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BEST OF BOTH WORLDS

Meesho wants big brands in

its cart. But unbranded
products are baked into its
DNA

By Gaurav Bagur

The $5 billion-worth online marketplace wants to boost profits

with Meesho Mall’s branded lineup, but this category is a
whole new ballgame

16 Jan 2024 / 10 min read

Comment

Gaurav is a reporter covering business and ecommerce. He has

a background in journalism and economics, and enjoys film,
fiction, and football.

READ SUMMARY

Meesho—the Indian e-commerce giant valued

at over $5 billion—finally caught a break in the
last month of 2023.

On 29 December 2023, it made headlines by

revealing in a blog post that it had turned
profitable in the quarter ended September after a
turbulent year in which the company saw layoffs
and swings in its valuation. So, all eyes were on
the 77% revenue growth, but a key venture was
overlooked: Meesho Mall.

Buried within its blog post were around 100

words outlining the role of Meesho Mall—the
latest in a series of experiments the company has
carried out in its eight years.

Founded by Vidit Aatrey and Sanjeev Barnwal,

batchmates at the Indian Institute of Technology
Delhi, Meesho started as a social-commerce
platform. It even ventured into grocery
deliveries. However, it is mainly known as an
online marketplace for small sellers.

With Meesho Mall, it is breaking the pattern and

aspires to be a platform that also offers a range
of branded products. Launched in August 2022,
this strategy put the startup—backed by
marquee investors such as Softbank and Peak
XV Partners—in direct competition with e-
commerce giants Amazon and Flipkart.

But Meesho has been clear about its target

audience—the value-conscious buyers. In 2023,
Meesho served 140 million customers, and eight
out of every 10 orders came from tier-2 markets
and beyond.

Meesho Mall features 500 brands across 6–7

categories, including the likes of Mamaearth and
Himalaya in personal care, Boat in electronic
gadgets, and Paragon in footwear. These are not
premium brands but rather a mix of legacy labels
and well-known direct-to-consumer (D2C)
companies. This is a stark contrast to the generic
products with descriptive names such as “Black
Printed Sneakers for Men” and “Round Neck
Puff Half Sleeves Polyester Blend Top” that
occupy most space on the platform.

With Mall, Meesho envisioned a model along the

lines of other global players like China’s Taobao
and Singapore’s Shopee, which took similar
steps into the branded segment with Tmall and
Shopee Mall, respectively, said the company
spokesperson. Mall would ideally drive a larger
share of Meesho’s profits as brands can be
monetised more effectively than small
businesses, they added.

SEE MORE VISUAL STORIES

But brands have expectations higher than

smaller sellers. And it’s something that Meesho
isn’t fully equipped to handle—just yet. The
platform is missing the mark on good returns on
ads, reliable analytics, and checks on fake
products.

The numbers game

Meesho saw users searching for brands on the
platform, so it knew there was a certain level of
demand, the spokesperson said. Now, Mall is one
of its “top bets” for sustained growth in the long
term, said an ex-employee of the company. This
person and several others who spoke with The
Ken are unnamed as they did not want to
comment on the company publicly.

In 2022, when Meesho Mall was still taking

shape, the company aimed for a 10% share of
branded products in its total sales during the
first six months.

However, the vertical contributed only 1–1.5% by

early 2023, said the former Meesho employee.
That figure has now reached around 5%, going
even higher during discounting periods and
festive sales, added another ex-employee.

The company’s spokesperson did not comment

on these numbers but said Meesho Mall has seen
“sustained 10–15% growth” on a monthly basis.
The vertical’s percentage share of the company’s
gross merchandise value is in single digits but is
expected to grow when it adds more categories,
they added.

With this new experiment, Meesho is also eyeing

higher revenues from its sellers.

Three key factors // Meesho did not want to

disclose how much profit it made, but said a rise
in revenue, better monetisation, and better cost
efficiency helped it get there

Meesho doesn’t take commissions from

unbranded sellers but charges them for logistics.
However, it takes a cut from sellers on Meesho
Mall. “We charge brands certain kinds of fees for
the services we provide for them—verification,
account managers, etc.,” said Meesho’s
spokesperson.

This share depends on factors such as the

brand’s scale and category, said the first former
employee. On average, this amounts to around
5% of transaction value, they said, adding that as
Mall scales up, Meesho would look at beefing up
its margins through these fees.

The average selling prices for Meesho’s

unbranded products are in the Rs 200–400
($2.40–4.80) range, depending on the category.
This figure would be over 2–3X higher on
platforms featuring mostly branded products,
such as fashion e-commerce site Myntra, as per
multiple ex-employees of Meesho and e-
commerce industry executives.

Eventually, Meesho Mall is expected to bring in

bigger orders. And at higher fees.

Here’s the problem, though: brands are drawn to

Meesho Mall partly due to its relatively low
commissions. For instance, Mamaearth is
optimistic about the venture as long as the unit
economics are positive, said a manager for the
brand. But since Meesho has been pushing for
higher commissions, they added, it would eat
into the already thin contribution margins.

Charging fees from brands is just one of the ways

in which Meesho wants to make money from
Mall.

Not as advertised
With Meesho Mall, the company finally can
double down on earning from advertising—an
avenue it could not make the most of so far.

