‘Farmiso’ in 2021
Rebranded ‘Farmiso’ into Meesho superstore in Mar 2022
Absorbed Meesho Superstore into Meesho app
Closes down the Grocery & FMCG part in most major cities because of poor unit economics
But after multiple pivots, Meesho finally decided to do the unthinkable or maybe the obvious for most startup enthusiasts. They opened their own marketplace for customers to directly purchase from. This didn’t turn out well for the loads of resellers on their marketplace.
Some of their lost entire businesses because some Meesho sellers would undercut them on costs
Some resellers lost relationships because their peers thought they were taking them for a ride with higher prices
Some even lost the trust they had formed in their community
At the end of the day, loads of broken hearts and eroded trust that will never be retained. But those are the second order effects Meesho had to go through after evolving into the e-commerce app we know today.
And that’s segue brings us into a very important question.
Who are Meesho’s users?
Meesho is essentially a threeway marketplace solving for three different users
Customers on Meesho’s website
Suppliers who sell their products on Meesho’s website
Resellers who sell products from the supplier marketplace on Meesho
1. Customer’s on Meesho’s website/ app
These are folks who land on Meesho to shop for anything fashion. They mostly discover new products through any of these following channels
Meesho organically shows up for a ton of Google searches that prioritised cost.
The official Meesho app:
Meesho is heavily dependant on visitors who buy products directly from the app. This yet again ties back to their target market which is majorly a smartphone first market.
However their android downloads is still on par with Flipkart.
Here’s a take from the official Meesho profile confirming the exponential growth on their platform
3. Word Of Mouth:
With the growth of Jio and UPI services like PayTM, the number of users who can buy stuff online has grown in Tier 2+ cities by crazy numbers!
This has led to an exponential word of mouth cycle within their target population which values MONEY >>>> CONVENIENCE.
2. Suppliers who sell on Meesho’s Marketplace (App/ Website)
Meesho’s current priorities are to increase the number of suppliers on it’s platform. It is obvious as they have added a ‘Become A Supplier’ button right at the top of their website header.
Success in the e-commerce game is all about depth & breadth in their offerings.
More suppliers → More products → Higher AOV & Repeat purchases
While they do onboard suppliers, they are very transparent about their key differentiating factors that standout for resellers
Zero Commission on Orders 😮
Lowest Delivery charges on the market 🤯
3. Resellers who sell products from Meesho’s marketplace
We searched Meesho’s website for almost a minute to find the reseller program they were known for. After all, the original DNA of Meesho is their social commerce angle. But we were only able to find it after two to three scrolls on the main page.
While the reseller nor the supplier options are nowhere to be found on the mobile app (which was quite weird).
That is a detailed roundup of the three categories of users on Meesho. Now that we have understood the users, let’s deep dive into the business model ⏬
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Why did Meesho pivot from a B2B company to a B2C company? And Why is it working?
Writing about Meesho’s business model is truly exciting for many reasons, but the biggest one being → the number of pivots!
Meesho is one of those rare startups that has pivoted multiple times to find a viable business model. But this wasn’t just any random pivot. The founding team made these pivots backed by the true market needs and customer data. That’s one of the reasons that it a true poster boy of the startup scene in India 🚀
These pivots have also been the reason why Meesho has always been under a ton of scrutiny.
In a matter of 7 years, they essentially went from,
A B2B app for shop owners selling clothes & fashion accessories
An e-commerce app selling fashion, electronics, kitchen accessories & more 🧐
What made these multiple pivots possible for Meesho?
While we could say that good leadership is one of the top reasons, we also have multiple other factors at play. Any other startup would have either ran out of funds or been sold off because they ran out of funds. But Meesho persisted and went from a B2B app to a true B2C app.
We’ve listed some of the reasons that made these pivots possible in a mindmap below 👇🏼
1. Good Timing & Luck 🪄
The founders of Meesho were successful because of their ability to accept change & trust data. But lady luck also played a huge factor in their success!
Right from the timing when both founder quit their jobs to startup, right to their college where the founders of Flipkart had also studied. Everything fell in place for the Co - Founders Vidit & Sanjeev 🫂
Their beautiful friendship paved the way for mutual trust and admiration for each other.
Also it massively helped them when JIO launched in India around the same time Fashneer was founded. Jio, led to the explosion of millions of internet users in India, which conveniently paved the way for the birth of online payment apps like PayTm & Google pay 💵
The combo of JIO and UPI accelerated not just internet usage, but also altered the fundamental buying patterns of the people in India 💪🏼
2. A Solid Leadership Team 🙏🏼
This is probably one of the lesser know success criterias of Meesho - Sound Leadership
Sanjeev & Vidit believed in putting customers at the centre. But they didn’t just stop at the belief but also put it into action. In the early stages, both the co-founders were big on visiting customers and talking to them frequently.
