Meesho transformed fashion and commerce in small-town India. But it might have to shed its ideals for growth.
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IN THE QUIET rural heartland of West Bengal, 29-year-old Amrit Sirkar is waging a retail war from his modest village of Kanki. Competing against retail titans like the Birla Group’s 14,000-crore-rupee arm, Sirkar’s brand Peter Europe—a clever play on Peter England by Aditya Birla Fashion and Retail Limited—is a testament to the disruptive power of online commerce.
Sirkar’s journey began in 2018 when he joined Meesho as a reseller. “I saw an opportunity to reach customers beyond my village,” he recalled. Starting with men’s shirts, he quickly scaled his business to handle up to 700 orders a day by mid-2020. Meesho provided crucial support—account management, ad postings, and a robust logistics system. “Meesho gave me everything I needed to get started, including an account manager and ad postings, all free of charge,” said Sirkar. This support kept customer returns low and delivery frauds rare, allowing his business to flourish.
There are thousands of small-time entrepreneurs like Sirkar, who rose along with Meesho as it charted new territories in the Indian e-commerce landscape. The rise of the online commerce platform is a narrative of strategic foresight and impeccable timing. By targeting Tier 2 and Tier 3 cities, Meesho tapped into a vast, underserved market. These regions, often neglected by e-commerce giants like Amazon and Flipkart, became the bedrock of Meesho’s growth. Built on the lines of China’s Taobao and Pinduoduo, the platform’s focus on unbranded apparel and merchandise resonated with budget-conscious consumers, driving rapid revenue growth.
Meesho’s innovative approach revolutionised India’s retail sector. The platform’s social commerce model—leveraging social media networks for sales—empowered millions of micro-entrepreneurs, particularly women, to run virtual boutiques from their homes. This empowerment is significant, providing financial independence to many who previously had limited economic opportunities. Not only did Meesho empower entrepreneurs, it also changed how small-town India dresses, bringing diverse fashion trends and affordable styles to regions previously overlooked by major retailers. The company’s success even led to a glowing review in late 2021 in the Harvard Business Review, which captured its journey in a three-part case study. However, a lot has changed over the past three years.
With Meesho’s success came a new set of challenges. To fuel its growth, the company opted for a strategic shift from being a reseller marketplace to a direct business-to-consumer model. This meant that big sellers began taking over the marketplace. This transition led to increased competition and changing platform dynamics for resellers like Sirkar. “The competition is tougher now,” Sirkar told me. “Orders have dropped from 700 to just 70 a day.”
Meesho’s rapid growth has sometimes outpaced its ability to provide consistent seller support. Many sellers, including Sirkar, face decreasing orders, high return rates, and inadequate customer service. “Returns are killing us,” Sirkar said. “Out of every ten orders, three come back, and at least one is a wrong return.”
External competition is also intensifying. Established giants like Flipkart, Amazon, and Reliance are now targeting the same Tier 2 and Tier 3 markets. Meesho’s deep-pocketed rivals are launching services tailored for this segment, threatening to encroach on its territory. Additionally, the entry of new brands focusing on affordable fashion, such as Reliance’s collaboration with Shein and the Tata Group’s Zudio, is making it increasingly unfeasible for Meesho to continue catering to small sellers as the market becomes saturated with low-cost options from major players.
Internally, Meesho aims to maintain four consecutive quarters of profitable growth to prepare for a successful IPO. This ambitious target will require strategic investments and possibly new funding rounds. “We need to show sustained profitability to attract investors,” a former senior company executive told me. However, securing this funding may not be straightforward, given the current market dynamics favouring quick-commerce companies.
Meesho’s journey from a nascent start-up to a social commerce powerhouse is a story of innovation and resilience. The company’s ability to address seller concerns, fend off competition, and balance growth with profitability will determine its future success. The tale of Meesho, and sellers like Amrit Sirkar, underscores the transformative potential of social commerce in democratising retail and empowering entrepreneurs across India.
