SoftBank-backed e-commerce firm Meesho, which has emerged as the third alternative to the Flipkart-Amazon duopoly, is growing faster than India’s overall online retail market, according to equity research firm Jefferies. In a recent note, the brokerage house states that Meesho’s value-first unbranded assortment targeted at mid-to-low-income households in Tier 2+ cities has led to a GMV growth of 9x to $4.5 billion on the platform over the last two years (CY20-CY22). As per Jefferies’ findings, “65 per cent products on Meesho are cheaper by 20-30 per cent versus other platforms.”
“Indian e-commerce has traditionally been skewed in favour of high-income consumers and branded suppliers. The AOVs [Average Order Value] of traditional platforms are well over Rs 1,000, compared with sub-Rs 350 for Meesho which also enjoys industry-leading engagements,” Jefferies explained.
Meesho also processed over one billion orders in 2022, growing at 2.2x year-on-year, and served 140 million transacting users as it consciously expanded its offering from apparel and lifestyle to other categories. “As of 4QCY22, 50 per cent of Meesho's GMV was from non-apparel categories as against just a 30 per cent share in 4QCY20,” Jefferies said.
The platform currently holds a 7 per cent share in India’s e-commerce market, and is the No. 3 player behind Flipkart Group (38 per cent) and Amazon (30 per cent) in terms of GMV split. While Flipkart and Amazon continue to be much larger platforms, Meesho’s uniqueness hasn’t gone unnoticed either.
Jefferies said: “Meesho had an impressive 120 million average monthly active users on its platform during CY22. Over the last two years, Meesho added ~100 million MAUs, much higher than additions by peers. Meesho scores well on all stages of an online purchase journey, including awareness (measured by app downloads), consideration (measured by MAUs) and transaction (measured by MTUs).”
Additionally, unlike its peers, Meesho has been a zero-commission platform since mid-2021. Its key revenue streams include fulfillment charges and ad income (which is currently 6 per cent of revenues, and the company looks to double over time). “Against the take-rates charged by competition who have a convenience-first model, Meesho's fulfilment charges are lower. This allows it to offer much lower prices to customers vs the same product for competition. In CY22, Meesho clocked $670 million in revenues, which implies a 15 per cent take-rate, the bulk of which was from fulfillment charges,” per Jefferies’ report.
The equity research firm also found that Meesho now accounts for a majority of India’s third-party e-logistics shipment volume per year. “India's annual e-logistics shipment volume is at around 3.5 billion, of which 50 per cent is captive (primarily Flipkart and Amazon) and the rest 50 per cent is third party. Of the 1.8 billion 3PL volumes, Meesho holds the majority share, making them a systemically important platform for the logistics partners. The scale offers Meesho the ability to negotiate better with the 3PL partners,” Jefferies noted.
Meesho’s leadership has gone on record to say that the company is striving to attain profitability by FY24, and has cut down its cash burn significantly (to near-zero) over the last 12-15 months. Even though funding has dried up post September 2021, Meesho’s investors told Business Today recently that it has enough cash in the bank and nearly two years of runway.
“Over the last few quarters, we have seen rising traction with users across the country flocking to the platform. With economies of scale kicking in and our strong focus on profitable growth, we are very close to becoming EBITDA-positive. Our key business differentiators such as an asset-light business model have proven to be effective levers in this journey,” Meesho CFO Dhiresh Bansal said in a statement.
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