Meesho Business Model: How Meesho Make Money?
What is Meesho?
Meesho is a social commerce platform that allows users to sell products online via social media sites such as Facebook, WhatsApp, and Instagram.
The platform was founded in 2015 by IIT Delhi alumni Vidit Aatrey and Sanjeev Barnwal to make it easier for anyone (especially women) in smaller towns and cities to develop and launch their own ecommerce businesses. It is currently valued at $4.9 billion.
In contrast to other e-commerce platforms, Meesho is a social commerce business. That is, products are not sold directly to customers. Instead, it provides a platform for resellers to connect with manufacturers and suppliers and to sell products via their own social media channels.
Meesho's unique selling proposition is that its users can "resell" products listed by suppliers in order to earn a profit margin. This is essentially a simplified dropshipping business model.
Signing up for a Meesho account requires only a smartphone. Once you've created an account, you can peruse various products listed by suppliers. You can distribute these white-label products on social media platforms such as WhatsApp, Facebook, and Instagram at your own price (cost price plus your profit).
The Idea Behind Meesho's Business Model
Even as sites like Flipkart and Amazon made online shopping more prevalent in India, many people, particularly the older generation and those from non-metropolitan areas, did not trust these sites.
For their retail needs, convenience stores, small vendors, and other local businesses were more valuable and reliable.
In addition, numerous visionary entrepreneurs in India lack the necessary resources and a sales platform. The lack of an online presence prevents housewives, students, and stay-at-home mothers from launching their own businesses.
In 2015, entrepreneurs Sanjeev Barnwal and Vidit Aatrey began generating ideas for their company, "FashNear," after recognizing this trend. Initially, they focused on developing a hyperlocal business model for fashion and retail that would connect local sellers with internet consumers; they dubbed this initiative "Swiggy for Fashion." However, there were numerous obstacles associated with the execution of the idea and the logistics of the model.
Based on market research and consumer behavior knowledge, FashNear was renamed "Meri E-Shop" (My E-Shop) or Meesho. It was one of the first platforms in India to permit local merchants to cater to an online user base and promote their stores via social networks.
Meesho's business plan quickly gained traction with local merchants and received backing from a number of investors. It was one of three Indian companies selected by Y-Combinator, a prominent California startup accelerator, for a three-month, $120,000 programme in 2016.
Who Are Meesho’s Customers?
Meesho employs a two-sided marketplace model and serves two primary customer segments:
Meesho primarily caters to first-time internet users in small towns and rural areas who desire high-quality, dependable products at affordable prices. They are typically more price-conscious and have little faith in online shopping due to a fear of fraud. According to the company, over 70% of its customers are from tier 2 and tier 3 cities, such as Jhansi, Mathura, and Dehradun.
Resellers are customers who serve as intermediaries between Meesho and end users. They use Meesho's platform to source products, which they then resell at a profit to their social network. Meesho has more than 15 million resellers from India on its platform as of 2022. The majority of these individuals are housewives, students, and young professionals who use social media platforms such as WhatsApp, Facebook, and Instagram to sell products to their personal networks.
How Does Meesho Operate?
Meesho's philosophy is to "Socialize Shopping," which means that people should be able to shop with their friends and family without fear of being scammed.
A customer contacts a Meesho reseller, who then purchases the product from the Meesho platform and resells it to the customer at a slight markup.
Meesho is so successful because it combines the traditional ecommerce business model with the social selling and dropshipping business models.
These are Meesho's core operations. Let's examine some additional factors.
Meesho Revenue Model
In addition to providing a one-stop solution for all the needs of sellers, customers, and resellers, Meesho's platform is monetized in a novel way.
Meesho, unlike any other marketplace, charges:
No commission on product margins
No penalty for order cancellation, late shipment, or any other errors.
No listing fees
What does this signifier?
It means that the entire price difference between what a product is purchased for and what it is sold for is retained by the seller.
But if Meesho does not charge sellers, how does it generate revenue?
Meesho Revenue Streams
Meesho has developed a novel method to monetize its platform by offering the following fee-based services:
Meesho charges resellers and customers for shipping costs. This shipping fee varies significantly based on:
Weight of Package
The business has divided delivery into three segments — local, regional, and national — and charges different shipping rates for each.
A portion of the shipping cost is paid to the shipping partner, and the remainder is profit for the business.
However, the company includes the cost of shipping in the final price displayed to the customer and portrays the product offer as including free shipping in order to increase its desirability.
Advertisements & Promotion:
The company offers to run cost-per-click advertising campaigns for sellers who wish to promote their products. The promoted advertisements are prioritized in search results, receive increased visibility on the homepage, and ultimately result in increased sales.
The advertising expenses are deducted weekly from the seller payouts.
The company charges the seller a shipping fee for returned products. Additionally, the company penalizes sellers who choose "Next Day Delivery" but fail to deliver on time by 2.5% of the order value per day.
The company also charges a number of other seller penalties if the seller violates the terms of its supplier agreement.
Possibilities For Meesho
Meesho is currently engaging in full-fledged e-commerce wars with existing marketplaces, while maintaining its core reselling business model.
As of 2022, 75% of Meesho's orders come directly from consumers, with the remaining 25% coming from resellers.
It would be fascinating to observe Meesho's efforts to strengthen its relationship with resellers, which forms the basis of its entire social commerce strategy. Despite this, Meesho appears to have a bright future based on its solid unit economics.
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