India’s social commerce market is expected to grow to $20 billion by 2025, up from $1-$1.5 billion in 2020. Analysts believe that social commerce can help connect more than 40 million small entrepreneurs across India. 85% of retailers using social commerce are small, offline-oriented business owners who are looking up to social commerce to drive their growth. Social commerce startup Meesho recently raised funding at a valuation of $4.9 billion.
Bangalore-based Meesho was founded in 2015 by IIT graduates and batchmates Sanjeev Barnwal and Vidit Aatrey. A few years after graduating from IIT, the two had set up a hyperlocal, on-demand fashion marketplace. The initial startup failed, but the two realized that there were several small businesses selling their wares online, but weren’t using their own websites to do so. These SMBs were relying on social media sites instead of eCommerce marketplaces sites like Amazon and Flipkart.
Back in the day, Facebook and WhatsApp both lacked e-commerce features. They didn’t allow for the much-needed search and payment capability. To fill this gap, the two founders set up Meesho in December 2015. Meesho is an online marketplace that connects suppliers a.k.a. manufacturers and distributors with customers on social media platforms such as WhatsApp, Facebook, and Instagram.
Traders, distributors, and manufacturers are the “sellers” who create a marketplace on the Meesho app. Individuals can become “resellers” when they promote and sell products curated from this marketplace within their social network. 80% of the resellers on its platform are women – Meesho believes it is helping women set up reselling businesses of their own without the need for capital. Meesho, in turn, provides a mobile store and takes care of delivery. As of April 2021, 13 million resellers and over 100,000 sellers were using Meesho. Meesho has expanded into every retail category, including fashion, lifestyle, personal care, electronics and accessories, automotive, and most recently, grocery.
Recently, Meesho also announced the launch of its own in-house analytics tool Meshlytics. It is a pure Koltin library that allows user apps to interact with all of its analytics platforms through a single interface. The tool makes it easier to integrate a new analytics platform or onboard existing events to a new platform.
Meesho earns commissions on each purchase made through the app. It recorded revenues of INR 341.6 crores (~$46.2 million) and losses of INR 315.4 crores (~$43 million) in fiscal 2020. More recent financials are not known. Meesho’s biggest expense is distribution costs that account for over 40% of its expenses.
Meesho has raised $1.1 billion in 11 rounds of funding led by investors including Trifecta Capital Advisors, Good Capital, Meta, Fidelity Management and Research Company, Prosus Ventures, SoftBank Vision Fund, Footpath Ventures, B Capital Group, and Cambium Grove Capital. Its most recent round was held in September 2021, where it raised $570 million and doubled its valuation to $4.9 billion.
The social commerce market is attracting several vendors. Flipkart, India’s largest e-commerce platform, launched its social commerce offering Shopsy last year and plans to add 25 million resellers by 2023. Small retailers are the backbone of the Indian retail economy, and companies like Meesho are helping these retailers leverage the digital world with the help of a growing reseller community. Meesho has a wide user base to tap into, and it can keep expanding its offerings by adding new product categories. For now, the company is burning through cash, and I find it difficult to see how its astronomical valuation is justified.
This segment is a part in the series : Indian Unicorns 2022