Meesho has cut 15% of its workforce, or 251 positions, as the Indian social commerce startup cuts spending to improve its financial health and face “economic reality.”
This is the second round of job cuts at Meesho, which cut around 150 positions a year ago. The Bangalore-based startup, backed by Fidelity, Prosus, SoftBank, Sequoia India and Meta, said in a statement that it seeks to “work with a leaner organizational structure to achieve sustained profitability.”
“We are committed to ensuring that all those affected have our full support and will be provided with a severance package that includes a one-time 2.5-9 month severance payment (depending on term and designation), ongoing insurance benefits, support for job placement and accelerated acceleration. granting of ESOP. We remain grateful for their contributions in the construction of Meesho,” a Meesho spokesperson said in a statement.
The job cuts follow Meesho aggressively cutting his cash burn in the past year. The startup is “close to zero cash burn” and aims to break even EBIDTA in 2023, its leadership team recently told brokerage firm Jefferies.
The seven-year-old e-commerce startup, whose sellers are predominantly located in smaller cities, fueled GMV of $4.5 billion in 2022, a nine-fold growth in one year, the startup told Jefferies.
Meesho tries to serve an audience that is too price sensitive and doesn’t care for off-brand products. This value proposition has “resonated well with low- to mid-income customer cohorts from tier 2+ markets, forming the majority of the consumer class in India, although traction is also seen in the metro/tier 1 area” wrote Jefferies.
Compared to traditional platforms, where the average customer order value is about 1,000 Indian rupees, or $12.2, Meesho’s AOV sits below 350 Indian rupees, according to Jefferies and people familiar with the affair. This small basket size presents unique challenges and opportunities and unlocking it is key to expanding the e-commerce market in India, analysts say.
“We grew 10 times from 2020 to 2022, helped by the tailwinds of Covid and aggressive investments. Even as we followed through with our plans, the macro weather undeniably changed considerably. As a result, we have had to accelerate our schedule towards profitability as part of the Redbull Project, while resetting our GMV growth targets to 30% YoY. While our cash reserves protect us well for these harsh circumstances, we must be very prudent on the cost front,” Vidit Aatrey, Meesho co-founder and chief executive officer, told employees in an email.
He added: “As leaders, we made errors in judgment by over-contracting ahead of the curve. At the same time, we could have run our organizational structure more effectively and efficiently overall. Our spans and layers were bloated, and this could have unintended consequences on our execution speed. While we are confident that Meesho’s business will remain strong, economic reality is here to stay. Now we are faced with the hard truth of aligning our personnel costs with the new projections for our business.”