Meesho Business Model: How it Works and How it Makes Money
Ecommerce has changed a lot from what it used to be when Amazon, one of the first movers started in 1994. Today, the rise of social media platforms like Facebook, WhatsApp, and Instagram and others means that there’s a new way to sell online. millions of people around the world have found serious business opportunities on social media. And when it comes to selling on social media, that is where Meesho and its social commerce business model comes in.
In the last five years, social commerce has been booming in India. As at 2021, there were over 150 million consumers of social commerce. And latest report suggests that figure could hit 500 million by 2025. And as a pioneer of social commerce in India, Meesho is showing others the way and reached the milestone of $1 Billion Valuation in just five years.
But how exactly does Meesho operate and how does it make money? As we delve deeper into the study of Meesho business model we shall provide answers to these and other begging questions.
What is Meesho?
Meesho is a social ecommerce platform that started with the aim of making it easy for women in smaller towns and cities in India to sell online. But its business model has taken a few twists and turns over the years. And today, Meesho can boast as been one of India’s leading social commerce platforms. And this not without figures to show for it. As at the last count, Meesho has about 18 million registered users.
Today Meesho has become a complete marketplace and you can find students, sit-at-home moms, micro and small businesses all selling through social media.
Meesho Business Mode – How it Works
A typical ecommerce platform provides an opportunity for manufacturers or suppliers to sell their products directly to customers around the world. But Meesho business model is different. Unlike other ecommerce platforms, Meesho is a social commerce enterprise. What this means is that, it doesn’t sell products directly to customers. Rather, it provides a platform for resellers to connect with manufacturers and suppliers, and sell products through their own social media channels.
This is the unique selling proposition of Meesho – its users can ‘resell’ products listed by suppliers to earn a margin rate. This is basically a a combination of 3 different business models: traditional ecommerce business model with the social selling and dropshipping business.
And guess all you need to start?
Just a smartphone to sign up for a Meesho account. I will share how you register on Meesho platform and start reselling, so stay tuned. Once created, you can browse through different products listed by suppliers. You can share them as white-label products on social media platforms at your own price (of course at a margin, so as to make your own profit).
As a reseller, you will also be able to suggest products to your audience. This means you won’t run out of products to sell. Moreover, you don’t need to invest in capital to sell on Meesho, neither do you have to bother about delivery. In addition to all these, you will also receive guidance on how to run a business online.
It is important to note that most of the resellers on Meesho are housewives in India who ordinarily cannot start their stores due to a lack of funds. But with Meesho business model, everything is simplified for them.
How to Sell on Meesho
The Meesho business model makes provision for anyone to enlist for business as a supplier and make money. But in order to start selling, one need to register on the Meesho platform.
And here is a step-by-step guide on process of how to register and sell on Meesho:
Step 1: Create Your Account
The first step in starting a business as a reseller on Meesho is to register on the Meesho Supplier Panel. And to be able to do this one will require the following details:
- Goods and Services Taxpayer Identification Number (GSTIN)
- Permanent Account Number (PAN) card
- Bank Account
After successfully registering as a supplier, one will now have to navigate to the Meesho supplier website and log in using one’s email address and password.
Step 2: List Your Products
After completing the registration process in step one, the next step is to add products to the catalogs you want to sell. You can create as many catalogs as you want. Though three to four catalogs can suffice. But more than one catalog will always increase your sales. Each catalog can represent a particular category of the items you sell. Catalog equally helps to organize your products accordingly. It is also important to list the specifications of the various products, including the dimensions, weight and price. And finally add a clear and quality picture of the product.
Step 3: Receiving Orders
After listing your products, it will become visible to all Meesho resellers once they are live on the Meesho app. If they think your product is worthwhile, they’ll start sharing and recommending it to their friends on social media. And from there you’ll start getting orders.
Step 4: Order Delivery
When you receive an order, Meesho will send a notification to through email and also through the Meesho supplier panel. Once you confirm the order, the next thing you do is to accept it, package the item, and apply the label to the package. Meesho has logistics partners that can help collect and deliver the packages to customers.
Step 5: Payments
Both online and offline payment methods are available and acceptable on the Meeshoo platform. You can find payment information on the Meesho Supplier Panel. Usually, the resellers will receive payment from the customer after the order is placed. And you receive payment for your offline orders on the 15th day after delivery.
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How to Earn on Meesho as a Reseller
In order to earn money from the Meesho platform and its business model, all you have to do is promote or share different products with your contacts on social media. The choice of products to share or promote is completely yours. And there is no limit to the number of products you can promote at once.
So from each sale made through you, you earn a commission.
You can add your commission and shipping charge above the price as an individual, and you will receive a notification when an order is confirmed. Your margin will be credited to your bank account within 10 working days after the customer receives the order.
However, another way of making money on the Meesho platform is through the Meesho’s referral program. It is actually a unique benefit to new users. If you refer someone to Meesho and the person signs up and make purchases as a referral you will earn a 40% commission on their first three purchases. To be rcognized, and accounted for make sure that the referral code is entered while signing up on the Meesho app.
Meesho Business Model – Value Proposition
There are three major pillars in the Meesho business model. And there is actually very little surprise about the success and growth of Meesho using its social commerce business model. This is because, the company provides a very strong value proposition that keeps bringing more users on board.
So we take a look at the value proposition to each of the three pillars
Value Propositions for Resellers
- Meesho provides resellers with a platform to start and grow their own business with zero investment.
