E-commerce firm Meesho has hit an annualised gross merchandise Value (GMV) of $4.5 billion during the current fiscal, a 100% year-on-year growth, Dhiresh Bansal, chief financial officer, told FE. The company, which posted a net loss of `3,248 crore in FY22 on a revenue of `3,232 crore, expects to turn profitable in FY24 as its cash burn is down by 90% in FY23 and it is cutting its advertising and promotional expenses considerably.
In FY22, Meesho’s revenues were up four times, while its losses had widened around six times, because the company was spending on marketing and promotional activities, Bansal said. For instance, in FY22, the company spent around ` 2,579 crore on advertising and promotional expenses, which was a six-fold rise compared to FY21.
“Typically, during high inflationary times, platforms such as ours, gain market share because consumers mostly go for less expensive goods,” Bansal said.
In the case of e-commerce, GMV is calculated as the total MRP value of goods sold in a given time period without including the cost of discounts.
Meesho, which initially began as a social commerce app for re-sellers, has pivoted into a majorly B2C e-commerce firm selling low-priced, long-tail goods across multiple categories. The e-commerce startup now has about 70% of its business come from selling to customers (B2C) while selling to resellers, who eventually ship to customers, account for the remaining.
Bansal said that roughly, about 50% of its overall GMV sales come from its apparel category, while other categories such as jewellery, accessories, beauty and personal care, electronics, home and kitchen, auto accessories, and pet food make up around 10% of the GMV.
While e-commerce behemoths such as Amazon and Flipkart battle it out in large categories such as home and kitchen electronics and smartphones to gain market share and GMV, Meesho has stayed away from these categories largely.
“We don’t sell smartphones or large electronic appliances, which are the lowest margin categories for existing large e-commerce firms. But apart from that, we do sell more affordable items such as Bluetooth headphones, and other kinds of electronic accessories, which make up another 10% in terms of the overall GMV mix,” Bansal said.
Currently, Meesho has an average order value (AoV) of `350. Although this is much lower than that of Flipkart and Amazon, Bansal believes that Meesho could likely hit profitability post-FY24 since it runs a pure-play e-commerce marketplace that doesn’t own its sown inventory or stock.
In CY2022, Meesho added about 500,000 sellers, taking its total seller base to 830,000, of which 61% are first-time sellers on any e-commerce platform. That compares with a 1.1 million seller base which both Flipkart and Amazon have. In the last 12 months, about 140 million people transacted on Meesho, While the unique transactors on Meesho on a monthly basis, vary between 30 and 35 million, according to Bansal.
Currently, Meesho makes a majority of its revenue from selling ads to its base of independent sellers who pay for promoted listings on the website and app. Meesho charges zero commission from sellers but works with third-party logistics players to fulfil orders. Bansal said that its advertising revenue has grown by 200% Y-o-Y between January 2022 and January 2023.
“We provide a very simple tool to help sellers allocate budget for ads on our platform, and we try to ensure that sellers get back a return on their investment for ads by upselling the products on the homepage…almost 70% of our suppliers have done at least one ad on the platform,” added Bansal.
To date, Meesho has raised around $1.1 billion in funding from prominent investors such as Softbank, Prosus, DST Partners, RPS Ventures, Shunwei Capital, Fidelity, Sequoia Capital India and many others. Speaking on fundraising plans, Bansal said that Meesho’s has sufficient runway left from its last Series F round of $570 million in 2021. However, the startup will look to be IPO ready although Bansal didn’t point out a specific year or data for the potential public offering.
“Most of our large investors have come in pretty recently in 2021, hence there is no pressure to provide exits to our investors as of now. Obviously, as the company grows, we aspire to get listed. From the recent experience of consumer Internet firms that went public (in India), it is better to become more profitable before going for an IPO,” Bansal added.