Meesho becomes first horizontal e-commerce company to attain profitability

Meesho, backed by SoftBank, has announced it is the first horizontal e-commerce firm in India to reach profitability. The company claimed to have attained profitability at a consolidated profit after tax (PAT) level, encompassing all costs, including employee stock ownership plans (ESOPs), across all its divisions and categories. Having embarked on its journey towards profitability last year, Meesho stated it achieved this industry-first achievement well ahead of the expected timeline, as of July 2023.

“From our inception, we have been driven by a vision to empower millions of small businesses, entrepreneurs and customers. Today’s milestone is a testament to the unwavering dedication of the entire Meesho family,” stated Vidit Aatrey, chief executive officer and founder of Meesho. “As the first horizontal e-commerce platform to achieve profitability in India, we remain committed to driving sustainable growth, democratising e-commerce for everyone and unlocking the true potential of India’s heartland.”

A horizontal e-marketplace such as Meesho combines markets with numerous retailers from various industries into a digital one-stop shop to achieve broader coverage. It competes with players such as Walmart-owned Flipkart, Amazon and JioMart, backed by Reliance.

“In the last 12 months, Meesho has experienced rapid growth, with order volumes increasing by 43 per cent, culminating in over a billion orders,” disclosed Dhiresh Bansal, chief financial officer at Meesho, in an interview with Business Standard.

Approximately 85 per cent of the orders came from returning users, demonstrating user retention. The horizontal nature of Meesho is highlighted as non-fashion categories have surged by over 120 per cent in this period. The firm revealed that every category is profitable on a standalone basis.

Bansal stated that over the last 12 months, revenue surged impressively by 54 per cent, driven by substantial growth in order volumes and monetisation rate. “Meesho recorded $400 million in revenue from January to June 2023, with an annualised revenue of over $800 million,” said Bansal.

The company is targeting revenue of Rs 10,000 crore by the financial year 2025.

Despite significant reductions in customer acquisition cost (CAC) and marketing spending by 80 per cent year-on-year, Meesho claims to remain the most downloaded shopping app in India. It has served over 140 million unique transacting users in the last 12 months. Meesho also reported a 60 per cent year-on-year reduction in tech costs, further bolstering its operational efficiency.

Currently, Meesho is processing 3.5 million orders per day. What helped it achieve profitability, the firm says, is its focus on capital efficiency and an asset-light business model. Meesho operates on a 0 per cent commission model, offering a lucrative proposition for its sellers, who are primarily small businesses and individual entrepreneurs. There is also a strategic focus on servicing tier 3 and tier 4 cities, thus reaching new-to-e-commerce users. By offering products at affordable prices, Meesho claims to not only empower sellers but also enable millions of customers across India’s heartland to access a wide variety of goods at low costs, further democratising e-commerce for everyone. The firm’s asset-light model, with 80 per cent utilisation in third-party logistics providers, also contributed to the creation of positive unit economics, providing a competitive advantage.

This year, the platform also became the world’s fastest shopping app to register 500 million downloads and to cross a 1 million seller base.