Meesho Business Model: How Does Meesho Earn Profit?

Meesho is one of India’s fastest-growing e-commerce platforms, offering a unique approach to online shopping. Founded in 2015 by Vidit Aatrey and Sanjeev Barnwal, Meesho operates as a social commerce platform, connecting small businesses, individual sellers, and resellers to consumers through social media channels like WhatsApp, Facebook, and Instagram. The platform has gained immense popularity, particularly among micro-entrepreneurs, housewives, and small business owners who use it to sell a variety of products, ranging from fashion and home decor to electronics and beauty items.

With millions of users across India, Meesho has tapped into a massive segment of the population that prefers shopping through informal networks. But how does Meesho earn profit, and what makes its business model successful in India’s competitive e-commerce market? Let’s explore Meesho’s business model and understand how the company generates revenue.

Meesho’s Business Model: Social Commerce and Reselling

Meesho operates on a social commerce and reselling model, which allows individuals to set up online stores and sell products without the need for inventory or upfront costs. The platform is designed to empower small businesses, housewives, and individuals to earn money by reselling products through social media and messaging apps.

Here are the key components of Meesho’s business model:

1. Reselling Platform: Meesho acts as a reselling platform, where sellers and resellers can choose products from a wide range of categories listed on the app. These products are sourced from manufacturers and suppliers across India. Once a reseller selects a product, they can share it with their social media contacts, add their profit margin, and complete the sale through Meesho’s platform. This zero-inventory model allows resellers to sell products without owning or storing them.

2. Social Commerce: Meesho’s core strength lies in social commerce, where sellers promote and sell products through social networks like WhatsApp, Facebook, and Instagram. The platform encourages peer-to-peer selling, leveraging the trust and relationships individuals have with their friends and family on social media. This approach has helped Meesho reach a wider audience, especially in Tier 2 and Tier 3 cities, where traditional e-commerce platforms may have limited penetration.

3. Zero Inventory Model: One of the most attractive aspects of Meesho for resellers is that they don’t need to hold any inventory. Resellers select products from Meesho’s catalog, promote them to their social network, and place orders only after receiving an order from a customer. The supplier then ships the product directly to the customer, and the reseller earns a profit margin based on the price they set.

4. Logistics and Delivery: Meesho handles the logistics and delivery of products, ensuring that resellers don’t have to worry about shipping or managing returns. This streamlined process allows sellers to focus on marketing and selling the products, while Meesho takes care of the rest. The company partners with logistics providers to ensure timely and efficient deliveries across India.

5. Wide Range of Product Categories: Meesho offers a vast selection of products across various categories, including fashion, home decor, electronics, beauty, personal care, and more. The platform caters to the needs of both consumers and resellers, providing them with access to affordable, trendy, and everyday items that are in high demand. This diversity in product offerings has contributed to Meesho’s rapid growth.

How Does Meesho Earn Profit?

Meesho generates revenue through several channels, primarily focused on commission-based earnings and value-added services. Here’s a closer look at how Meesho earns profit:

1. Commission from Sellers: The primary revenue source for Meesho comes from the commission it earns from sellers who list their products on the platform. Sellers and suppliers pay Meesho a commission on every sale made through the app. The commission rate typically ranges from 10% to 20%, depending on the product category and the volume of sales. Since Meesho acts as an intermediary between sellers and resellers, it benefits from the high volume of transactions happening daily on the platform.

For example, when a reseller sells a product for ₹1,000, and the supplier’s base price is ₹800, Meesho earns a commission on the difference or a fixed percentage of the sale.

2. Shipping and Logistics Fees: Meesho handles logistics and shipping for all transactions on its platform. While resellers do not need to worry about shipping costs directly, Meesho charges a shipping fee to the buyer. This shipping fee is typically added to the total order value, and Meesho earns a margin by negotiating favorable shipping rates with logistics providers. By managing delivery services efficiently, Meesho ensures that logistics operations contribute to its overall profitability.

3. Value-Added Services for Sellers: Meesho also offers value-added services to sellers and suppliers who want to boost their visibility on the platform. These services include promoted listings, advertising, and analytics tools that help sellers increase their sales. Sellers pay Meesho for these services to gain more exposure to potential resellers and customers. This provides Meesho with an additional revenue stream beyond commissions.

4. Subscription Plans: Meesho has introduced subscription plans for sellers who want to access premium features on the platform. These subscription plans offer benefits such as priority customer support, better visibility, and exclusive access to new product categories. Sellers pay a recurring fee for these subscriptions, adding another layer of recurring revenue for Meesho.

5. Fintech Services: Meesho has also started exploring financial services by offering credit facilities to sellers and resellers on the platform. By partnering with financial institutions and fintech companies, Meesho provides working capital loans and credit options to sellers who need funds to expand their businesses. Meesho earns a commission from its lending partners for facilitating these financial services.

6. Partnerships and Affiliate Programs: In addition to direct sales, Meesho generates revenue through affiliate marketing and partnership programs. The platform partners with other brands and service providers to promote their products and services to Meesho’s user base. Meesho earns a commission or referral fee for every successful sale or lead generated through these partnerships.

7. Advertising Revenue: With a large user base, Meesho can also generate revenue through advertising. The platform offers in-app advertising opportunities to sellers and brands who want to promote their products to a wider audience. By offering featured product placements and banner ads, Meesho can monetize the traffic on its platform and create additional revenue streams.

Challenges and Opportunities for Meesho

While Meesho has built a successful business model, it faces several challenges and opportunities in the Indian market:

1. Competition from E-Commerce Giants: Meesho competes with major e-commerce platforms like Flipkart, Amazon, and Snapdeal, which have much larger customer bases and deeper financial resources. However, Meesho differentiates itself by focusing on social commerce and reselling, which appeals to a different segment of the population. To stay competitive, Meesho must continue innovating and offering unique value propositions for resellers and customers.

2. Expanding to New Markets: Meesho has significant growth potential in Tier 2 and Tier 3 cities, where traditional e-commerce platforms may not have a strong presence. By focusing on these underserved markets, Meesho can tap into a large customer base that prefers informal, trust-based shopping experiences through social networks.

3. Building Trust and Quality Control: As Meesho grows, it must maintain a high standard of product quality and customer service. Ensuring that resellers and customers trust the platform is critical to its long-term success. By improving product quality checks and offering better support, Meesho can enhance customer satisfaction and build stronger relationships with its users.

Conclusion

Meesho’s business model revolves around empowering resellers and small businesses to sell products through social media platforms, offering a zero-inventory approach to online selling. The company earns profit through commissions on sales, shipping fees, value-added services, and advertising revenue. By focusing on social commerce and catering to underserved markets in India, Meesho has carved out a unique position in the country’s competitive e-commerce landscape. As the company continues to expand and offer more services, Meesho is well-positioned to maintain its growth and profitability in the coming years.