Meta-backed Meesho is accelerating the retail of branded products in categories like personal care and electronics, among others
Started as a social commerce platform that sold through a network of resellers, Meesho recently ventured into consumer-led commerce, putting it in direct competition with majors like Flipkart and Amazon. A source close to the company told BusinessLine that Meesho’s direct commerce vertical or consumer-led commerce commands around 60 per cent of its gross merchandise volume (GMV), while reseller-led commerce makes about 40 per cent.
Meesho’s decision to accelerate towards branded products owes to the fact that consumers show more preference to buy them directly from the platform. In reseller-led commerce, consumers tend to also trust the reseller because of their taste in shopping, and not just the ease of buying online. So, there is not much difference between branded and non-branded products.
“Currently, branded products hold about a single-digit percentage in Meesho’s business. Even today, brands can list on its platform, but seeing that more people associate brands with a certain amount of trust, they are going to accelerate it,” the source said.
In September 2021, the Bengaluru-based start-up raised $570 million Series F funding at a valuation of $4.9 billion. This more than doubled its valuation from the $300 million Series E round that it raised in April 2021. Some of its investors include Prosus Ventures, SoftBank Vision Fund 2, Meta (formerly Facebook), and B Capital Group, among others.
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Further, recent reports claimed that Meesho resellers have seen a decline in sales after the launch of direct commerce. Another source in the company ridiculed the reports to say that resellers’ sales have grown 2.5 times in the past 8-9 months. “While the resellers’ sales grew 2.5x, the growth in the number of resellers has been much lower. So on average, the earnings of the sellers have increased,” the source added.
A growing trend
Sources BusinessLine spoke to believe that Meesho’s foray into direct commerce is an indication of a larger trend in internet commerce. They see it as a natural transition across industry, where some consumers of reseller-led commerce will keep graduating to become direct consumers of e-commerce. “Whether these consumers shop on Meesho or they shop on Flipkart, Amazon etc — that’s a natural transition in the consumer journey that will happen over time. So rather than losing them to another platform, Meesho started offering the same convenience and products which are more attuned to their needs,” the source added.
Commenting on the possibility of more social commerce companies like Meesho eventually entering direct commerce, Roshan Farhan, founder and CEO of GoBillion, said, “While reseller commerce helps with breaking the initial customer acquisition barrier, it is not sustainable in the long term. Reseller-led social commerce companies eventually realise that over-dependence on digital middlemen or agents to sell their products to end-customers would naturally encounter issues around scale, reliability, margins, reseller retention and end-customer experience.” Y Combinator-backed GoBillion enables social group buying of groceries for direct end-customers.