In a recent interview with CNBC-TV18, Vidit Aatrey, the CEO of Meesho, articulated a vision that has sparked excitement and curiosity across India. He spoke of a mission to reach 100 million; a tagline that raises eyebrows and prompts one to ponder its significance. So, what does this ambitious mission entail?
At the heart of Vidit Aatrey's vision lies a fundamental truth: small businesses are the lifeblood of India's economy. In a country, where tradition and entrepreneurship intersect, these enterprises have played a pivotal role in driving economic growth, fostering innovation, and providing livelihoods to millions. It's not just a matter of scale; it's a matter of survival and prosperity.
According to Aatrey, India boasts approximately 60 million small businesses, encompassing both registered and unregistered entities. This staggering number underscores the pivotal role these enterprises play in shaping India's economic narrative. Moreover, when one peers into the realm of retail, it becomes apparent that small businesses are the driving force, contributing to a remarkable 85 percent of the sector's activity. It's undeniable; a substantial portion of India's economic engine is powered by these enterprising individuals.
Below is the verbatim transcript of the interview.
Q: Mission to 100 million, what is the big dream? What is the big play here? What is the big idea?
A: Mission to 100 million — a lot of people here have been asking me this; it's a very exciting tagline but what it really means? So if you look at today, India’s, small businesses by most accounts registered, unregistered are about 60 million small businesses. And if you look at retail in India, 85 percent of that is driven by small businesses. So a very large part of the entire economy in India is led by small businesses.
Today, if you look at online, out of the 60 million, only about 1.5 million to 2 million SMEs are selling online. When the pandemic happened, we heard so many stories of small businesses who said if I was online, I would have been able to kind of continue my business, continue my income in the family and things would have been much better. But things were much harder for them because they were not online, where everyone had to move online. So everyone realises that being online is important, but still a very small part of small businesses in India are online.
As Meesho, we've taken a goal of democratising internet commerce for 100 million small businesses, so that's what Mission to 100 million is.
Q: That's a bold target and we hope you achieve that soon.
A: So basically, a number that we have taken for the next few years, something which is much closer, much more real is, as a company we have taken a goal of having 10 million small businesses selling on the Meesho platform by 2027.
Q: What makes you bullish with it? How are you going to achieve this target? If you can throw some light on that?
A: No, I'm very excited and very optimistic for many reasons. Some tailwinds that have been with all of us, I think, 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 the internet penetration, reliability, everything is improving, digitisation happening because of things like UPI and ONDC coming, so a lot of infrastructure is kind of happening.
Apart from that I would say, a big thing which is going to happen very soon is non-GST sellers now in India will be allowed to sell online, which was not the case so far. Only GST sellers, which is a very small amount, were allowed to kind of come online, today we have about 1.3 million sellers who are selling on the Meesho platform, all of them are GST registered. In our category, less than 10 percent of all businesses are registered with GST. So a very small part of businesses were allowed to sell online. I think that will change starting this October. So again, that's a big tailwind I would say.
Q: You mentioned the fact that Meesho’s mission is to democratise e-commerce for everyone. How important is this for you? And how are you doing that at Meesho?
A: I think it's very important because its a core part of our mission statement. Our mission statement, the way we write, is to democratise internet commerce for a billion consumers and 100 million small businesses. So as core as something can be for our business is this and by the way, we have done lots of things to stay true to this mission. The number one thing is we're a zero commission platform. We don't charge any commission to our small businesses — nothing at all. We innovated on our business model saying, we will enable these small businesses to come online and not make money at all by charging commission. As a business we were always straight, very true to marketplace principles, we don't force them to keep it in the warehouse, we don't take inventory we've never done any private tables, will never do it so we don't compete with a small businesses. So again, as a business we have been from day one very oriented towards making these small businesses successful rather than competing with them or making it harder for them to come online and become successful.
Q: Meesho has turned profitable and which is at a consolidated profit after tax level in the last 12 months. In fact, your order volumes have grown by 43 percent, your revenue has surged by 54% and every category is profitable on a standalone basis. So that's a huge milestone to achieve. Tell me how have you been able to drive growth and operational efficiency?
A: I would say there are a lot of things coming together. The team just came together and took this goal of making it happen. I think a lot of that inspiration came from proving that our business model works. 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.
