Bengaluru-based e-commerce company, Meesho has reduced its cash burn by 90% in the last one year. The move is in line with the company’s aim to become earnings before interest, taxes, depreciation and amortization (Ebitda) positive by the end of this year.
Not just that, the company also reduced its server cost per order by 50% over the last one year. Speaking to FE, Sanjeev Barnwal, co-founder and CTO, Meesho, said, “On the road to Ebitda profitability, we have reduced our cash burn by about 90% in the last one year.”
The company doesn’t charge commission from sellers like most other e-commerce players. Meesho is using technology to increase its operational efficiency. It is also relying strongly on two key revenue streams – fulfillment charges and advertisement income.
Barnwal said AI has made significant contributions in helping the company reduce operating costs in a few areas, including taxonomy tagging (which involves assigning appropriate attribute values to product attributes). “By harnessing the capabilities of AI, we have automated this process, leading to faster and more efficient tagging. As a result, we have reduced overall costs by approximately 45%”, added Barnwal.
Meesho saw its losses surge to `3,248 crore in FY 2022, an increase of 550% from `499 crore that the startup reported in the preceding fiscal, on the back of higher logistics and advertising expenses.
The startup’s total expenses in FY22 increased to `6,607 crore, up by 394% from `1,337 crore that it spent in FY21. Nearly half of the costs came from logistics and fulfilment centres, which stood at `2,829 crore, up from `632 crore in FY21, representing a 347% jump year-on-year (y-o-y). The company’s advertising and promotion spends also soared to `2,579 crore, a massive 508% up from `424 crore that the firm spent in FY21.
This year, the startup has significantly reduced its IPL and other marketing spends. According to Jefferies, Meesho clocked one billion orders in 2022, a 2.2x YoY growth.
Barnwal, said, “We have integrated ONDC onto our platform. We are on the buyer’s side and we do not face any threat from such initiatives of government, because unlike other players, we already have zero-commission model in place.”
Founded in 2015 by IIT graduates, Vidit Aatrey and Sanjeev Barnwal, Meesho has a prominent position across multiple fashion and lifestyle categories. During the early years, Meesho primarily focussed on apparel, but has diversified into other lifestyle categories over time. Today, nearly half of its gross merchandise value (GMV) comes from non-apparel categories.