Meesho Online Shopping - Meesho's 30,000 Crore Valuation

Meesho Business Case Study – Meesho Online Shopping

Fortune lies at the bottom of the pyramid. Most of the growth opportunities lie at the bottom of the pyramid. Do you know which is the most selling ketchup in India? No, it’s not Kisan, it is Tops, why because it is affordable to all. And similar is the story of Meesho. A reselling app, today, has touched a valuation of Rs. 30,000 Crore. Now, how did all these things happen with Meesho?

Table of Contents

Meesho was started in 2015 by Vidit Aatrey and his friend Sanjeev Barnwal together. Both of them are IIT pass-outs. The fun fact is that start-ups began with some ideas and end up becoming somewhat different. So how did they reach the valuation of Rs? 30,000 Crore.

What are the factors behind this?

The first factor is Community Ecosystem.

What is the biggest problem in India?

Unemployment, so they have basically targeted two communities and focused on them. The first community is those people who want to do some small selling business. Basically, sellers and the second community are women. So they identified two problems with sellers.

First, they don’t have any platform. Many people would say that Amazon is there but the competition on Amazon is so tough that every seller can’t sustain it there. And the second problem that they observed as they don’t have good suppliers. So even if they are doing business but they are not successful in it because suppliers don’t provide quality products and customers curse them for poor quality.

Apart from this, they have focused on women. They spotted two problems with women as well. Actually, there is no identity in our country. Here I am not talking about metropolitan cities. If you look at tier 2, tier 3 cities, at villages then there is no strong personal identity for women.

And the second problem is Extra Income. There are so many women who have a lot of time. And they also want to utilize that extra time to earn extra money. And many women are single bread earners of the family, and they also need extra income. So they identified two problems each for women and for sellers. And to solve this they built a proper ecosystem.

Today Meesho has 70% women sellers.

What is the reason behind this? The reason is Ease of Selling. If you ask a woman to become FBA on Amazon and sell on Amazon, it is very tough for them to do it. But for a woman to do marketing with Whatsapp and Facebook is comparatively quite easy.

So they build such a system to empower women with which women, as well as other sellers, can easily sell the products with Whatsapp and Facebook and earn money. Now the interesting fact is that not just women but many people are benefited. How? See, when so many people particularly women came on the platform, so they, first of all, earned extra income. Along with that, they got empowered.

They got their identity. The most interesting fact is that the male sellers got inspired by women. If a lady can easily build such a great business on Meesho then we can also do it. So many people got profit out of this. And that built an ecosystem of an entire community.

The next strategy is Zero Commission Model. You take any platform such as Flipkart, Myntra, or amazon, and everywhere sellers have a commission to sell but there is no commission on Meesho, zero commission. Brother rise above the commission mentality. There are other ways of earning. So how does Meesho actually earn? Well, their first way is Shipping. All the people who sell products on Meesho, their shipping is controlled by Meesho.

It means that if you have promoted products through a catalog and they have placed orders so you have earned through it but your product is delivered to the customer by Meesho. So Meesho earns through shipping charges as the shipping is in bulk quantity. That is also one of their revenue sources. The second way is Advertising, all the suppliers on Meesho, and all the sellers on Meesho are charged for advertising.

Meesho says to them that if they have to rank their product higher then pay us. If you have to promote your products then pay the fee. Meesho charges them advertising fees. Why do they do this? What happens because of this is sellers on Meesho see more of the products that they have advertised.

So they most likely promote those products and their sale are more. Simple concept. Apart from this, what is the third revenue stream of Meesho? That is a Penalty. Meesho generates good revenue through penalties as well.

How? Many suppliers are there who can not supply the products on time or supply poor quality products Meesho charges a penalty for that. And they earn through this penalty as well. Apart from this, there are three more revenue streams for Meesho which I will discuss later. Now the question is will Meesho be profitable? Because till now it is loss-making.

Seller Centricity

Pay attention to your profit as well. You also want to know the profitability scene of Meesho, right? To understand the next strategy. Seller Centricity, what does this mean? Seller Centric means platform in favor of the seller. The local sellers used to face some problems. They identified three problems, the first is shipping, if not selling on Amazon, local sellers’ shipping problem would be there, second is supplier, would not get supplier on time.

Sometimes their supplier doesn’t deliver quality products. And the third problem they were facing was they had to manage inventory. You need money for storing goods, it’s not for free. Meesho said, forget all this and come with us. Sell comfortably, no problem at all. We will manage everything, you will just have to sell. Along with this, they have built another thing called local relevance.

What does this mean? This means if you are in Kerala and you open the Meesho app as a seller then you will find all the local products from Kerala, locally relevant products from Kerala. Because brother that’s what sells over there. If you open the Meesho app in Delhi then you will find the products in and around Delhi. Because that is sold more in that region. But if someone wants to wear a Kerala saree in Delhi then it is done differently but building local relevance is very important.

Why? Because most of the sellers on Meeshosell are in their closed circle or known circle. It means women, especially women, ladies sell more in their circle. They share the catalog on Whatsapp. Now if a lady is from Delhi then most of the people in her circle would be from Delhi itself and if a lady is from Keralathen all of the people in the circle would be Keralites only. So for them having a locally relevant product is very important.

For seller centricity, you have to give them freedom. Meesho has so much freedom. First is the Freedom of Profit. You can select your profit. Select your product and add profit to it and forward that catalog further. And sell comfortably. Apart from this, the second problem that you have is which product should be sold.