If I have to pick few things that we have done to kind of get here, first, the brand of the platform has gotten stronger and stronger. We have reduced our marketing spends over the last one year by a large amount. We're still for the last 12 months the most downloaded shopping app in India because the word of mouth is so strong for the brand and the organic installs, organic number of people who are coming to the app has been growing.
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 to be in every category, we've been very selective, we don't go out and sell every possible category out there on our platform, we've been very selective on categories that are profitable, we have focused on that and scaled that.
Q: So you're not competing with the Amazon’s of the world. You're not?
A: From day one we've been very focused on small businesses and really building it for India and I think we will stay true to that irrespective of what the ecosystem or competition does.
Q: Can you give us a sense of your topline? We understand that the profit figure is under Rs 10 crore? Can you confirm that?
A: We just became profitable in July. So I would say single digit crore, but that number, again, you reach here, and now it continues to grow.
Q: You have a target that you can share?
A: No, I don't think I can share yet, but soon as we make more and more progress, we will continue to share more and it will come out. But some of the other things you were asking, if you look at topline, in the last one year, we grew our orders by about 43 percent. Just in the last 12 months, we delivered about a billion orders on our platform. So again, while becoming profitable, we did not take away the focus from growth, we've continued good growth in the platform and I think that will stay.
Q: Can you throw some light on Meesho’s tech edge? How have you adopted deep tech technologies, artificial intelligence, and that has been your USP?
A: A lot of that comes from the kind of users we serve. If you look at the kind of consumers or sellers we serve, they are not the most tech savvy. So we've always had a lot more burden on our tech to kind of make it much easier, simple. For example, we were the first ones to innovate around - even seven years ago we allowed sellers to take photographs from their phone and upload a listing. Before us people used to believe you can't do it, you don't get any metatag information, which category, the photograph is not of great quality, people don't understand this product. So we leveraged a lot of AI and ML. So as soon as you upload the photograph, we will tell what kind of category does it belong to, what color it has, so that the seller doesn't have to figure out all of this. Some of our small sellers find it very difficult to do it.
So like this, there are lots of things we have done on consumers. Our app is available in multiple languages. And, again, some of these products are very long tail, all kinds of photographs come, so how do you kind of make it usable and very accessible to all kinds of consumers. So I would say tech is at the core of everything that we do. And that's how we've been able to solve this problem as we started eight years ago, until today. We're still investing more and more of AI around customer support experience, it can improve a lot with some of the generative AI things that are happening. We are also using a lot of generative AI around sellers improving their listing quality, can they add better content which improves the marketability of some of the products they are uploading? Can it grow their business, we want to build some tools around it? So those are I would say some of the new things we are adding. However we have always invested aggressively behind technology- AI, ML for growing our platform much faster and making it much easier for everyone in our ecosystem.
Q: Meesho has a run rate of 3.5 million orders per day and 85 percent of the orders in the last 12 months have actually come from returning users. In fact, non-fashion categories have also surged over 120 percent. So, take us through the top three categories and the top three markets of Meesho?
A: Let me share both, top three overall and what has been like very fast growing, because that's interesting. When we started the business about eight years ago, we were very focused on apparel because we realised a lot of Indian small businesses were engaged in Indian ethnic fashion and that's the category we focused on, that was the largest part of the business for many years. But if we look at the last three, four years, non-apparel has grown very, very fast. So I would say some of the fastest growing categories in the platform, our kids, baby, beauty, and wellness, even long tail categories around books, automotive, some of those have scaled very, very fast and they continue to grow at a very fast pace.
Some of the old categories in fashion, like apparel, accessories, footwear, they are still very, very strong and as more and more people have access to them across the country, we see demand scaling, but some of the non-apparel is growing much, much faster.
Q: Meesho like you also mentioned earlier that has been at the forefront of SMB enablement, you've announced that you have 1.3 million sellers onboard and you you're the fastest to reach that milestone as well. How do you see this evolving?
A: Some of the things that have always helped us are these long term tailwinds, which is more and more consumers coming online. So today, there are about 200 to 250 million people all together who transact online in India, out of 1.5 billion people. I think it's still very early days, about 5-6 percent of all retail is happening online. If you compare with countries like China, you look at all the developed countries in the West, India should be much, much higher than this 5-6 percent. So I think it's still very, very early days. And we being part of this journey is anyways pushing us forward, we are seeing lots and lots of consumers coming on our platform and scaling. In last 12 months, we did about a billion orders, that's a large volume, very few countries are able to do it. But even at this pace, for the last 12 months, we grew our order base by 43 percent. So at a large base, we continue to scale this up at a very fast pace. I think that's what evolution is going to be for the next 10 years. Some of these tailwinds will continue both on demand and seller side, we just have to keep doing a better job around providing better technology, better experience, so that it continues to scale up.