But it seems that to grow beyond its current achievements and take on giants like Amazon and Flipkart, Meesho might need to shed some of the ideals that initially propelled it to success.
MEESHO’S JOURNEY BEGAN in the vibrant start-up ecosystem of Bangalore, where co-founders Vidit Aatrey and Sanjeev Barnwal, both IIT Delhi graduates, sought to create something impactful.
“We were indifferent to the problem statement and also indifferent to the market, but our goal was always to start a venture that solves a difficult problem and makes a long-lasting impact,” recalled Barnwal in an interview to the Harvard Business Review. In 2015, the duo started a platform called FashNear, a hyperlocal fashion delivery service, but soon pivoted to social commerce after recognising a gap in the market.
In January 2016, Meesho was born. The name, derived from ‘Meri Shop’ (My Shop in Hindi), signified Aatrey and Barnwal’s mission to empower small retailers. The platform allowed local shops to create digital storefronts, manage inventory, and reach customers using their own social media accounts on WhatsApp and Facebook. “During the conversations over cups of tea and amidst playing with the retailers’ children, we tried to understand the problems these people were facing, and we identified a pattern in the way they operated,” Aatrey said in the Harvard Business Review study.
Meesho’s real breakthrough came from understanding the unique dynamics of Tier 2 and Tier 3 cities in India. These regions, home to millions of small businesses, were largely ignored by major e-commerce players. Meesho’s user-friendly mobile app, coupled with low entry barriers, quickly attracted a vast number of sellers and buyers from these areas.
Social commerce was the company’s key differentiator. Traditional e-commerce models didn’t cater to the social buying habits of consumers in smaller towns. Meesho leveraged this by integrating social media directly into the buying and selling process. Sellers could integrate their Facebook accounts with the Meesho app, and users could browse, share and purchase products within their networks. This approach resonated deeply with the target audience, driving rapid adoption and growth.
By 2017, Meesho had onboarded thousands of small retailers, transforming how they did business. Sellers could now reach a wider audience without the need for physical storefronts, and buyers enjoyed access to a diverse range of products at competitive prices.
Meesho’s innovative model didn’t go unnoticed. The company attracted significant attention from investors, culminating in its participation in the Summer 2016 batch of Y Combinator— an American technology start-up accelerator and venture capital firm—which came with a 120,000-dollar investment. This provided the necessary capital and mentorship to scale the business. With fresh funding, Meesho expanded its reach, aggressively targeting more Tier 2 and Tier 3 cities. The platform’s simplicity and effectiveness in addressing the pain points of small sellers fuelled its growth. By 2018, Meesho had raised substantial venture capital from marquee investors, including Sequoia Capital and SAIF Partners.
A pivotal moment came when Facebook invested $25 million in Meesho in June 2019. The social media giant recognised Meesho’s potential to drive social commerce in India, aligning with its own strategy to onboard small businesses. Facebook’s investment validated the company’s vision and what it was trying to achieve.
One of Meesho’s most profound impacts was on women entrepreneurs. The platform enabled many women, especially homemakers, to start and scale their businesses from home. By providing tools for inventory management, payments, and logistics, it simplified the complexities of running a business. This support was crucial for women who faced socio-cultural barriers in traditional business environments. “Supplier management was debilitating for the women,” said Aatrey in the case study. “They were often not allowed by their families to go and meet suppliers alone, so they would be heavily dependent on their husbands to accompany them to the shops or go to the suppliers on their behalf.”
In response to the challenges women sellers face, particularly the dependency on male family members to source products from suppliers, Meesho introduced Meesho Supply. This initiative addressed the supply chain issues that disproportionately affected women entrepreneurs. By providing a curated selection of products directly on the platform, Meesho Supply enabled women to source inventory without needing to visit suppliers physically or rely on intermediaries. This streamlined their business operations and empowered them to operate more independently.
