Vidit Aatrey and Sanjeev Barnwal reshape India’s e-commerce landscape, focusing on affordability and underserved markets, as their company Meesho thrives amid challenges.
Vidit Aatrey and Sanjeev Barnwal, former college friends from Delhi, embarked on an entrepreneurial journey a decade ago that would reshape India’s ecommerce landscape. After leaving their stable jobs, they traveled through Bengaluru, engaging with family-run shops to understand why many small storeowners were not transitioning their businesses online. This exploration culminated in the creation of Meesho, an online platform established with the ambition to “democratise ecommerce” in India, as articulated by Aatrey.
Reflecting on their motivations, the 34-year-old Aatrey stated, “Around us are people who are looking for affordability.” He, alongside Barnwal, who previously held roles at Sony and other major companies, recognized a significant market opportunity within India’s larger, price-sensitive population. Their focus on the less affluent Tier-2 and Tier-3 cities has positioned Meesho as one of the fastest-growing online retailers in the country, currently serving approximately 190 million users and earning a spot at 72nd on the Financial Times’ High-Growth Companies Asia-Pacific ranking.
Despite the promise of India’s burgeoning consumer market since economic reforms in the early 1990s, the ecommerce sector remains relatively small compared to the vast network of traditional neighborhood grocery stores known as kiranas. Aatrey reflected on their early missteps when they first launched an app allowing merchants to list products online, stating, “No one used it.” Their crucial realization came when they observed shoppers utilizing WhatsApp groups for purchases, prompting them to pivot and assist small businesses in selling through social media platforms. This strategy proved pivotal, especially as affordable mobile data became widely available in India.
By 2021, after considerable growth, Meesho introduced its own app, which has since acted as a gateway to ecommerce for many users unfamiliar with online shopping. Mohit Bhatnagar, managing director of Peak XV, one of the company’s early investors, noted that Meesho has introduced a new demographic to online buying. Other notable investors include SoftBank and Tiger Global.
Meesho distinguishes itself from its competitors, which often target wealthier consumers, by focusing on underserved regions, where average order values are significantly lower. Analysts from Goldman Sachs identified that only 60 million Indians earn above $10,000 annually from a population of 1.4 billion, indicating a substantial gap in purchasing power among the majority. Aatrey pointed out that many foreign companies replicate their Western business models in India, appealing only to a small affluent segment.
The company is currently preparing for an initial public offering (IPO) later this year, despite facing economic slowdowns and a retreat in the stock market, which has seen the Nifty 50 index drop by 10 percent over the past six months. Factors such as stagnant urban wages, escalating debt, and high inflation have contributed to a decline in consumer spending. Consequently, Meesho’s valuation has decreased from a peak of $5 billion earlier in 2023 to approximately $3.9 billion, as reported by startup database Tracxn.
Bernstein’s Rahul Malhotra suggested that the current retail slump could be affecting Meesho, and raised questions about the company’s ability to achieve profitability given its low average order value. However, Aatrey remains optimistic, asserting that their focus on affordable products helps keep demand stable during economic downturns. “In good times, people want to come on a platform because they have more money to spend. In bad times, also they want to come here because that’s the place where they save the most amount of money,” he said.
Meesho’s revenue model includes a mix of advertising and logistics, with recent expansions into shipment services for other online sellers. As the company looks to further its market presence, it aims to penetrate the low-margin, high-volume online grocery sector, contingent upon improving its supply chain logistics.
Aatrey conveyed confidence in the company’s growth trajectory, noting that Meesho is cash flow positive and experiencing a 20 percent annual increase in transacting customers. He also highlighted a significant reduction in adjusted losses, which fell 97 percent to Rs530 million ($6.2 million) for the financial year ending March 2024. Emphasizing a long-term vision, Aatrey stated, “Our focus is not to maximise profitability in the short term, we still serve only 200 million people out of 1.4 billion people… the ecommerce journey is still quite early so we’ll stay in the growth mode for some time.”
Source: Noah Wire Services