- It sources products from suppliers at wholesale prices and offers the same to resellers to sell to their target audience.
- Sellers create their branded stores on the Meesho platform and start sharing products with their contacts on WhatsApp, Facebook, and Instagram.
- Resellers have access to almost unlimited number of products to select from
- As a reseller you don’t have to bother about the technicalities of setting up a business, Meesho takes care of all that plus offers free training to resellers
- Meesho also takes care of packaging and logistics
- After-sales activities like customer queries, product returns, and refunds are also handled by Meesho on behalf of the resellers.
With all of these, the resellers’ focus is only on how to get more customers, while Meesho takes care of every other thing.
Value Proposition For Consumers
The biggest problem with online shopping in India is the lack of trust. In a country with a population of 1.39 billion, only 150 million (a little over 10%) shop online. Even more disturbing is that much fewer than this number make repeat purchases. This is definitely a far cry from what is obtainable in America where 70% of the population shop online.
And what could be responsible for this?
Fear of being scammed. Especially when it comes to buying products from a new seller or website Indians are quite skeptical.
Meesho however stepped up to solve this problem in a most amazing, innovative, yet simplest way possible.
What did they do?
They decided to connect customers with people they already know (resellers) as their contact point in buying products online. With this, there is no more fear in shopping online.
The second value Meesho business model brings to customer is that the products available on Meesho meet the customer’s exact needs as they are mostly customised according to their budget, preferences and location.
Value Proposition For Suppliers
- Opportunity to sell to a very large market
- Low return rate
- Able to set competitive prices
- Can list as many products as possible
- Have unlimited number of resellers promoting the product at the same time
Meesho Business Model – Customer Segments
Meesho operates on a two-sided marketplace model and has two main customer segments:
- Consumers: Meesho main targets are first-time internet users in small towns and rural areas. These are people who want to buy quality and reliable products at competitive rates. These class of shoppers are generally more price conscious and do not trust online shopping much due to fear of scams. in fact, according to the company, more than 70% of its customers are from tier 2 and tier 3 cities like Jhansi, Mathura, Dehradun, etc.
- Resellers: Resellers like we already know are customers, loyal customers that have decided to become promoters of the brand. They act as middlemen between Meesho and the end consumers. They use Meesho’s platform to source products and sell them further to their social network at a marked-up price. As of 2022, Meesho has more than 18 million resellers on its platform from all over India. These are mostly housewives, students, and young professionals who use social media platforms like WhatsApp, Facebook, and Instagram to reach out to their personal networks to sell products.
Meesho Business Model – How They Make Money
Meesho’s Business Model is similar to that of any other e-commerce company. Meesho earns money in a variety of ways, including the following:
Meesho earns money from the commissions they charge sellers. When a reseller sells a product on the Meesho platform, the seller of that product will be charged a 10-20% commission. The commission earned model is similar to e-commerce platforms such as Amazon, Flipkart, and others.
2. Rank Push
As Meesho becomes more popular, more seller want to have their products listed. But there is a challenge for sellers here. As the number of sellers on the platform increases, so will the challenge of been seen. Competition also increases.
This therefore works to Meesho advantage, as they capitalize on it to make extra revenue.
They charge a different rate from sellers who want their products to appear at the top of the product page.
3. Selling of Data
4. Shipping Fee
Meesho charges shipping fees from the resellers or the customer. This shipping fee usually would depend on the package weight and delivery area.
The company has segregated delivery into three segments:
- Local delivery
- Regional delivery
- National delivery
And it charges different shipping fees for each of these.
A part of the shipping cost is paid to the shipping partner, and the remaining is the company’s profit.
Unlike any other marketplace, Meesho charges:
- 0 commission on product margins
- 0 penalty charge for order cancellation, late dispatch, or for any other mishaps
- 0 listing fees
What does this mean?
It means that whatever the price difference is between what a product is bought at and what it is sold at, 100% of that goes to the seller’s pocket.
Is Meesho Making a Profit or Loss?
Meesho is yet to start making profit. Despite been valued at $5 billion even having a plan to go public the company is still making loses as at today. For example 2021 ended with a loss of 124 million dollars.
What is Meesho’s Competitive Advantage
Unlike traditional retail stores, Meesho helps homemakers run an online store without initial capital or inventory. Using Meesho is easy and does not require tax registration or official documents. As a result, homemakers can easily start reselling their goods on Meesho and run their business simultaneously with their day-to-day jobs. This way, they can take a break from their routine and lead a more independent life. Using the Meesho app, homemakers can create a store listing in seconds. They need an active cell phone number, personal details and a store name.
They can even choose a catchy store name to attract potential customers. Once they have their store listed, they can begin to promote their products on social media.
What Makes Meesho So Unique?
While social commerce was a hot topic in India at the time, it had problems. There weren’t many payment options and a limited supply. Meesho’s innovative approach to customer-friendly policies revolutionized the concept.
Meesho’s philosophy is to make ‘Shopping Social’, i.e. people should be able to shop with their friends and family without fear of getting scammed is another unique dimension brought by Meesho business mode.
Future Of Meesho
While keeping the reselling model as its core, Meesho is now trying its hands on full-fledged e-commerce wars with the existing marketplaces.
As of 2022, Meesho’s 75% of orders come directly from the consumers and the rest 25% from resellers.
It would be fascinating to observe how Meesho attempts to enhance its connection with resellers, which forms the foundation of its whole social commerce strategy. Nevertheless, with sound unit economics, Meesho seems to have a promising future ahead.
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