By 2020, Meesho had become a household name in India’s small towns. The platform boasted millions of users, both sellers and buyers, and facilitated millions of transactions. Its growth trajectory was staggering, doubling revenues and gross merchandise value (GMV) year on year.
An industry insider told me that Meesho’s growth was driven by its deep understanding of the market and its ability to adapt quickly. The company’s focus on unbranded, affordable products appealed to price-sensitive consumers, further solidifying its market position. The rise of internet penetration and digital payments in India, spurred by initiatives like Reliance Jio and UPI, also played a significant role in Meesho’s success.
But around mid-2021, Meesho began changing. A direct business-to-consumer approach meant that the small entrepreneurs it once empowered are no longer a priority. It faces the challenge of maintaining its growth momentum while ensuring profitability. The company’s ability to innovate, address seller concerns, and fend off increasing competition will be crucial.
AS MEESHO STANDS today, it is a powerhouse in the Indian e-commerce landscape. The platform has redefined how small retailers and consumers interact, creating a vibrant marketplace for unbranded, affordable products. However, with rapid growth come significant challenges.
Meesho’s wide selection and competitive pricing have made it popular among buyers. The platform offers virtually unconditional return and refund options, even for lingerie. For instance, Sheuli Bibi, a cook in Dehradun, shared how Meesho has made her life easier. “I place my orders while at work,” she said. “Prices are lower by 150 to 200 rupees on Meesho compared to Myntra or Flipkart.”
Similarly, Prinsi Singh, a researcher at Banaras Hindu University, prefers Meesho for its affordability and ease of returns. “Returning is easier on Meesho than platforms like Flipkart and Myntra,” she said.
However, Meesho's rivals have also noticed its meteoric rise. Major e-commerce players like Amazon, Flipkart, and Reliance are now aggressively targeting the same Tier 2 and Tier 3 markets. They are launching services tailored for this segment, often in collaboration with major manufacturers targeting small-town India, posing a formidable challenge to Meesho.
For instance, Amazon has launched the ‘Local Shops on Amazon’ programme, which enables local shops and stores in Tier 2 and Tier 3 cities to sell online, directly targeting the same market as Meesho. Flipkart has been aggressively expanding its ‘Flipkart Samarth’ programme, which aims to bring artisans, weavers, and small businesses from rural and semi-urban areas online, offering them a platform similar to Meesho. Reliance Retail’s collaboration with Shein is another significant move. Former and current company executives admitted that they did not have the market to themselves, and the competition was heating up.
One of Meesho’s most pressing issues is maintaining positive relationships with its sellers. The platform’s rapid expansion has not been kind to many of its older sellers, and folks like Amrit Sirkar have been feeling the heat.
As Meesho scaled, it shifted its focus toward larger sellers. Of the 1.5-million seller base, roughly 1,50,000 transact at least once a month, and approximately 25,000 sellers contribute more than 80% of the gross merchandise value (GMV) as of mid-2023, according to multiple executives of the company, who did not want to be named as they were not allowed to speak to the media. This shift could signal a departure from Meesho’s original mission of empowering small, local entrepreneurs. The platform’s increasing reliance on larger sellers might help boost profitability and streamline operations but could alienate the small sellers who initially drove its growth.
High return rates, especially wrong returns where customers send back different or damaged items, are a significant pain point. This problem distorts sellers’ ‘unit economics’—a way to measure a business’s direct costs and revenues on a per-unit basis—making it difficult for them to sustain their businesses.
Internally, Meesho is grappling with the challenge of balancing growth with profitability. The company has ambitious plans for an IPO but must first achieve sustained profitability. This involves cutting costs, optimising operations, and ensuring that growth doesn't come at the expense of financial health.
