Indian ecom penetration could mirror WhatsApp user base: Meesho cofounder

Meesho Cofounder Sanjeev Kumar says India's ecommerce penetration could eventually match Whatsapp's vast user base, driven by rapid growth in smaller cities and heavy investment in AI and tech

As ecommerce platform Meesho’s much-anticipated ₹5,421 crore IPO opens, the company’s Cofounder and Whole-Time Director Sanjeev Kumar talks about the potential opportunities and challenges of the business in smaller cities and towns in an interview with Surajeet Das Gupta.

 

You have said that Meesho has merely touched the surface of the huge potential of ecommerce in smaller cities and towns in India. Can you elaborate?

 

In China or Indonesia, the number of ecommerce users tends to be similar to the chat app subscriber base. A good parallel in India would be the Whatsapp base of 800 million users. There is no reason why India’s ecommerce penetration should be very different from these countries and more so, as they are more value-seeking users in India compared to other countries.

 

Today, currently we are at 234 million transacting customers who have placed at least one order in the preceding 12 months and that number has grown 30 per cent year-on-year. And we have invested in growth through aggressive marketing expenses, which has led to an increase of 54 per cent in terms of orders this year in the first half of the financial year, and a 44 per cent growth in net merchandise value (NMV).

 

Substantial portion of the IPO proceeds, according to your document, is for investment in technology and technology infrastructure. That seems to be unusual for startups in ecommerce. Why is it so?

 

Our business model has to be asset light and have zero inventory, so the platform is the core for us where everyone comes together. That is why we want to invest heavily in AI, because the sheer scale of the numbers of customers and transactions makes it impossible for humans to handle. So, we depend on AI to personalise for customers and for sellers to list their product easily and not do heavy lifting. Even on logistics, AI decides which is the right partner for shipment across the network. That is why we are investing heavily on tech talent and building AI infrastructure. If you look at our current headcount, we have 2,000 people and 70 per cent of them are techies. Our requirement is different from other companies who have to invest a lot of capex. For us, the equivalent for that is investing in technology and tech infrastructure.

 

You have also given a big push now to content commerce which has caught on in China and some Asian markets. Do you think it will succeed in India? 

We saw consumers spending a lot of time on seeing short videos out of Meesho platforms, so we looked at other emerging markets like China and realised that content commerce or short video-based commerce make up for 15-20 per cent of NMV. Content ecommerce is very unique and engaging, so we build a three-sided platform between sellers, influencers and consumers. Sellers come and list their product for which they want short videos to be created, influencers will decide which product to choose and create short videos and post them in Meesho or outside on Instagram etc. And for all the orders which come through this, the seller pays a commission to the influencer. We don’t pay, we also haven’t taken a cut yet. In 12 months, we saw close to 10 lakh short videos and NMV of over ₹1,000 crore. It is small considering that in FY25, our NMV was 30,000 crore. We expect content commerce share will go up.

 

You seem to see a lot of similarities between the Indian and the Chinese or Asian ecommerce market behaviour. But are there major differences in consumer behaviour with India?

 

There are many areas of difference. For instance, cash on delivery (COD) has come down for us, but it is still at 72 per cent compared to 90 per cent three years back. It will take time to shift as more and more people trust the platform.

 

Another area of difference is voice usage, which is very high. This is unique in India and many users have low-end phones, so we have built our app tailored for them, as voice searches are very popular. Also, in India we have 10 different languages to cater to.

 

But does COD affect your margins or cash flows? 

No, it does not because we make the same margin contribution in each order, COD or prepaid, and we pass the benefit to customers online through some discount.

 

You have also made your intention of getting into digital financial services clear, like Alibaba has done in China. What is your gameplan?

 

We are in the very early stages, but as we have so many buyers and sellers on the platform , we can underwrite it much better to build the platform. Of course, capital providers will be part of the platform and we will connect them. We have a lot of consumers who use the buy now pay later scheme for products and it is a common behaviour for customers to settle at the end of the month and manage their cash flows. For sellers, they can manufacture a product doing well more for which we will get capital at lower interest rates for them.

 

You have tried selling grocery on Meesho, how has that been for you?  

 

With logistics costs coming down, we can have more low-margin products on our platform. As far as grocery is concerned, we currently sell products at high price points. But our aim is to have low-cost logistics so that we can replicate our model at the local level to give low-priced grocery.