Meesho’s losses near Rs 3,248 crore as expenses rise 4X in FY22

Meesho, the e-commerce platform, saw its losses mushroom to Rs 3,248 crore in financial year (FY) 2022, an increase of 550% from Rs 499 crore that the startup reported in the preceding fiscal year, on the back of higher logistics and advertising expenses.

The Meta-backed startup’s total expenses in the year increased to Rs 6,607 crore, up around 394% from Rs 1,337 crore that it spent in FY21. Nearly half of the costs came from logistics and fulfilment centres, which stood at Rs 2,829 crore — up from Rs 632 crore in FY21, representing a 347% jump year-on-year (y-o-y). The Bengaluru-based startup’s advertising and promotion spends also soared to Rs 2,579 crore, a massive – 508% – increase from Rs 424 crore that the company spent in FY21.

In comparison, the unicorn’s operating revenue climbed 308% y-o-y to Rs 3,232 crore in FY22. It stood at Rs 793 crore in FY21. Meesho’s zero commission model, where it collects no money from sellers, has helped the platform make gain market share in Tier 2 and beyond regions, which account for over 70% of Meesho’s business, Bernstein analysts had earlier said.

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The company earns money by running advertisements, promotions on the home page, among other ways.

That concentration on non-metro cities has however resulted in the company’s low average order value (AOV). The SoftBank-backed startup’s AOV stood at around Rs 400 which compares with Flipkart’s roughly Rs 3,000, according to several analysts. Further, in terms of gross merchandise value (GMV) Meesho was at about $5 billion as against Flipkart’s $23 billion and Amazon’s $20 billion, according to Bernstein.

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That largely after Meesho pivoted from a pure social-commerce platform to an e-commerce portal, in late 2021. The Vidit Aatrey-led firm now has about 70% of its business come from selling to customers (B2C) while selling to resellers, who eventually ship to customers, accounted for the remaining.

Meesho has so far raised over $1 billion and is valued at around $5 billon, according to Tracxn data. The company also aims to go public, and has also laid off about 450 employees in 2022 as it shut its grocery division. Meesho has reportedly cut its monthly burn by 90% to $4 million in January, down 90% from $40 million it was burning earlier as it paves its path towards profitability.