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Meesho, a Bengaluru-based e-commerce startup, has set its goals on improving customer experience and increasing conversion rates by strategically implementing artificial intelligence (AI) and data science. In an interview, co-founder and CTO Sanjeev Barnwal outlined the company’s aspirations to use AI and data science to create tailored customer experiences and targeted product localisation.
However, worries regarding Meesho’s bad reputation for poor customer service arise in the midst of this technological leap (huge expenditure). Will the latest be able to reverse Meesho’s poor image among its customers?
Meesho saw enormous growth, particularly during the 2021 financing boom, with its reseller model being extremely popular in India’s smaller cities and among low-income households.
Meesho, supported by SoftBank and Meta, underwent a strategic transformation in its stance in 2022, moving to sell directly to end consumers. As it entered direct competition with industry titans like Flipkart and Amazon, this move necessitated large investments in customer acquisition.
Meesho’s most recent investment round was in September 2021, when it raised $570 million at a valuation of $4.9 billion. Despite several attempts to secure further funding, including conversations with search engine Google, the company has struggled to attract potential investors’ interest.
Meesho’s losses increased 7.5 times to Rs 3,247 crore during the fiscal year 2022. However, its income increased during the same period, increasing 4.5-fold to Rs 3,232 crore from Rs 792 crore the previous fiscal year. Meesho’s ambitious efforts to compete with large companies such as Flipkart and Amazon India have resulted in growing losses.
Meesho’s High Claims (Customer Experience)
As advertising, salaries, and other expenses increased throughout the fiscal year, the company’s total expenses increased fivefold to Rs 6,607 crore from Rs 1,337 crore. Employee benefit spending increased 3.4 times in FY22 to Rs 509 crore, up from Rs 149 crore in FY21.
Meesho’s logistics and fulfillment expenditures increased 4.4 times from Rs 632 crore in FY21 to Rs 2,829 crore in FY22. As the firm actively advertised its app on television during the Indian Premier League, advertising expenses more than sixfolded to Rs 2,579 crore from Rs 424 crore.
Since then, the startup has been attempting to lower its burn. Meesho aims to decrease costs and lengthen its cash runway as it struggles to raise capital in a difficult macroeconomic environment, according to a report on June 2.
But here’s where it really shines: it implemented new regulations like “no returns for goods sold at a reduced price” and “pickup from the nearest delivery center” to cut last-mile and return costs.
Meesho’s zero-commission strategy set it different from its giant competitors and helped it pull the rug out from under them. Small merchants flocked to Meesho’s marketplace as a result of venture capital (VC) funding, which fueled the e-commerce startup’s technology and marketing. Because there were no commissions, merchants could price their things substantially lower on the platform than on other marketplaces.
Meesho has been fine-tuning its strategy after winning vendors, buyers, and volumes by linking unbranded items at the bottom of the e-commerce pyramid with its target clients. By selling branded merchandise to its 100-million user base, a substantial portion of which is scattered across India’s aspirational small towns, it has entered the area of its larger rivals, Flipkart and Amazon.
Meesho claims that overall returns on their platform are around 25%, with customer returns, or reverse pickup as it’s known in the business, accounting for 8%-9% and return to origin’ or failed attempts to deliver a product accounting for the rest – however, these figures are extremely questionable!
Sellers Unhappy Too
Several Meesho vendors claim that because of the large returns, they frequently have to spend on forward and reverse shipping for multiple purchases and are thus not profitable on the site.
Meesho’s earlier this year change of its goods return policy, which introduced more product checks, also created some dissatisfaction among vendors. According to several merchants, the procedure of collecting reimbursement when buyers return faulty merchandise has gotten more difficult.
Meanwhile, some sellers claim that the cost of conducting business on the platform has risen significantly. “Meesho has consistently raised their rates.” For example, until a few months ago, the return rate per order was INR100. It was raised to INR150, then to INR160, and now to INR200,” says a seller who wishes to remain anonymous.
Dhiresh Bansal, on the other hand, denies this. “In January, we gave sellers the option of selecting from various third-party logistics businesses. Some are paid INR100-INR110, while others are paid INR130-INR140. We provide suppliers with information on a logistics partner’s performance in their PIN codes. They are given the option to express their preference. Then we strive to accommodate as much of their preferences as possible,” he explains.
High On Marketing And Advertising
- Meesho’s marketplace pivot, like any other business in India, has not been without dangers; in just a year, it has lost approximately USD 430 million.
- Although sales increased, the company’s net margin deteriorated as it spent INR2 for every INR1 made in FY22, and this kind of capital burn is no longer a possibility as the funding climate changes.
- Meesho has lately executed digital marketing with top celebrities.
- Meesho spent a lot of money on advertising last year, especially since it switched from a reseller business to a marketplace model and had to spend money on client acquisition. However, the corporation claims to have decreased ad spending by 80% this year.
Meesho vs. Flipkart vs. Amazon- _revenue comparison @2x (1)
Bansal claims that the company will be profitable over the next six months, with a quarterly burn of roughly USD10 million-USD12 million. “On a cash-flow basis, Meesho saw a breakeven in four out of the first six months of the year,” he continues.
“We have accounted for all marketing spend in our calculations to hit profitability in the next six months,” Bansal adds.
The company also claims to have reduced cash burn by 90% year on year to USD10 million-USD12 million per quarter.
Last but not least, While Meesho has made significant strides towards customer acquisition, winning sellers, buyers, and volumes by matching unbranded items at the bottom of the e-commerce pyramid with its target customers, it has made no or little efforts towards one critical segment – customer support and grievance handling, which by far is the only critical way in which the company can not only ensure repeat customers or customer base but also mitigate risk.