One of the critical areas Meesho is focusing on is improving the average order value (AOV), which is the average rupee amount spent by a customer on an order. Currently, the platform caters to price-sensitive consumers, which keeps the AOV low. “Increasing the AOV is crucial,” another former Meesho executive said. “It improves our marketing efficiency and supply chain cost as a percentage of order value. With a high AOV, you just need one transaction, as opposed to five small transactions, to break even.”
As Meesho scales, its technology and infrastructure are also under pressure. The rapid growth has exposed gaps in the platform's ability to handle large volumes of transactions and returns. “Our systems were designed for a smaller scale,” said the former executive. “We are now playing catch-up to ensure that our technology can support our size.”
The company has faced criticism for its inadequate seller support system. Many sellers have reported issues with the ticketing system for complaints, which often closes cases without a resolution. “The complaint and redressal process is ineffective,” Sirkar said. “Many issues remain unresolved for months.”
Meesho has also encountered regulatory and legal challenges. In April 2023, a seller association in Surat filed a legal notice against the company, protesting against changes in the returns policy that made life harder for sellers. These disputes highlight the delicate balance Meesho must maintain between satisfying sellers and protecting consumer interests.
According to the company’s executives, Meesho tried to measure the sellers’ experience using Net Promoter Score (NPS)—a business metric to measure customer satisfaction and loyalty. A former executive told me that around June 2023 the NPS was about ten on a scale of 100.
In response to a detailed questionnaire sent to Meesho on 31 May, a representative provided a brief statement emphasising the company’s commitment to supporting small businesses. “We’ve taken many industry-first initiatives to facilitate the online journey of SMBs (small and medium-sized businesses),” it said. “These include initiatives like zero commissions, no seller tiering, the absence of wholesale play or threat from private label brands.”
However, as the platform focuses on scaling with larger sellers, it remains unclear how effective these measures will be in addressing the persistent challenges faced by smaller sellers, including high return rates and increased competition.
Meesho executives believe they can adapt to market needs. The company has invested in developing better logistics solutions and improving its customer-support infrastructure. Its success will hinge on its ability to navigate these complex challenges.
As Meesho prepares for its next phase, the stakes are higher than ever. The company’s journey, marked by rapid growth and significant hurdles, highlights the dynamic nature of India’s current e-commerce landscape.
TO SUSTAIN ITS growth, Meesho might need to compromise on the ideals that it has always claimed as its foundation. The platform's transition from a reseller marketplace to a direct business-to-consumer model in mid-2021 was a significant shift.
Meesho stopped charging commissions from sellers and employed multiple third-party agencies to carry out massive campaigns to onboard retailers on the platform. This strategy expanded its seller base from less than a hundred thousand to over 1.5 million in three years.
The company first onboarded retailers and then targeted their suppliers, the big sellers based in manufacturing hubs like Surat, Ahmedabad, and Ludhiana, who could offer more competitive pricing and an assured supply to the marketplace. This is why only 10 percent of the 1.5 million sellers are contributing the lion’s share to the GMV. An internal survey conducted in 2022 found that one-third of 35,000 surveyed sellers faced issues with returns and wrong returns.
Even as its executives focus on increasing the AOV and overall profitability, the platform’s current design rewards cheaper products, making it challenging to attract higher-value ones.
To address these issues, Meesho needs to enhance its product quality. It also needs better management of returns, more effective customer support, and the introduction of higher-value products. The company must also ensure that its technology and processes keep up with its size and scale to provide a seamless experience for both sellers and buyers.
But most of these solutions—introducing better-quality products, changing the design to make the platform more suitable for higher-value products, shifting the burden of returns to the sellers, and increasing the AOV—indicate that only the bigger sellers are likely to survive this transition in the long run.
Meesho’s journey from a seller-friendly platform to a major e-commerce player highlights the complexities of scaling a business while maintaining its core values. With greater dependence on larger sellers, Meesho’s original mission is likely to fall by the wayside.
Reporting for this article took place in April and May 2024.
Illustration By : Amreeta Banerjee