Q: So like you said, you're seeing these tailwinds growing, so aren't you not seeing some inflationary pressures? What is the average amount that the consumer is spending? Has it come back? Is it getting better?
A: We see lots of seasonality around this data. So I don't know if we can derive some of these insights, some of these numbers go up and go down. But on the broad thing around consumers have inflationary pressures, how does that impact our platform. What we have seen is generally offers a big opportunity to us so as a platform, we remove the middleman, get consumers to transact from small businesses directly, most of them are manufacturers. 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 their channel and move towards value a lot more as compared to like 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're able to provide much better value and we see a lot more consumers move to this.
So I think even inflationary pressures, some of the macro things you're talking about, is only helping some of these small businesses get a lot more business online.
Q: Give us a sense of the next quarter, how is it looking like? It is the start of the festive season. What are you aiming at? What are your customers should be watching out for?
A: Festive season always like a very exciting part of our business. We see even small businesses on the platform are very excited. They want us to kind of share more insights, what kinds of things, 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 in this time. So again, it's a time where we are aggressively investing. We just started the festive season with a big brand campaign recently we did it and we saw it get a lot of great coverage organically inorganically. So I think we are aggressively investing behind it. And we believe the festive season like last few years should be very good. A lot more new consumers will try online for the first time.
Q: So any new offerings or any new categories in the pipeline?
A: We've been adding new categories continuously. As I said, some of the fastest growing categories, also the new categories in the platform, we didn't have books a year ago, we didn't have automotive or some of the electronics on the platform, like a year, a year and a half ago. So all of these are new categories. And they're scaling. And some of the new categories will keep coming. Our goal in the long run is to be a one stop shop for consumers to come and find across all categories. So if we don't have something, eventually we'll have it. But we've been adding gradually, as we kind of solve all these problems for small businesses in those categories, make it easier for them. And then we continue to launch these and scale these categories.
Q: You just said that you want to be a one stop shop for all sellers. So what new areas would you like to expand into? Is groceries one area that perhaps you would want to get those sellers on board as well?
A: Yes the plan is there. I would say it's still very early. But groceries 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 of the categories 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.
Q: Your last fundraise was in September 2021, and you have raised a $570 million in your Series F round. And you've often said that you've got sufficient funds at Meesho. So will your next round be through the public markets, will you be raising funds from there? What are the IPO plans?
A: Hopefully. Again, we haven't kind of fixed on a timeline deadline.
Q: You told me earlier, once we reach profitability, that's the next plan.
A: So we are closer to that. That's right. Internally, things we control, we control profitability, we control growth, and I would say we have done much better than the plans we had made as a company. So I think it's closer than when we last spoke about it.
Q: Are the investment bankers in place?
A: No, I don't think we are as close yet. But I would say it depends a lot on the timing when markets are open to kind of companies like us. But I would say all things in the right direction. And when we feel the timing is right, I think it'll happen. It'll happen soon. I don't think it's going to be much later. I would say, internally, we look at time period of the next two years, but yeah, should happen soon.
Q: I want to bring your focus to Open Network for Digital Commerce (ONDC). You joined the platform last year. What is the kind of impact? How has that worked out for you so far? And how big a role will this integration play in expanding India's eCommerce sector?
A: I think ONDC has always been - the mission of the ONDC is very close to us. Like it's around 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 the very early days. I would say, in terms of creating impact, it's still very early. How many people are buying, how many people are trying this, I think it has still started to take off in few categories that we have seen in news around mobility and food delivery, but some of the other categories still very early.
But as you said, we are integrated. We continue to work together very closely in terms of what kind of things need to be built for the consumer. So they want to try this more and more, and then we scale it. So I think all things again in the right direction, but still very early, but I would say 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.
Q: Let's now talk about your expansion plans, your global ambitions. What is the big plan as far as global operations go?