Unbranded sellers, in general, tend to minimise

their ad spending, while brands are willing to
scale it up with volumes to capture more market
share, said the first former employee.

So, Meesho sought to secure a small minimum

commitment on ad spending from brands—a
percentage of their GMV on the platform. But
the results have been mixed.

A major cosmetics brand that was onboarded

early onto Meesho currently spends around 5%
of its GMV from the platform on advertising. Its
return on ad spending has been “satisfactory”
but mainly because its expectations were fairly
low, said a manager for that brand.

Being a well-known “legacy” brand with a strong

offline presence, it didn’t see much value in
spending a lot on ads on the platform, they
added.

The problem isn’t just how much brands spend

but also what Meesho gives them to work with.

For instance, a personal-care brand was unable

to integrate Meesho with its e-commerce
software platform. That made it difficult to draw
insights into performance, said an e-commerce
industry veteran who works with the brand.

The manager of the cosmetics brand agreed.

Meesho’s analytics and data visibility fall short in
comparison to platforms like Amazon and
Flipkart, they said. This leaves brands in the dark
about key metrics like the gender split of their
audience or the contribution from various
geographies, they added.

The brands also lack control over how to deploy

their marketing funds in terms of ad types, said
the manager at Mamaearth.

“Meesho is basically a dukaan [small

shop] in a village in terms of ads,
analytics, data. It’s like a black hole
where inventory goes in, and we don’t
see the numbers come out”
A MANAGER AT A COSMETICS BRAND

The personal-care brand mentioned above had

pulled out of Meesho in 2022 after selling on it
for around a year. Mall was contributing only
around Rs 1 lakh ($1,200) to its overall monthly
GMV of nearly Rs 6 crore (~$724,000). But the
more pressing issue was the lack of robust
processes in place, according to the industry
veteran.

The cosmetics brand, on the other hand, saw

sales of around Rs 25 crore ($3 million) a year, or
around 15% of its online sales, on Meesho.
Hence, it is more bullish on the platform. But the
company had to put in more resources to
balance out the shortfalls on Meesho’s end, said
the manager.

The lack of transparency makes it difficult for

brands to have the confidence to spend more
money on ads, the managers at the cosmetics
brand and Mamaearth told The Ken.

When asked about these issues, Meesho’s

spokesperson said: “We are a platform that was
built for small businesses. There are a lot of
[capabilities] we’ll need to build out for brands.”

Some sellers—like Mihir Parashar, co-founder of

activewear brand Chkokko—claim that Meesho
has made improvements with Mall. The
company has been deriving around 5% of its
GMV from Meesho Mall since joining it three
months ago.

But Meesho has another nut to crack—one that’s

rooted in its DNA.

Quality control
As an online hub for budget-conscious shoppers,
Meesho’s unbranded section is stocked with
knockoffs of branded products and cheap, low-
quality imports. These imports have historically
driven the company’s return rates to be much
higher than its rival platforms.

All of this makes bigger brands sceptical about

Meesho.

A D2C jewellery brand, for instance, opted not to

sell on the platform as it goes against its
positioning as a line of trendy, aspirational
products, the company’s founder told The Ken.

“From day one, we have been clear

about where we want to sell and to
whom we want to sell. Meesho sells
products that are unbranded to
consumers who are looking for a hell of
a deal”
FOUNDER, D2C JEWELLERY BRAND

“We aren’t in active conversations with premium

brands for Meesho Mall,” the Meesho
spokesperson countered, adding that the
company is aware of its customers and brands
and price points they seek. They also stated that
its current return rate is under 10%.

However, multiple ex-employees from Meesho

believe that a key aim of Mall was to raise the
perceived standard of the products on its
platform. And branded merchandise comes with
a certain guarantee of quality and authenticity.

The company is said to be working on fixing

counterfeit issues with algorithms but is careful
not to be too aggressive against sellers of fake
items. Doing so could hurt its order numbers and
top line, said the first former employee.

And this is rubbing brands the wrong way.

Meesho wasn’t doing enough to ban those

selling counterfeits of the products
manufactured by the personal-care brand that
quit the platform, claimed the expert quoted
earlier.

It was damaging our brand equity, added the

manager at Mamaearth. “It has come slightly
under control but is still a big issue.”

Meesho has an artificial intelligence-driven

initiative called “Project Suraksha” that aims to
keep its platform free of fake sellers. As a part of
it, over 4.2 million counterfeit product listings
have been deactivated in the past six months,
said the company’s spokesperson.

Despite these concerns, Meesho Mall will have

its takers. “[Most brands want to] be present on
every platform to optimise visibility and
presence,” said the e-commerce industry
veteran.

Meesho makes distribution for up-and-coming

brands easier, eliminating the need for hefty
investments and extensive sales teams to reach
smaller cities and towns.

While Meesho has got brands’ attention for now,

winning them over will take a whole lot more.

Lede image credit: Bastian Riccardi/Unsplash

Update: An earlier version of the story said that

Meesho had return rates of 60%. Post-publication,
the company spokesperson said its return rate is
under 10%. The article has been corrected to show
that. We regret the error.

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CREDITS

Written by Gaurav Bagur

Edited by Meenal Arora

TOPICS

E-COMMERCE MARKETPLACE MEESHO MEESHO MALL

PROFITABLE STARTUP SOCIAL COMMERCE

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