That’s what led them to their first set of successful pivots.
Even at an early growth stage, they allocated time to talk to their best customers. They created WhatsApp groups where active customers were onboarded. These customers were able to directly interact with the founders and solve their queries, which led to a lot of trust.
True to their customer first motto, they have also made customer calls as a mandatory step in their new employee’s onboarding cycle. Meesho’s founders have also set a rare culture where senior leader are not only encouraged, but also mandated to talk to customers across regular intervals 🤯
3. Solid Positioning from the start 🏹
While Flipkart and Amazon were aimed at the Tier 1 population, Meesho was already working closely with thousands of resellers and sellers from Tier 2+ areas.
Meesho was solely focused on the ‘COST >>> CONVENIENCE’ from the get go while Amazon & Flipkart were focused on the ‘CONVENIENCE>>>COST’ market. While Flipkart had to build a new brand (Shopsy) to get into the Tier 2+ market, Meesho was already established in most of these communities.
While you can argue that Meesho won because of had first mover advantage, it’s also because they team had the guts to pivot constantly 🚀
4. Market Advantage 👨👩👧👧
From a logistics angle, it seems absurd for a startup like Meesho to not have a fulfilment department. It was utterly shocking to us when we realised that Meesho did not have a logistics unit in place.
But that’s one of their biggest advantages. It has allowed them to stay lean, which has given them the power to make multiple pivots without terrible second order effects.
Their focus of working only with local brands and resellers without any brands has also paid off incredibly well. Although we can also argue that it could one of their biggest shortcomings with growth.
While Amazon & Flipkart charge an average of 15% of commission per order, the 0% commission lowers the objections for local brands and local Indian sellers. It also signals a lot of trust to existing sellers who might be switching from Amazon & Flipkart 🤘🏼
5. Cost & Growth Advantage 🪴
Meesho has grown a shocking 5x in the year of 2021 alone. This hypergrowth is very good for markeptaces like Meesho. When it comes to a marketplace, monopoly in your market can be one simple loop
More buyers → More sellers → More buyers → More sellers → and on and on….
As we’ve mentioned in the previous section, low logistical overhead has allowed them to pivot quick, unlike their competitors, who need to be careful before any pivot.
Why is Meesho becoming a B2C company?
Before we talk pivots and reasoning, we have to keep something in mind.
Funded Startups by their DNA equate to growth.
The idea of raising funds is to grow and reach bigger markets. This is especially true for marketplace or e-commerce startups that need to have the first movers advantage.
The nature of a marketplace or e-commerce startup only allows a maximum of two startups in any domain.
The examples are plenty
Ola & Uber
Flipkart & Amazon
Olx & Quikrr
Other players either close shop or get acquired by one of the two bigger competeitors.
So when you are running a funded ecommerce marketplace, if a pivot allows you to increase your market share and MTUs, you will go for it.
So the simple answer for Meesho’s B2C pivot can be understood by the revenue metrics on one of Meesho’s official blog, posted after their latest round of fundraise 👇🏼
By the words of their founders, Meesho’s goal has been to democratice the next set of online buyers in Tier 2 & beyond
We set out on a mission to democratise internet commerce for everyone, little did we know of the impact we were going to create in just 6 years. Today, 5% of all Indian households come to shop with us every day, with over 75% of our users coming from Tier 2+ cities!
While Flipkart & Amazon are just trying to enter a new colder market with much lower AOV, Meesho is doubling down it 🥵.
From the perspective of the founder, their why is still the same. The only difference is in their how!
They see a new streak of Indians who’ll be shopping online for the first time with an AOV of 400 - 600 rupees.
While resellers were a good start, it is not a model that is essentially built for scale 😞.
There is a physical constraint to how many resellers you can onboard and help become successful 😓
But there is no upper limit to how many buyers & sellers you can onboard to Meesho. The current numbers after the B2C pivot also confirm that this is the right direction for them 🤞🏼
So what is Meesho’s Growth Strategy to become a B2C Ecommerce company?
Let’s look at the old & new Goals of Meesho:
Old Goal: Increase the Average Income of each reseller
New Goal: Increase Monthly orders and Monthly Transacting Users
While the old goal was a B2B play, the new goal requires a B2C play. With that insight, let’s dive into Meesho’s Growth Strategy. We’ve continuously seen folks confuse growth with marketing. While marketing is a part of growth, growth is not just marketing.
