Have you wondered how meesho earns money? if you don’t know, read this article on the meesho business model.
According to TechCrunch, Meesho is valued at over $4.9 billion, backed by several high-profile investors. This social e-commerce startup boasts 100M+ App downloads and 125+ active customers.
What is Meesho?
Meesho is a social commerce platform that enables users to sell products online through social media platforms like Facebook, WhatsApp, and Instagram.
But unlike other ecommerce platforms, Meesho is a social commerce enterprise. That is, it does not sell the product directly to the customers. Instead, it provides a platform for resellers to connect with manufacturers and suppliers and sell products through their social media channels.
Meesho’s unique selling proposition is that its users can ‘resell’ products listed by suppliers to earn margin rates. It is a dropshipping model of business that has been simplified.
All you need is a smartphone to sign up for a Meesho account. Once created, you can browse through the various products listed by the suppliers. You can share these products as white-label at your cost (cost price + your profit) on social media platforms like WhatsApp, Facebook, and Instagram.
Founder Of Meesho
Meesho was founded by IIT Delhi graduates BATCHMATES Vidit Atre and Sanjeev Baranwal in 2015 after leaving their jobs at InMobi.
The duo started a startup named Fashnear, a hyper-local shopping app for fashion curating inventory from nearby fashion stores. Prospects could choose three items from nearby fashion shops/boutiques, and a delivery person would fulfill that order. Customers could pick the ones they want, pay for them, and return the rest.
Yet, Fashnear didn’t work out well because:
- The founders failed to cope with the demand for instant delivery.
- Low-profit margins as Fashnear sold unbranded items.
This failure left founders with market insights from their interactions with shop owners.
Fashnear pivoted to enable small, unorganized sellers to open their online shops. The duo named their new company “Meesho.”
How does Meesho work?
Meesho is a social eCommerce startup helping customers access products ranging from apparel, electronics, and jewelry at a lower price. Over 70% of customers come from Tier 2/3+ cities. These customers are generally naturally price-conscious yet willing to buy quality products.
“My first order from Meesho was nice and was cheaper than e-commerce Websites like Flipkart and Amazon,” ~ says Kusum, a frequent Meesho customer.
The products listed by the sellers or suppliers are being pushed by resellers, which helps the Meesho model to scale rapidly.
Consider the reseller as an affiliate marketer that helps suppliers find buyers for its products while charging a commission over the top. These resellers are usually homemakers or fashion influencers who operate WhatsApp and Facebook groups, with hundreds of potential buyers looking for something to buy.
These resellers already have the trust and loyalty of their group members, which they utilize to acquire customers.
So, how does Meesho fit in this seller-reseller model?
Once they ordered something from the seller, the reseller had to deal with product packaging, delivery, payments, etc.
Meesho made this whole process of product distribution easier for the reseller.
Now, the reseller can easily suggest products to her audience from the curated digital catalog on the app. That means the best reseller won’t run out of items to sell.
Once a buyer shows an interest in a specific product, the reseller needs to enter the buyer’s address & add their margin, and the product will be shipped by the Meesho logistic partners from the seller’s place.
Most Meesho resellers are Indian homemakers looking to earn money or start their businesses but couldn’t do so before because of a lack of capital requirements. With Meesho, these housewives get all the necessary tools, resources, and guidance to start their online businesses from the comfort of their homes.
Who Are Meesho Customers?
Meesho operates on a two-way marketplace model and has two main customer segments:
Consumers: Meesho primarily targets first-time internet users in small towns and rural areas who want good quality and reliable products at reasonable prices. They are generally more price-conscious and do not rely much on online shopping for fear of scams. According to the company, more than 70% of its customers are from Tier 2 and Tier 3 cities like Jhansi, Mathura, Dehradun, etc.
Resellers: Resellers are customers who act as middlemen between Meesho and the end consumers. They use Meesho’s platform to source products and sell them on their social networks at a marked price. As of 2022, Meesho has over 15 million resellers on its platform across India. These are primarily homemakers, students, and young professionals who use social media platforms like WhatsApp, Facebook, and Instagram to reach their network to sell products.
What makes Meesho different from its peers?
Meesho was one of the first players to enter the Indian social e-commerce space, but in the last couple of years, we’ve seen startups like Bulbul, Simsim, Citymall, and Glowroad capture a good share in the market.
Recently, Flipkart also launched its social e-commerce platform Shopsy app to empower aspiring local entrepreneurs to set up online shops.
In addition, Shopsy has a zero-commission model (similar to Meesho), which makes it a no-brainer for Tier-II and above suppliers to sell their products on the platform.
So, what’s Meesho’s secret sauce to tackle heavy competition in the market?
It’s Meesho Logistics Network. Let’s understand this together.
As we know, Meesho primarily targets tier-2/3+ buyers, who usually order cheaper products, which is why Meesho’s average order value (AOV) is Rs 400-500.
That means Meesho is catching up with its competitors (& large e-commerce platforms) on large daily order volumes offering their logistic partners high utilization.
With this, Meesho can reduce its logistic cost and save money simultaneously. These savings get passed on to suppliers making the platform a “supplier-friendly” place to sell.
This unique proposition is a bit challenging for the competitors to crack within a short time.
Meesho Business Model & Financials
Meesho’s revenue model is somewhat similar to any other social E-commerce business. Earlier, their primary source of revenue was a commission, but from August, the platform stopped charging any commission, becoming among the few marketplaces to offer 0% commission.
Currently, The primary source of income for Meesho is through Ads & Rank push. Like Amazon & Flipkart, Meesho also allows its suppliers to run ads and showcase their products to a broader set of users. The best part is that the seller will be charged only when a customer clicks on his ad.
The other 2 Potential sources for Meesho to earn its revenue from:
- Selling of data: Meesho has a good amount of user data, a part of which it can sell to its partner companies. These partner companies can use this data to understand user needs and motivation to grow their business. However, Meesho claims to keep the sensitive data of its users safe with them.
- Logistics: Meesho has partnered with several logistics partners to cater to the delivery. Once the product is delivered, Meesho can pay a small portion of the delivery charges to its delivery partners.
Meesho Cost Structure
Running a marketplace is not an easy feat and comes with many costs. Here’s a quick run-down of the Meesho cost structure:
Meesho has built a strong technology team constantly working on improving the platform. The technology costs include server costs, CDN costs, and other related infrastructure costs.
Meesho spends a lot of money on marketing and customer acquisition. The company has run several TV commercials and other offline campaigns. It also spends a significant amount of money on online advertisements.
The business’s day-to-day operations include costs such as rent, order fulfillment, customer support, etc.
Payment Processing Costs
Since Meesho uses third-party payment gateways (like Paytm, PhonePe, etc.), a small percentage of each transaction is charged as the payment processing fee.
Meesho has to incur the logistics cost for each order placed on its platform. The customers generally bear this cost, but Meesho also runs a small portion.
General & Administration Costs
It includes employee salaries, legal and professional fees, and general overhead costs.
That’s all for now, if we missed something to mention in this article on Meesho Business Model, please let us know in the comments section. We love to read your comments and suggestions.