Ecommerce has emerged drastically in the past few years and is primarily due to emerging many social media networks. These networks may include Instagram, Facebook, WhatsApp, etc., which introduced a new online selling method. It is where the existence of Mesho occurred.
An e-commerce network, Meesho, entered the online marketplace with the objective of making online selling easier for females from small cities and towns. Meesho has more than 18 million members registered on its network and has become India’s leading e-commerce platform.
Besides, Rahul Malodia guides entrepreneurs, startups, students, individuals, and homemakers to start their earnings through online marketplaces and provides them the strategies to succeed in their businesses.
So what is meesho business model and how does Meesho operate and make money? It is the primary query asked by several individuals. Let us find out!
Everything About Meesho Business Model
You may instantly understand Meesho by taking a quick peek at the company’s business model in this blog. The idea behind the meesho business model, revenue model, customers, costs, etc., is briefly explained to help you know how Meesho makes money.
What is Meesho?
Meesho, an internet site for resellers, has experienced the fastest growth in India. This web network may link tiny enterprises with a massive client base, including several micro-small firms.
The network, which has an estimated 4.9 billion USD value, was created in 2015 by Sanjeev Barnwal and Vidit Aatrey, alumni of IIT Delhi, to simplify it for everyone, particularly females from small areas, to create and operate their ecommerce enterprises.
Meesho has developed significantly over the past seven years and is trendy on social networking sites like Instagram, Facebook, and Whatsapp.
Meesho is one of the networks with the highest sales volume in India, providing unparalleled advantages. This network allows you to start a free online business and advertise your goods to countless users.
A smartphone with internet access is required to open a profile on Meesho. After creating an account, you may browse many items offered by vendors.
On popular social networking sites, you may distribute these goods under your brand and charge whatever you choose, including the item price and profit.
The reselling strategy used by Meesho, which connects suppliers and customers, is comparable to assisted purchasing. Suppliers provide goods to the reseller of Meesho, who subsequently distributes them across the network and gives them directly to the consumers.
The seller receives a commission, while the reseller and Meesho Supplier save logistics and marketing costs.
Meesho’s distinctive selling concept is that its users may sell the goods again posted by vendors to make a profit. In essence, it is a simplified dropshipping concept of the company.
The Idea Behind Meesho Business Model
Meesho’s creators initially launched it as a fashion-focused social commerce platform and named it Fashneer to make it possible for nearby stores to sell garments online.
Their first goal was to create a Swiggy-like hyperlocal business for the fashion industry. Besides, they had observed many proprietors of stores selling their stock through WhatsApp and Facebook groups and directly transporting it to their consumers.
In addition, many brilliant Indian businesspeople didn’t have the means, network, or opportunity to market their goods. Such individuals were homemakers, mothers, and students who wished to launch their enterprises but were unable to accomplish so due to difficulty establishing an internet presence.
Therefore, they focused on this market niche to help small store owners manage everything. They wished to assist these shop owners in easily providing clothing to their clients. Fashnear operated exclusively in the payments and logistics areas, identical to Swiggy.
Both the production of commodities and the inventory storage were nonexistent. The shop owners managed all aspects of operations, including procurement, warehousing, and marketing.
They also discovered a strange phenomenon that most of such companies’ proprietors didn’t make their goods. Indeed, the items were purchased from a factory or distributor and resold for profit.
They finally realised the importance of resellers in the Indian region. A common reseller would update their catalogues daily, unlike traditional merchants who do so monthly.
FashNear was renamed My E-Shop “Meri E-Shop,” also known as Meesho, following customer behaviour understanding and market research. It emerged as the initial network in India to enable neighbourhood retailers to serve a digital client base and promote their stores on social media.
Meesho’s business plan immediately caught on with neighbourhood retailers and received funding from several investors. It was among three Indian companies selected in 2016 for Y-Combinator, a three-month, 120,000 USD program by California’s well-known startup accelerator.
Who Are Meesho’s Customers?
Here are the primary customer categories of Meesho:
Customers that serve as an intermediary between end buyers and Meesho are resellers who use its network to find the goods, mark them up, and then sell them through their social networks.
Meesho’s platform has over fifteen million resellers from throughout India. They are primarily homemakers, young professionals, and students who utilise WhatsApp, Facebook, and Instagram to market the products of their connections.
Meesho focuses primarily on attracting new internet users from rural areas and small cities and towns who desire trustworthy products at affordable pricing.
They are typically more cost-conscious and have less faith in internet buying because of concerns about prevalent deceptions. Meesho has over 70% of clients from Mathura, Jhansi, Dehradun, and many other tier 2 and tier 3 cities.
Meesho’s Value Proposition
The socio-ecommerce business concept of the company is its key competitive advantage, and here are a few points on how Meesho adds value for its clients:
1. For Resellers
The company offers resellers an avenue or platform to launch and expand their businesses with no capital outlay. Meesho seller set up brand-specific shops on the company’s platform and began sharing goods with their friends on Facebook, Instagram, and WhatsApp.
It purchases goods at wholesale costs from vendors and makes them available to resellers to help them market to their intended customer base.