We don’t have a choice. Most of the local sellers can sell only those products for which they have suppliers but on Meesho there are so many suppliers today, more than 23 lakh suppliers are there, so you can sell the products of your choice, no problem whatsoever. Apart from that you need not worry about shipping as Meesho will handle it.

And the most interesting fact is owned Branding, all the sellers or resellers can sell the products under their brand name. How? This is quite simple. See the supplier selling unbranded products locally on Meesho.

But suppose there is a lady who has introduced her own brand, a personal boutique, Devine Fashion, now she is sharing the catalog through Whatsapp, and people who receive it, know Divine Fashion, so they are buying from Divine Fashion, the lady is establishing her brand, she is earning. Along with that the sellers or suppliers on Meesho are also earning money.

In this, they had a small problem with Inventory Management. They solved it through Live Inventory Systems. Basically what used to happen was the re-sellers who used to send the catalog to people, by the time it was received by them, the products would be out of stock by that time. Now the re-seller would not come to know that it is out of stock until he has not checked. And the person who has received the catalog, the product is out of stock for him.

Meesho Business Case Study - Meesho's 30,000 Crore Valuation

The problem was the re-seller had to wait for the products to be made available so that he could inform the same customer so that he can buy. They solved this by Live Inventory Management. This means if the product is out of stock then it will be visible to both the customer and re-seller. And as soon as it is available in stock, the customer will automatically get the notification of the same and the re-seller will also get a notification.

So that you can promote it comfortably. These are small points in business that are neglected and business grows if they are taken care of. The next strategy is Community Mentorship. You go to Amazon & ask top sellers by approaching them that you want to sell your products, so help me. He would not entertain you at all.No response.

Why? Because Amazon is a very competitive marketplace. Whereas Meesho is not like that. If you observe on Meesho, the top sellers help new re-sellers. They help the new re-sellers. They mentor them and help them so that they can sell their products and can build their business. The reason behind this is that the Meesho is a community application, in a way it is a reselling application but it is community-based. So there is no competition with anybody.

Why? Because the selling that you are doing is done through your own marketing. Imagine that there is a supplier, through him you are getting the stock, two persons are going to sell, one is a top seller and the other is a new seller. Now the top seller would sell as much as possible because he does not sell on Meesho, he sells on different platforms, Meesho just helps him.

And the person who is a new seller, he may sell anywhere, it does not affect the top seller. That is why top sellers happily help new sellers. New sellers also offer them some reward in return. Also, the publicity of top sellers increases, and their recognition increases with this.

So with Meesho, there is no cutthroat competition like amazon where only the top 5-10 sellers earn money. The rest of the sellers are struggling. But that is not the case with Meesho. Anyone can join, may he be new or old, top seller or a beginner, he can easily start his earning and all these things are possible because of a mentorship program that is built in a community.

There are so many mentors on Meesho to help you that you can build your business as well. It’s a win-win situation for all. And because of this principle, Meesho has more than 1 Crore reseller. Because the platform is such that it supports the community and not individual. If you have to understand the profitability of Meesho then look at the next strategy which is Profit Acceleration.

One concept is earning profit now and the other is sacrificing now and then earning huge profit later. Just like Jio’s business model. How will Meesho do this? See I have not told you about the three revenue streams of Meesho earlier. Now listen to them. The first is Float. What does it mean? Float means float money.

Money that is floating, how will Meesho get it? As soon as a re-seller sells his products on Meesho, when the order is delivered to the customer then the re-seller gets the payment in his account after 15 days and the supplier gets the payment after a few days. Now for all these days, the money is there in Meesho’s account. As the number of sellers on Meesho increases the amount that Meesho keeps in its account also increases, it becomes crores of rupees, and that is floating money for Meesho.

This means the money is there with Meesho for 15 days which Meesho can lend as a loan to other people and can earn short-term interest from them. And you earn handsome interest even in 15 days as you are lending crores of rupees. This also can become a big revenue stream for Meesho in near future. Listen to the second one, Manufacturing. Meesho has so much data that they know which design is trending, which color is trending, at what price it is trending, which product is sold in which season, and how much the sell quantity is, all this data is already available with Meesho.

Now the data that Meesho has collected can be used by Meesho to enter the Manufacturing business. Now firstly as they will have mass production so the cost will come down and people who are selling on Meesho, the re-sellers can earn better margins. Apart from that Meesho will have another advantage, as Meesho is doing bulk manufacturing & using data while manufacturing so the inventory cost for Meesho will reduce.

As Meesho knows which are the seasonal products so they can manufacture in that season only. And the third one is Consulting, Meesho has so much data that they know everything. Now they can consult all the suppliers and will inform them which products they should keep, at what price, which are the seasonal products, so keep more stock of it, which inventory should they totally avoid, because of this the inventory cost increases unnecessarily, so remove this, don’t keep these products.

All this consulting will be provided by Meesho to all the suppliers on Meesho. And along with this, they can provide consulting services to the re-sellers as well in the future. As they have data, on the basis of which they can inform re-sellers that which product should be promoted more and the demand for which product is increasing so you promote this one more, it is more likely to sell. So Meesho can earn handsome revenue through this as well. And if you are willing to do then there are so many revenue streams other than commission. And Meesho is a sure-shot example of this.

Download MEESHO APP Now