Meesho says IPO in 2 years, platform to digitise 10 million sellers by 2027

Ecommerce marketplace Meesho recently became the first horizontal e-commerce company in India to achieve profitability at a consolidated PAT level, incorporating all costs, including ESOP, across all divisions and categories.

Operating on a zero percent commission model, CNBC-TV18 asked Vidit Aatrey, Founder and CEO of Meesho, how he managed to achieve this feat.

“A lot of people thought that without charging commission, you cannot make money in this business. And we wanted to prove that hey, we can stay true to our principles of making small businesses successful and also becoming profitable in which is what we did. And I would say if I have to pick a few things that we have done to kind of get to here, first is just the brand of the platform has gotten stronger and stronger,” he informed.

According to Vidit Aatrey, the company has experienced a substantial reduction in marketing expenditures over the past year. Nevertheless, it has managed to remain the foremost downloaded shopping app in India for the past 12 months, by a significant margin. This success is attributed to the strong word-of-mouth recognition of the brand. “The organic number of people who are coming to the app has been growing,” he continued.

“Second, we have also become much more focused on efficiency. Internally, in terms of what kind of projects we invest, where we don't invest, what kind of businesses we want to scale, what kind of economics do we want? We have been very selective, we don't go out and sell every possible category out there on our platform, we have been very selective on categories that are profitable. And we are focused on that and scaled that.” said Vidit.

“We just became profitable in July. So I would say the profit figure is in single digit crores. But that number continues to grow. In the last 12 months, we grew our orders by about 43 percent and delivered about a billion orders on the platform. While becoming profitable, we did not take away the focus from growth, we have continued good growth on the platform. And I think that will stay.” he added.

Meesho saw its last fundraise in September 2021 when it raised $570 million as its Series F round. While the company claims it is well capitalised, will its next round of funding be through the public markets?

“Hopefully, we haven't fixed a timeline deadline. It depends a lot on the timing when markets are open to companies like us. But I would say all things are in the right direction. Internally, we are looking at a time period of the next two years, but it should happen soon.” said Vidit.

While Meesho is seeing growth in order volumes and in revenue, we asked Vidit if he is seeing some inflationary pressures?

“As a platform, we remove the middle man, get consumers to transact from small businesses directly, most of them are manufacturers, right. So you get much better prices as compared to what you get offline. So we see, in times where people are affected a lot by inflation, they tend to change the channel and move towards value a lot more, as compared to some of the other places.”

“And we see it's helping some of these small businesses across the country through their factories, through whatever they have, they are able to provide much better value. And we see a lot more consumers move to this. So I think even inflationary pressures are only helping some of these small businesses get a lot more business online.”

As the next quarter marks the beginning of the festive season—a significant revenue generator for ecommerce platforms—we inquired of Vidit, what should customers be on the lookout for?

“So festive season is always like a very exciting part of our business. We see even small businesses on the platform very excited. They want us to kind of share more insights - How should we plan our inventory? What kind of products should we manufacture at this point in time, because they also make a large part of their business or income for the year at this time. So again, it's a time where, again, we are aggressively investing. We did a big brand campaign recently, and it got great coverage organically. So we are aggressively investing and we believe the festive season like the last few years should be very good. A lot more new consumers will try online for the first time.” said Vidit.

In its mission to democratise internet commerce for everyone, the company has announced “Meesho: Mission to 100 Million” with an immediate goal to onboard 10 million small businesses by 2027 and help them succeed online.

The aspirational goal marks a remarkable ten-fold expansion of Meesho’s current seller base of 1.3 million, simultaneously unlocking new opportunities for small, medium, and local enterprises with an annual turnover below 40 lakhs, to embrace the realm of digital commerce.

This initiative also aligns with the decision taken by the Government of India to relax the mandatory GST requirement for online sales for businesses with annual turnover of less than 40 lakhs.

“I am very excited and very optimistic for many reasons. Some tailwinds that have been with all of us continue to be there. Number of consumers who are coming online every year is growing at a very fast pace. The number of people who are buying online is now 10x of what it was like a few years ago and will continue to go up.”

“We are seeing that internet penetration, reliability, everything is improving. Digitisation is happening because of things like UPI and ONDC, infrastructure is improving. Apart from all this, one big thing, which is going to happen very soon is that non GST sellers now in India will be allowed to sell online, which was not the case so far. We have about 1.3 million sellers who are selling on the Meesho platform, all of them are GST registered. If you look at our category, less than 10 percent of all businesses are registered with GST. So a very small part of businesses are allowed to sell online. I think that will change starting this October. So again, that's big!” said Vidit.

Meesho became a part of the ONDC platform last year, and we queried the founder about the sort of impact they have observed thus far. Additionally, we inquired about the extent to which this integration will contribute to the expansion of India's ecommerce sector.

“The mission of ONDC is very close to us, it's about making these small businesses successful across all kinds of categories. So that was one of the big reasons why we became a part of it. In terms of creating impact, it's still very early. I think it's still starting to take off in a few categories that we have seen in news around mobility and food delivery. But some of the other categories, still very early.”

“We continue to work together very closely in terms of what kind of things need to be built for the consumer. The mission is very close to what we want to do as a company, so we think it can really make a big mark in getting more and more small businesses online and making them successful.” added Vidit.

While Vidit wants Meesho to be a one stop shop for all sellers, we asked him if groceries would be an area that Meesho would want to tap on and get those sellers on board as well?

Vidit said, “Yeah, the plan is there. I would say it's still very early. But grocery is very interesting, because when we say 100 million, like a large part of 100 million small businesses in India are engaged in grocery. So I don't think we can do justice to this mission of 100 million until we really solve it for grocery sellers in the country. But it's also a very different problem than some other categories we have solved so far.”

“So I would say it's still very early but an area where we continue to invest and in the long run we really want to make it very easy for all kinds of small businesses especially in the grocery category because that's when we get closer to this number,” he informed.