We will continue on our journey to democratise e-commerce for everyone
Started with a mission to democratise internet commerce by bringing a range of products and new customers online, Meesho is India’s fastest growing internet commerce company. The company’s vision is to enable 100 million small businesses in India, including individual entrepreneurs, to succeed online. What started six years ago as a reseller-focused platform enabling millions to sell online, has now emerged as a single ecosystem connecting sellers to consumers and entrepreneurs. In an interview with Fibre2Fashion, Meesho’s senior director-growth Soumen Samanta discusses the Indian start-ups, growth aspects and success of online platforms.
How do you see the Indian start-up ecosystem growing over the next few years and the role of the fashion sector to drive this?
The burgeoning Indian start-up ecosystem has finally hit PMF with consistently growing demand across pockets, made for Bharat solutions and offerings, efficient support systems and policies, and the same reflecting in capital inflow currently. Over the next five years, I expect India to cross the following milestones:
- We will have demand catering to 1,000 million+ active internet users with improving SOW per capita leading to 4x growth in e-commerce market size at ~$200 billion.
- Number of start-ups will jump by ~2x to 100,000 with 150+ unicorns with potential to attract 3x investment at $100 billion+.
- Start-ups will employ 3.5 million+ people to become the second-largest ecosystem in the world after the US.
Fashion so far being the acquisition driver for Indian e-commerce story will continue momentum with 2.5x growth and potential to reach $30 billion market size in next five years with improvement in brands consumption led by Gen-Z and increasing e-commerce accessibility in tier 3 and tier 4 cities to be catered through home grown opportunities.
How do we understand the potential of any new age start-up early on in its journey?
Given standard DCF methodology may not be accurate/low on confidence while assessing steady state potential performance of an early-stage venture, the following approach can be used in the form of a balanced scorecard which ranks the options being evaluated within these broad factors:
- Size of the market opportunity and growth rate (how big and deep is the ocean you are trying to swim).
- Core offering (Is it 10x and differentiated enough to solve real time and big enough problems).
- Competitive environment (consolidated vs fragmented, ease of entry etc)
- Prototype and initial traction if metrics (growth rate and repeat rate, LTV/CAC, UE line of sight etc) available.
- Other key future risks (negative scoring): Need for further big scale financing to grow, potential political/technological/supplier headwinds etc.
What are some of the factors that are emerging over the coming years to drive e-commerce adoption?
The growth of internet penetration led by smart phones and cheaper data availability, online payment revolution led by UPI, rising disposable income (especially tier 2-4) coupled with globalisation, and increasing scope of needs (convenience, variety etc) are the key drivers so far.
Going forward to sustain this momentum, locally created regional solutions reducing pain points in the current ecosystem and focus on omni-channel presence in terms of availability while being digital and tech first in terms of user engagement will be critical. India is a very large but heterogeneous market; hence offerings and services need to be curated accordingly for a large-scale player, or have to find a niche where start-ups have a right to win.
Besides these, government regulations and macro-economic conditions will continue to influence this journey which is part of the connected ecosystem.
What are the key aspects of growth for any online/digital company like Meesho?
A. Nature/quality of users: Any hyper growth company in its journey realises that with increased acquisition and tapping into more customer segments, non-core TG comes into the fold where you don't have a product-market fit given difference in shopping behaviour, spending capacity, interests etc (like metro vs tier 4, male vs female, North vs South India or <21 years vs >30 years). Hence, we need to be cognizant of CAC payback period given the inherent difference in LTV of different user cohorts and continue to improve the offerings for the adjacent TG to continue acquisition at a larger scale.
B. Organic growth: This is a function of core product/service offerings that leads a user to become loyal and sticky to you. It can range from price/value to assortment width to just UX/UI and/or post order customer service which makes the flywheel stronger. The expectations and sensitivity for different user cohorts as mentioned above may also vary and hence understanding these feeds into personalised/localised offerings with increased distribution and share of the market.
C. Inorganic growth: This is generally done to win back churned users or short circuit repeat habit formation of a user on back of paid nudges like discounts, performance marketing, additional 3P channels, loyalty vouchers etc. While this is an extremely critical lever, consideration here to keep in mind is long term incremental revenue/spend for improved capital allocation and efficiency with a second order impact of ensuring that users don’t get into the habit of spend led retention or repeat behaviour and continue to stick organically to your core platform.
Which key metrics determine the success and health of the business in large scale online platforms like Meesho?
One of the biggest pro working for an online centric/ e-commerce company is that you have a lot of data to slice and dice and gather insights across any user journey level to derive powerful insights. Personally, I have found the below three key metrics tracking most effective which encapsulates the impact of almost all input levers and may proactively tell a lot about the health of a business’ top/bottom line in the long run from a user growth lens.
1. Quick Ratio= (New users acquired + Reactivated dormant users) / (Churned out users): True indicator of sustainable growth in the long run (also imagine alternative complex tracking of retention for M0, M1....Mn where n->100+ in steady state).
2. DAU/MAU (engagement and retention depth basis past experience and usage value prop.) and DTU/DAU (attractiveness of the product/service offering for repeats and dictates SOW).
3. LTV/CAC: More of a guardrail check metric to determine net value creation (monetary) in the long run while shooting for the stars in terms of market penetration.
As a leader what is one of the key areas of concern for you and how are you tackling the same?
India has no scarcity in human resources yet talent density for a start-up is always a concern in today’s environment. Hiring (and growing talent) is extremely crucial for any ‘Build to Last’ organisation across its lifecycle for explicit reasons. The tricky situation here is how to decide and select the correct generalist or specialist.
I think understanding what kind of value addition you want to derive will be helpful to enable this decision.
There are very broadly three types of candidate/resource skill sets that we can evaluate based on their thought process/experience/interest:
A. Critical thinker: No matter what the nature/context of the problem is, this person will be able to do RCA with structured, analytical and user led thought process (Strategy case in point).
B. Blue Ocean thinking: Out of the box and creative ways of doing the same stuff for building long term advantage (Consumer Insights/Product case in point).
C. Process/execution specialist: No matter what the job is, this is the best person to get it done with speed and perfection (Operations or Performance Marketing case in point).
How has been your journey at Meesho so far and what is the road ahead?
The journey with Meesho so far has been absolutely fantastic, one filled with working on exciting challenges solving for Bharat with an extremely smart and dynamic set of people. The cherry on the top has been the 10x growth with us logging more than 100 million+ downloads in Q4 FY22 and recently crossing the 55 million daily order mark in our ‘sale’. Going forward we will continue on our journey to democratise e-commerce for everyone with focus on profitability and with the objective to become the catalyst for Bharat’s small and local entrepreneurs’ growth while continuing to improve experience and selection for our consumers.
What are your future plans?
I am an ardent believer in India’s growth story in the coming years in the global context and hence I will continue to be professionally invested towards continuous learning and building for the same, while simultaneously trying to get exposure across various verticals going ahead.
Published on: 07/09/2022
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
