Meesho becomes first horizontal e-commerce company to attain profitability

E-commerce platform Meesho on Monday announced that it achieved profitability in July at the consolidated profit after tax (PAT) level, on the back of an uptick in order volumes and revenue, and cost cuts.

“As the first horizontal e-commerce platform in India to achieve profitability, we remain committed to sustainable growth, democratising e-commerce for all, and unlocking the true potential of India’s heartland,” said Vidit Aatrey, chief executive officer and founder of Meesho.

The slim profit in July for the Bengaluru-based firm — supported by the likes of SoftBank, Meta Platforms and Prosus — accounts for all costs across all divisions and categories of the company, including employee stock ownership plans. The firm declined to reveal the PAT figure but said it was in “single digits”, indicating it was under Rs. 10 crore.

“Over the past 12 months, Meesho has experienced significant growth, with a 43 per cent increase in order volume, culminating in over a billion orders,” Dhiresh Bansal, chief financial officer at Meesho, told Business Standard.

Bansal said revenue grew by 54 per cent over the past 12 months, propelled by a substantial increase in order volumes and monetisation rate. "Meesho recorded $400 million in revenue from January to June 2023,” said Bansal. “We anticipate ending the year with an annualised revenue exceeding $800 million.”

The company is targeting a revenue of Rs. 10,000 crore by 2025.

The firm began focusing on profitability last year, and claims to have turned a profit, a significant industry milestone, ahead of the projected timeline of October-December 2023.

Currently, Meesho processes 3.5 million orders daily. The firm attributes its profitability to a focus on capital efficiency and an asset-light business model. Meesho operates on a 0 per cent commission model, which provides a lucrative proposition for its sellers, primarily small businesses and individual entrepreneurs. The firm also strategically targets Tier-III and -IV cities, reaching out to consumers new to e-commerce.

"About 140 million people transacted on our platform over the last year, the majority of whom are from tier-2 and tier-3 cities and beyond," Bansal said.

The startup laid off around 250 employees in May and cut spending on customer acquisition, marketing, and server infrastructure. Meesho cut its customer acquisition cost (CAC) and marketing spend by 80 per cent year-on-year. It also saw a 60 per cent reduction in tech costs year-on-year, which helped operational efficiency.

Meesho's asset-light model, utilising third-party logistics providers at an 80 per cent rate, helped foster positive unit economics.

Around 85 per cent of orders came from returning users in the past 12 months. The company noted that non-fashion categories have witnessed more than 120 per cent growth in this period, with each category profitable on its own.

According to a recent Jefferies report, Meesho is experiencing fast growth and improving profitability in a highly competitive market, potentially reaching break-even ahead of larger rivals like Flipkart and Amazon in India. While smaller in size (in terms of gross merchandise value) than the Flipkart group and Amazon India, Meesho's average monthly active users count is about 55 per cent of these incumbent players. The report highlighted that Meesho had an impressive 120 million average monthly active users on its platform during the calendar year 2022.

Over the past two years, Meesho added about 100 million monthly active users, outpacing its peers. “Meesho is India's third largest e-commerce retailer with a CY22 gross merchandise value of $4.5 billion and a 7 per cent market share, growing much faster than the overall e-commerce market,” stated the Jefferies report.

Meesho recently became the fastest shopping app worldwide to cross 500 million cumulative downloads across Google Play and the iOS App Store, reaching this milestone in six years, according to data.ai, a leading mobile data analytics provider. More than half of these downloads (274 million) were achieved in 2022, with consumers across India flocking to the platform. The Android app of Meesho, at just 13.6 Mb, is the lightest e-commerce app in India on Play Store.