Meesho News: Meesho seeks to cut costs and extend cash drain with new policies for sellers

Bengaluru: Social commerce startup Meesho, which battled bigger rivals Amazon and Flipkart after entering the consumer e-commerce segment a year ago, is now shifting gears.

It braces for relatively slower growth amid a slowdown in major funding and an unfavorable macroeconomic situation.

The SoftBank-backed company aims to reduce its monthly cash burn to $25 million from around $40-45 million.

The company has told at least one of its third-party logistics partners — among the largest nationwide — that it expects shipping volumes to decline by around 25-30% over the next two quarters. .

The e-retailer, which focuses on the lower end of the market, will step on the pedal during the holiday season, when the retail sector seeks to corner a significant share of annual sales.

“There is a readjustment going on. As one of the biggest e-commerce players relying on third party logistics, they (Meesho) work closely with us and plan things ahead and recently this (shipping volumes issue) was discussed,” said a person with knowledge of the matter.

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The movements of Meesho_Graphic_ETTECHETtech

Meesho has also started preparations for the holiday season sales, when Amazon and Flipkart roll out competitive discount and sales tactics.

Informed sources tell ET that Meesho’s internal “Project Unbundle” initiative has gained prominence as it focuses on cost reduction across the board and monetization.

Returns are generally higher for low-cost e-commerce players like Meesho, but the company maintains that it’s no different from its industry peers.

What is project unbundling?

“Unbundling means unbundling the price as much as possible to provide a no-frills service, such as low-cost airline tickets,” said someone close to the company.

Meesho, which was last valued at $4.9 billion, began work on “Project Unbundle” in 2020 but only implemented it from January this year.

It has actively pushed sellers to adopt services like its new returns policy over the past two months, sellers told ET.

As part of the project, the Bengaluru-based company had started offering discounts on products, on the condition that they could only be returned if they were faulty.

Categories like apparel and footwear typically see more returns.

Meesho told its sellers that the new rules would reduce returns by up to 40% for more than 5,000 sellers.

ET reviewed the note Meesho sent to traders on its platform.

The company has also introduced warehouse pickup services for customers to reduce last mile costs and is pushing online payments by offering discounts to reduce reliance on cash on delivery.

Meesho has been able to reduce overall return rates by 2-3% since launching “Project Unbundle”, a source said.

Sellers told ET that the new return policy is not business-friendly because the possibility of not being able to return products ends up affecting reviews and ratings.

Control burn

His new policies come at a time when Meesho has put fundraising plans on hold due to a valuation mismatch after setting out to raise at least $500 million, the sources added.

Rising interest rates in the United States and the pushback from foreign investors who can lead such rounds have made it even more difficult to close a large funding round, ET reported on May 30.

According to a person close to the company, Meesho has reduced its cash burn significantly over the past few months as the cost of acquisition has fallen, in part due to Shopee’s Singapore exit, and competitors have also slashed. their customer acquisition spend.

Discounts have been limited, but fluctuate depending on various categories and specific sales campaigns, said another person with knowledge of the developments.

“They (Meesho) need to adapt to the new market reality as growth at any cost is no longer viable and burnout needs to be curtailed to extend the company’s cash trail,” a person said at the time. file current.

Although the online retailer still has ample capital from its two consecutive funding rounds last year, conserving cash will play a vital role in its long-term bid to disrupt the e-commerce market where Amazon and Flipkart are well established.

Multiple sources, including investors who reviewed its pitch deck for the new funding round, said the strong demand for the valuation — exceeding $6 billion — was a major hurdle for the company even before the economic downturn began.

“There have been discussions for an internal funding round, but that appears to be on hold for now as the plan is to cut costs,” one of the sources said.

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