Let us explain 👇🏼
Growth has four levers
→ Acquisition: How you acquire new users?
→ Onboarding: How you set these newly acquired users for success?
→ Engagement & Retention: How do you make sure these new users keep coming back to your product and become power users?
→ Monetisation: How do you make sure they buy your product and turn into customers?
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Once you break down growth into four levers, it comes to understanding your end goals and prioritising these levers.
Since Meesho is selling to Tier 2+ audiences, they need to solve for some of the problems mentioned below ⚠️
Building trust for new users (essentially people who have never/ minimally bought anything online)
Enabling first-time customers to keep purchasing
Increasing the depth of their product offerings (inventory under each category)
Increasing the breadth of their product offerings (the total no of categories)
Increasing the speed at which first-time orders are delivered (faster delivery = Aha moment)
Increasing the speed at which second time + orders are delivered (increases trust)
Increasing the speed at which support queries are solved (better support = increased trust)
Making sure orders are delivered with accuracy and without any damage
Out of all these different factors, the Meesho team needs to solve for two things on priority ✅
Getting new customers (since it is a cold market)
Getting the first time customers to buy multiple times (Increases trust and helps them acquire new customers)
So with that priority list Meesho needs to prioritise for these two levers
Acquisition - Getting new customers
Engagement & Retention - Enabling first time customers to buy again
and an optional third lever
Onboarding - Converting more website and app visitors into first time customers
1. Acquisition ✋🏼
Meesho is set to position itself as the e-commerce platform for tier 2+ cities. Here are some facts we know about the habits and buying patterns of people in tier 2+ cities
A majority of them are smartphone first internet users. Most of them found the internet on a smartphone before they even used a laptop or a personal computer
Their online purchases are minimal and they lack trust to buy from online e-commerce companies
The most commonly used language is their local vernacular based on their region (it is very rarely english)
With these facts in mind, Meesho needs to create an acquisition strategy that solves for
Building trust for ‘Meesho’ by partnering with local players
Smartphone first marketing campaigns
Marketing campaigns in local languages
Advertisements will be an important part of Meesho’s acqusition strategy because most of their customers have never heard about Meesho. Also most of them are not actively searching to buy something on the internet. Therefore, well designed ads will solve for the first touch point for their users.
In theory, Ads should help Meesho find
🥶 Find cold audience who haven’t visited their website/ downloaded their app 🥶
♨️ Target warm audience who have downloaded the app, but haven’t made a purchase yet
🥵 Target hot audience who have made their first purchase and push them to buy more
The buying habits of tier 2+ audience is dependant on word of mouth. People buy from businesses their friends, family trust & can vouch for. A well designed referral system will help Meesho tap into their existing customer base and create exponential growth in the long term.
Moreover a successful referral system is easier on the bank 💰and much easier to scale 📈
The channel-product fit of a referral system is incredibly good for an e-commerce shop like Meesho
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Since tier 2+ audience don’t already buy a lot of things online, organic channel fit for SEO is poor (atleast for now). But once Meesho starts getting more customers, SEO will make a spectacular change in their growth.
Since SEO also has a long payback period 🥲, it’s better to invest in local SEO from the get go and prepare for hypergrowth.
Social Media on the other hand has a very strong channel fit for Meesho. Since their potential customers are active on social media platforms, they need to invest heavily on organic Social. Their whitespace will depend on organic social channels that are cater to the multi lingual audience across the country.
Since trust and word of mouth are incredibly important piece in tier 2+ cities, partnerships are crucial. It allows Meesho to borrow trust from existing players in the community. But we don’t just mean online partnerships with social influencers.
Meesho also needs to partner with local business if they need to win in the long term.
2. Engagement & Retention 🛍️
Once you acquire users, you need to get them to buy the first time and then keep buying again. This will build a habit loop, which will also help with the acquisition lever.
The more someone buys from Meesho, the more they will talk about it in their communities. This tier along with all the acquisition levers in a number of ways:
Ad Costs Go Down →
Rather than downloading after seeing 6 ads, someone who has already heard about Meesho, will download it after just seeing one ad 😋.
Referral Loop Gets Better →
The person who is talking about Meesho, might also tell his community about the secret discount code he has with him 🎢.
Organic SEO Improves →
When searching on Google, even if Meesho doesn’t show up on top, some users might choose to click on Meesho’s result 🖱️. When more people choose Meesho over other results, search engines automatically start placing it over other results.
Partnerships Become Easy →
When more people keep hearing about Meesho, they trust the brand and are open to partner with them 🤗.
