IMB 909

MEESHO (B): TECHNOLOGY ENABLEMENT OF SMALL

SRIVARDHINI K. JHA, JACQUELINE GOMES, AND SURESH BHAGAVATULA

Srivardhini K. Jha, Associate Professor of Entrepreneurship, Jacqueline Gomes, Case Writer, and Suresh Bhagavatula, Professor of
Entrepreneurship, all at the Indian Institute of Management Bangalore, prepared this case for class discussion. Meesho
cooperated and provided information to IIMB in connection with the preparation of this case. No funding was received from
Meesho for the development of this case. It was reviewed and approved before publication by a company designate. This case is
not intended to serve as an endorsement, source of primary data, or to show effective or inefficient handling of decision or
business processes.

Copyright © 2021 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or transmitted
in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise (including internet) – without the
permission of Indian Institute of Management Bangalore.
MEESHO (B): TECHNOLOGY ENABLEMENT OF SMALL RETAILERS

Though FashNear failed, Aatrey and Barnwal had gained a lot of information in the 4 months of interacting with the
shop owners in and around Bangalore’s Koramangala and HSR Layout areas.1 Aatrey recalled:

During the conversations over cups of tea and amidst playing with the retailers’ children, we tried to
understand the problems these people were facing, and we identified a pattern in the way they operated.
Almost all retailers were jotting down mobile numbers of consumers who came to their shops, and with
the consent of those consumers, the retailers were adding them to the store’s WhatsApp group. They would
post photographs of new products they received on the WhatsApp group. Interested consumers would then
place an order for those products. The retailer, in turn, would put down the details in a notebook and send
a sales boy from the store to deliver the product to the consumer’s house.

POPULARITY OF SOCIAL COMMERCE

Almost 40% of the sales were happening through WhatsApp by retargeting existing customers. Strangely, Aatrey
and Barnwal had overlooked this customer interaction process earlier, although a majority of the small shops were
using this model.

They visited more shops to research this trend deeper and found that this process was not without its own set of
challenges. One of the main issues was that the retailers frequently resent pictures of the unsold products and ended
up spamming the consumers. As a consequence, consumers often left the WhatsApp group or muted notifications.
This led to another problem – by the time they responded on a product of interest, it would no longer be available.
Also, once a deal was made between the store and the consumer, the mode of payment proved to be an issue;
retailers had to send someone from the shop to collect payment in cash.

Around 2015-16, social commerce was gradually growing in popularity in India. The Social Media 500 report by
Internet Retailer, stated that the top 500 retailers, mostly in small businesses, earned more than $3.3 billion in 2014
through social commerce. This contributed to a year-on-year increase of nearly 26% in revenues. 2 Aatrey and
Barnwal had stumbled into the world of social commerce – a subset of e-commerce that supported transactions
over social media. Social commerce allowed businesses to promote and sell their products via social networking sites
like Facebook, WhatsApp, Twitter, and others. Customers could leverage the power of social networks to inform
their buying decision and proceed to make a purchase. While Aatrey and Barnwal were quite aware of the increasing
importance of social commerce for small businesses, they were also aware of the gaps. They knew which pain points
to address to make social commerce more successful and streamlined. With this new knowledge, they pivoted
toward developing an alternative distribution channel for the small retail shops that led to the birth of Meesho
(derived from Meri Shop, meaning “My Shop” in Hindi) in January 2016.

MEESHO

Meesho was the Indian mobile version of ‘Shopify’. The mobile application was designed to be user-friendly (see
image below). It was designed to work with Facebook login details. When users logged into Meesho for the first
time, a webpage for their business was created using the information from their Facebook account. The application
provided the retailers a comprehensive set of features to manage their business operations. This included inventory
management, catalog management, order management, and payments. The retailers could share links of their stores
over WhatsApp, which enabled consumers to browse through the latest product(s), choose product(s), and make
payments.

1
Koramangala and HSR are commercial areas in Bangalore, India
2
https://yourstory.com/2016/08/growing-social-commerce/amp - last accessed on September 1, 2021

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MEESHO (B): TECHNOLOGY ENABLEMENT OF SMALL RETAILERS

Source: Case writers prepared this image

The founders introduced the beta version of Meesho as a free tool to the retailers of small, neighborhood shops.
Given the ease of usage and completeness of the product, the retailers loved the tool and it gained traction quickly.
In the summer of 2016, the founders approached Y Combinator with this tool and raised angel funding.

The team was constantly in touch with their users, discussing the problems they were facing with the tool and
introducing features that made it more convenient. Their goal was to make the product sticky and increase the rate
of retention. The industry benchmark for retention was ~30% in the third month. Barnwal elaborated:

During this early stage, monthly growth and retention of retailers was a very important metric. Our
approach was to do what it took to make sure that the number of users grew consistently month on month.
In the beginning it was possible to target a 100% increase in the number of retailers and downloads, and
achieve 80-90% of that, but with time we realized that we could not increase our targets without increasing
our marketing expenses. And this then became a limiting factor.

LUCKY BREAKS

At the end of 6 months, 25,000 shops all over India were using Meesho. Aatrey pointed out some tailwinds that
helped Meesho grow faster:

WhatsApp gaining popularity around 2015 worked in Meesho’s favor. For most people in India, WhatsApp
is the first and only app they have used. Also, Reliance Jio (Indian telecom company) got popular and it
significantly reduced the cost of data usage in India. Now, this resulted in more and more people coming
online even from the smaller towns of the country. This was huge for us. Also making digital and mobile
payments using Unified Payment Interface (UPI), an instant real time payment system, was rapidly gaining
popularity making a lot of people do transactions online, which they wouldn’t be doing otherwise.

This was a stage of mixed emotions for the founders. On one hand, Meesho was steadily gaining traction, but on the
other hand, Aatrey and Barnwal were yet to figure out a way to make money. It seemed difficult to monetize by
charging the small retailers a user fee. There was a possibility of exploring advertising revenues. Even as they were
grappling with the issue of monetization, Meesho’s retention rate stubbornly remained below the industry
benchmark. To add to this, they were fast running out of funds and investors did not seem interested in Meesho’s
business model.

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