Besides, Meesho handles logistics, packaging, product refunds, returns, customer queries, and many other activities on the resellers’ behalf. As Meesho handles the details, resellers may concentrate on growing their businesses.
2. For Consumers
In India, the absence of faith is the main issue with purchasing goods online. There are just 150 million consumers who shop online and considerably fewer repeat buyers in the world’s 1.38 billion inhabitants. Besides, the fear of getting fooled and cheated is higher when it is about purchasing through a new online platform or seller.
However, Meesho addresses such issues with the customers by allowing them to use someone they know or trust (a reseller) as their primary point of communication when conducting an online purchase.
Meesho’s products are also typically personalised to the customers’ preferences, budgets and locations that precisely fit their requirements.
How Does Meesho Operate?
Meesho’s popularity and uniqueness stem from combining the conventional ecommerce business strategy with dropshipping business models and social selling.
Meesho believes that individuals must shop with their family members and friends without worrying about being taken advantage of or cheated.
It’s in line with their idea of making ‘Shopping Social’. A consumer approaches Meesho’s reseller through its platform, which obtains the goods from the company’s platform and distributes it to the buyers for possibly inflated prices.
Meesho Revenue Model
The business plan for generating revenue for Meesho is the same as many E-commerce companies. In the past, the commission was Meesho’s main income source. However, from August 2022, the site ceased to charge any fee (0% commission), making it one of the handfuls of markets to do so.
The commission is waived off from the following categories:
- Listing fee- 0% commission
- Product margins- 0% commission
- Penalties for late dispatch, order cancellation, and other issues- 0% commission
It implies that the seller keeps the 100% or entire price variance between how much an item costs to buy and what it costs while selling. Although it seems Meesho doesn’t charge anything, Here is how Meesho makes money.
Meesho Revenue Streams
Using the following chargeable fee-based services, Meesho has created a novel approach to monetise its network:
1. Shipping cost
Meesho’s resellers or customers charge shipping costs, and it is highly variable based on factors such as the product delivery area and the package’s weight.
Three categories are made by the company, including national, regional, and local. It collects different shipping charges for each category. The shipping partner receives a portion of the shipping price; the remainder goes to the profit of Meesho.
Besides, the cost of shipping is displayed to the buyer by the company in the final price and represents the deal on the product, including free shipping to make the goods seem more appealing to the customers.
Meesho levies the shipping fee on the sellers for things that buyers return. Additionally, the business taxes sellers who choose “Next Day Delivery” but don’t deliver timely.
The penalty is 2.5% of the purchase cost for each day. In addition, the business may impose further fines on sellers who violate the conditions of the suppliers’ agreements.
3. Promotions and Advertisements
The business provides interested sellers with CPC advertising campaign services for those who wish to advertise their goods. Sponsored advertising has greater exposure on the homepage;
they are displayed first in search outcomes and ultimately results in higher sales. However, weekly deductions from seller payouts are made to cover the expense of advertising.
Meesho Cost Structure
The cost structure designed by Meesho is as follows:
1. Administrative And General Costs
Along with normal overhead expenditures, the company also comprises the staff’s salaries and any necessary professional and legal fees.
2. Logistics Costs
Every purchase made through Meesho’s network requires the company to pay for the logistics. Customers typically pay for this expense, and Meesho pays a tiny amount.
3. Marketing Costs
Meesho invests considerable amounts of revenue in developing clients and marketing. The business has executed advertisements on television and various offline initiatives. Besides, it invests a lot of money in web-based advertisements.
4. Operational Costs
The company charges order fulfilment, customer assistance, and other daily operating expenses.
5. Payment Processing Costs
Meesho deducts a tiny portion of every transaction as the processing fee of payments because the company utilises PhonePe, Paytm, and many other third-party payment processing services.
6. Technology Costs
Meesho has developed an effective technological meesho panel that constantly strives to enhance the platform’s capabilities. CGN, server, and many other relevant infrastructure expenses are included in the technology costs.
Future of Meesho
In an interview, Vidit Aatrey, the company’s founder, revealed their intention to increase the product team and technology over the following years.
Meesho hopes to have 100 million active users per month who execute transactions through its platform.
Meesho, a newcomer to the e-commerce segment in some areas, has also begun taking order requests directly from customers. However, Meesho’s decision upset the resellers because it would make it harder for them to make money.
The company is now attempting to engage in complete e-commerce warfare with the established platforms while maintaining the resale model as its basis.
Let us see how Meesho works to strengthen its relationship with resellers, which serves as the cornerstone of its entire social commerce approach. But Meesho appears to have a bright future because of its healthy unit economics.
Meesho started concentrating on social commerce; however, its direct-to-consumer market share keeps rising, putting it up against major competitors like Amazon and Flipkart.
It receives twenty-five per cent of its revenue from resellers and seventy-five per cent directly from clients.
Customers’ shopping experiences would be improved by getting the same goods affordably from the sellers directly rather than from a reseller.
How Meesho attempts to strengthen its bonds with the resellers, which form the foundation of its entire social commerce model, is intriguing.
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CA Rahul Malodia is the founder and CEO of Malodia Business Coaching Pvt. Ltd. He is a Business Coach, Mentor & Investor. He has trained over 25,000+ Businessmen across India.