→ To enable users to buy the first time, they need to solve for onboarding (which we have explained in the next lever)
To enable first time customers to buy again, Meesho needs to make sure that they have enough products & multiple options fo each product. They also need to make sure that the support is multilingual and buyers can use Cash On Delivery 💶.
Better communication will also allow Meesho to convert first time buyers into second time buyers and so on. Ideally they should go from buying some things from Meesho to buying almost everything from them 😊
3. Onboarding 💣
The only two JTBDs (Jobs To Be Done) of onboarding is to
Enable the first time user to download Meesho
Enable her to buy something
The first purchase is one of the biggest blockers to achieving profitable growth for Meesho. It isn’t enough if the users only download Meesho’s app after their intense marketing efforts. Revenue is only generated when they actually buy something from them 🪄
Once they make the first purchase and receive the order, their trust for ‘Meesho’ & ‘Buying Anything Online’ automatically goes up. This overcomes the trust deficit barrier and allows them to trust e-commerce as a whole and buy more things online.
The first purchase also stands in the way of the word of mouth loop 😢
Only when someone buys something from Meesho, will they actively talk about it to their friends, family & relatives 📈
By just mastering these these three levers, Meesho can tap into the cold tier 2+ markets and become one of the biggest e-commerce companies in India.
What will be the struggles of Meesho becoming a true B2C company in India?
While Meesho hasn’t gone full on B2C e-commerce, the statistics definitely point that way. They still cater to the reseller market, but that isn’t one of their priorities going forward.
They have the brand, they have the affiliation with delivery partners and they have the momentum to become a B2C e-commerce business. But will it be easy for Meesho?
Short answer is → not so much
Here’s a breakdown of all the struggles Meesho might face trying to become an e-commerce giant in India 💪🏼.
1. Keeping quality issues at bay will be a challenge
As they onboard more sellers onto the platform, it becomes a challenge on it’s own to maintain quality. But that’s a natural problem for most e-commerce companies.
Meesho has an additional problem to solve for - finding a balance between quality & cost. It’s a given that not all products sold at such low price points will have great quality. But the fact is that they need to sell at a low price to capture the cold tier 2+ market!
For example, we have some of these smartwatches priced at the range of 300 & below. While it’s a given that the quality would be subpar, will the customer accept it?
How do you solve for customer satisfaction when this watch costs a total of 65 rupees?
Out of 8 total ratings we have 3 folks rating it ‘Poor’.
How do you manage customer expectations while making sure cost is also kept low?
How do you solve quality issues?
→ One of the first things the Meesho team can do is to hire an experienced operations team and install a kickass quality control process in place.
Next they need to think about their decision making framework from first principles (since Meesho is going after an extremely new market)
→ Do we let this product stay even though we know it might piss off some customers?
→ Is there a cost - product quality ratio defined inside the org?
→ Under what conditions do we decided to remove a product from our listing?
→ What sort of feedback/ training/ communications do we send to the supplier before we remove a product from our listing?
→ Do we remove/ prioritise poor quality products from the listing of first time buyers?
They can also at parallels and understand how startups like Taoboa manage this in China (since they also operate in a very similar market)
2. Cannot increase prices with growth
The whole premise of Meesho going from a social commerce company to a B2C e-commerce company is to target the Tier 2+ segment in India. But we know that this segment is extremely price sensitive and value money >>>> convenience
There’s also the fact that the AOV is mostly just between 400 - 600 rupees. In comparison, Amazon & Flipkart have an AOV of 1500 - 2000 rupees.
So how do you improve margins without increasing prices?
Let’s look at the levers we have at our disposal
1. The Seller:
Currently the sellers operate on a Zero Commission Model. One option could be to tie up commission rates with the number of products you sell.
More products = Lesser commission
Meesho can also provide sellers with Sponsored Ads, a premium subscription & more. Looking at Amazon, Flipkart and the other e-commerce players around the world can give them some ideas 🪄
2. The Buyer
Meesho is already coming up with a bunch of experiments like ‘Meesho Mall’ and ‘Meesho subscriptions to solve for this.
Charging for ‘quicker delivery times’ could also be one more lever for Meesho to earn from it’s buyer.
3. The Reseller
Currently Meesho does charge resellers for some add-on services. Eventually it could also charge resellers for Ads placements, better product discoverability.
In essence, Meesho could look at other players and implement whatever they’ve done. But the second order effects could stall growth and also lower trust among new customers ⚖️.
One good way to earn additional revenue is to create ‘subscriptions’ like ‘Amazon Prime’. It is something Meesho has been experimenting with in the recent months. They have also been trying to create ‘brand malls’ to feature local brands.
But isn’t that pushing Meesho to become more like the competitors?