A: I don't think it's going to be global anytime soon. We are very focused. Our mission statement has been focused on India. India journey is still very early.5-6 percent of all commerce is happening online for a country where so many people are using other online services. I think, to me it just feels like a big opportunity that we haven't solved yet. So I don't think we're going to take away any of our mental focus on any other country except India. Many next years that we internally plan, it's all about India. And for that, I think we are very aggressive. It's about today we have close to 150 million people transacting on the Meesho platform in the last 12 months, in the next three years, how do we get closer to half a billion people transacting every year, how do we get to - as I said, by 2027, 10 million sellers across categories selling on the Meesho platform by 2027. I think this is the thing that we're focused on. And these are hard problems. These are scaled hard problems for India. And that's what keeps us excited and inspired.
Q: You spoken about your organic growth. Let's now talk about inorganic growth, any acquisitions in the pipeline?
A: I don't have anything. We continue to evaluate opportunities to be very frank, but we haven't found something which is very close to a mission statement yet, like someone who's building for the same consumer, same sellers.
Q: You want to reach the 10 million, you said groceries would be a big area, any acquisitions there?
A: All the things that we see currently are not focused so much on the kind of small businesses we are talking about, or our kind of consumers. So I think when we find something, we'll definitely act on it. But so far, we haven't. But I would say we are open to it. But when we see something interesting, we would love doing it, but so far, we haven't.
Q: Let me now talk to you about Meesho’s focus on mass media platforms. You've often said that consumers rely a lot on influencers, before they make any important purchases. So your view on regulating the social media, influencer marketing space. That plays a big role for you, right?
A: Yes, I think it has played a big role, I would want it to play even a bigger role. On a platform today on Meesho, when we speak to people we see a lot of discovery today starts on social platforms. And when we started the business that used to be WhatsApp, we're interestingly seeing some of the other platforms become a large part of people getting inspired and discovering new things before they come and fulfill their shopping needs. Some of this now starts on Instagram, some of that starts on YouTube and some of the other places. But I don't think the experience built out is so seamless today to see this product, to find somewhere else, all of that is still quite broken, and influences are enabling some of these consumers to find these products much better. So I believe it will grow because people are getting inspired by new needs on social platforms. So it will only go in one direction.
But the regulation is needed to make sure - people continue to have trust in what they see. All of that is expected. But in general, as a company, we believe that social - influences, I would say is part of social will continue to play a large part in how consumers discover, get inspired and essentially fulfill eventually their shopping needs. I think it'll be a large part of it. And Meesho 1.0 was always about leveraging some of these social funnels much better. And we continue to invest behind it like today, I would say for example, we now have lots of influencers, creating live videos on the Meesho platform already, like we see again, that is also one of the fastest growing parts of the business, growing at a very fast pace was almost negligible last year, has kind of grown significantly. So we see more and more consumers take recommendation from influencers, we believe it will be a large part of how ecommerce will go in the next 10 years. But how does it really work? I think everyone's still trying to figure it out. But I'm excited.
Q: The last few years have been challenging for founders in general. And there were questions raised on business models and you had a couple of layoffs at your company. But you've turned profitable, and you've put those questions to rest, the bottle has clearly worked. But tell me what have been the big learnings with it for you in this journey?
A: I think the biggest learning if I have to pick from all the top three, four is just the belief. You need to first have the belief that you can make it happen. I still remember two years ago, as a company we used to focus on only one thing which was on growth. Nothing else, because that's how we came where we were. We continue to solve problems for consumers and sellers and continue to scale it. And from then on at that point of time, we say we have to become profitable, how much time will it take? And like if you do just some simple linear planning, it will take many years. So first you needed belief. And I think that's what the entire team kind of spend most of their time on. How do we believe that we can get there without compromising some of the principles which I was talking about? A lot of people said, now will you charge commission now because you have to become profitable. We said we will not do it. Like we will stay true to our principles, true to our values, because character is really tested in times like this, like if you have everything available to you like you can pick any position it's very easy, but I think we stayed there. We did not change anything which is a very core part of the business in terms of its principles and values. And once we believe you can get here - we are the first horizontal eCommerce platform in the country to become profitable, though I would say we are the last one to start.
So a lot of this is because the belief. So I would say that's the biggest learning. You have to first believe it.
Q: First to get 1.3 million sellers, first to horizontally turn profitable, first to reach the 10 million goal and first to reach the 100 million as well?
A: Hopefully, yes, fingers crossed.
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