Meesho posts its first profit by controlling costs & improving operational efficiency

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Meesho posts its first profit by controlling costs & improving operational efficiency
  • Meesho becomes the first horizontal ecommerce company in India to turn profitable at the consolidated PAT level.
  • By FY27, nearly 50% unicorns in India are expected to be profitable and 20% would struggle due to falling demand.
  • Company retrenched 15% of its workforce in May 2023 after it sacked 300 last August.
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Meesho, a homegrown e-commerce marketplace, on Monday announced that it was the first horizontal e-commerce company in India to turn profitable. The news must bode well for its investors as most startups have been struggling in the midst of a funding winter, which have also triggered sharp markdowns. But the profitability is not without its share of pain. In May, the startup retrenched 251 people as it was looking to cut costs. It had earlier handed pink slips to 300 employees in August last year.

Commenting on this, Vidit Aatrey, CEO and Founder at Meesho, said: “Since our inception, we have been driven by a vision to empower millions of small businesses, entrepreneurs and customers…As the first horizontal e-commerce platform to achieve profitability in India, we remain committed to driving sustainable growth, democratizing e-commerce for everyone and unlocking the true potential of India’s heartland.”

With the onset of the funding winter sometime last year, many unicorns started concentrating on profitability rather than growth and cashburn. For instance, Meesho has cut marketing and customer acquisition costs by 80% year-on-year. Redseer in its recent report on unicorns and their prospects said that most of the unicorns in FY22 had started focusing on profitability. By FY27, nearly 50% unicorns in India are expected to be profitable and 20% would struggle due to falling demand, regulatory challenges and unclear business models.

In this context, Meesho has attained profitability at a consolidated profit after tax level, encompassing all costs (including employee stock options), across all its divisions and categories. Setting out on its ambitious path to profitability last year, Meesho accomplished this industry-first feat well ahead of the expected timeline, as of July 2023.

In the last 12 months, Meesho has experienced remarkable growth, with order volumes soaring by 43%, culminating in over a billion orders. This success is further underscored by the fact that 85% of the orders have come from returning users, demonstrating robust user retention. Meesho's truly horizontal nature is evident as non-fashion categories have surged by over 120% in this period.
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According to Crunchbase, Meesho has raised a total of $1.8 bn over 11 rounds and the most recent round of funding was in October 2021 from a debt financing round. Meesho is funded by 36 investors. Trifecta and Good Capital are the most recent investors in the company.

ALSO READ: Unicorn health check: 30 will be IPO ready next year but future bleak for 20

Meesho has not only concentrated on profitability at the consolidated level but is looking to ensure every category is profitable on a standalone basis. The e-commerce platform’s revenue over the last 12 months surged 54%, driven by substantial growth in order volumes and monetization rate.

Despite significant reductions in customer acquisition cost (CAC) and marketing spends by 80% (YoY), Meesho remains the most downloaded shopping app in India, underscoring the company’s organic strength and strong word-of-mouth. Meesho serves over 140 million unique transacting users in the last 12 months. The startup also reported 60% YoY reduction in tech costs, which would have further boosted its operational efficiency. Meesho receives 3.5 million orders per day.



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