That’s also raises bigger positioning questions into play.
3. Unsaid problems of a substandard delivery partner
There’s a reason why Amazon & Flipkart majorly employ their own delivery fleet → To Control Delivery Issues 😌
Meesho has only built it’s business with it’s third-party fulfilment partners to date. This has allowed them to stay lean, but it does come at some hidden costs - bad fulfilment rates ☹️
The reason Amazon and Flipkart have good satisfaction rates is owed to it’s incredible delivery fleet.
Flipkart has Ekart,
while Amazon has Amazon Delivery Services.
This control allows them to tweak changes to their fulfilment model and find a pattern that best suits them.
But Meesho, with their delivery partner have no control or visibility into the delivery fleet. While it is one of the major clients for these partners in terms of order volume, it cannot dictate how they work.
Meesho is still only a majority, not a monopoly.
This lack of control is leading to tons of fraud, wrong deliveries, packages getting lost etc.
One search on Twitter for the keyword ‘Meesho’ after their diwali sale and the full story unravels before your eyes 🥲
Tons & tons of tweets which describe orders not being fulfilled for days 💔
Support staff closing inquiries because they had broken communication lines with the delivery fleet and had no clue where the customer’s order were 😞
Words like scam & harassment thrown out by customers because the orders were delivered damaged, late or just wrong 😩
How to solve their fulfilment & delivery problems?
There are a couple of ways to solve this problem. But each comes with own set of second order effects. But before we dive into the solution, Meesho needs to decide what they can sacrifice:
2. Money1 →If they’re ready to sacrifice time, they can look at datapoints and start building out their own delivery fleet. It might take some trial and error, but they can start with the areas where order volume is high.
Eventually they can build a system, and prioritise these delivery fleets wherever order volumes or average AOV is higher.
However this will take time and a lot of effort by which some other player may capture their market.
2 →If they are ready to sacrifice capital, they can acquire delivery fleets in areas where order volumes are high. Mergers & Acquisitions is an active play used by numerous startups while they are capturing new markets.
It will allow Meesho to both capture talent, knowledge & processes in these logistics companies.
4. Solving for support at scale will be problematic
As we’ve seen in the screenshots above, solving for support when you’re scaling with a low margin is hard. India in a tier 2+ setup is still very trust deficit. The average household income is still low and people still are still hesitant to buy from an online setting.
If they keep hearing that Meesho is scammy or has a bad service, getting new users to try Meesho almost becomes impossible.
Bad reviews + Bad support → Erosion of trust (in an already trust deficit economy) → No repeat purchases or Word Of Mouth
How to solve for customer support?
This is something Meesho can borrow from the tons of successful e-commerce startups around the world. But adding these two nuances can instantly make their support systems 10X better
1. Support should be multilingual 🗣️
2. Support should be smartphone first 📱
Nailing these two nuances can take their support to a whole new level 🤘🏼
Summing it all up 🏓
What are the things that are working with Meesho?
→ Strong leadership
→ First Mover advantage
→ Low overhead on delivery
→ Enormous market size
→ The power of existing community fuelling growth and building trust for brand Meesho
What are the things that are not going Meesho’s way?
→ Finding a balance between cost & quality
→ Scaling support with low margins
→ Introducing new pricing structures with a Cost >>>> Convenience angle in mind
→ Erosion of trust with a substandard delivery partner
→ Erosion of trust with resellers as Meesho is literally eating away their business
One of the good signs is their 5X growth in 2021.
The second good sign is they just clocked higher order volumes than Amazon in the last festive sale. As per the Redseer report “ In terms of order volume, the Flipkart group leads the market with about 49 per cent share and Meesho ranks second with about 21 per cent order share”
Althoug from a GMV perspective, Meesho still ranks behind Flipkart group (Flipkart, Myntra & Shopsy) & Amazon!
While traditional players might look at Meesho and say that they’re unfocused, trust startup enthusiasts know that this is the DNA of a startup. Meesho is essentially creating a new market in the tier 2+ economy.
Being open to change and staying close to customers is one of the best bets they’ve taken from inception. Nobody knows if it Meesho will truly capture the low AOV market with razor thing margins.
Will they have sufficient volume to hold them steady?
What if they get sufficient volume but that ends up choking their support and fulfillment rates?
All these are open questions that still haven’t been answered.
Sure there have been players like Taoboa in the Chinese economy who are killing it in terms of Social Commerce.
But can Meesho also pull off the same kind of magic 🎩
While it looks a bit grim, we have to accept that there are still things out of our control.
But as India’s poster boy in the e-commerce space, Meesho will always hold a special place in our hearts and we truly wish them success 📈
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