Meesho reduced its personnel by 15%, or 251 positions, on Friday as the Indian social commerce company trimmed costs to strengthen its financial position and face “economic reality.”
Meesho slashed roughly 150 jobs in the previous wave of layoffs, which occurred a year ago. In a statement, the business with its headquarters in Bengaluru, which is supported by Fidelity, Prosus, SoftBank, Sequoia India, and Meta, stated that it is aiming to “work with a leaner organizational structure to achieve sustained profitability.”
The separation package will include a one-time severance payout ranging from 2.5 to 9 months (depending on the tenor and classification), continuous insurance benefits, help with job placement, and accelerated vesting of ESOPs. We are dedicated to making sure that everyone affected has our full support. We are still appreciative of their assistance in creating Meesho, according to a statement from a Meesho representative.
The employment losses come after Meesho actively reduced its cash burn during the previous year. The startup’s executive team recently informed brokerage firm Jefferies that it is “nearing zero cash burn” and aiming to reach EBITDA breakeven in 2023.
“We grew by 10X from 2020 to 2022, helped by COVID tailwinds and aggressive investments. Even as we tracked our plans, the macroclimate undeniably and considerably changed. As a result, we have had to accelerate our timeline to profitability as part of Project Redbull, while readjusting our GMV growth goals to 30% YoY. “While our cash reserves buffer us well for these harsh circumstances, we need to stay highly prudent on the cost front,” Meesho co-founder and chief executive Vidit Aatrey told employees in an email seen by TechCrunch.
He added: “As leaders, we made judgment errors in over-hiring ahead of the curve. At the same time, we could have run our organizational structure in a more effective and lean manner overall. Our spans and layers were inflated, and this could have unintended consequences for our speed to execute. While we are confident that Meesho business will stay strong, economic reality is here to stay. ” “We are now faced with the hard truth of aligning our people’s costs with the new projections for our business.”
The seven-year-old e-commerce startup, whose sellers are predominantly based in smaller cities, drove a GMV of $4.5 billion in 2022, a nine-fold growth over a year, the startup told Jefferies.
Meesho is making an effort to cater to a customer base that is not bothered by unbranded goods and is too price sensitive. This value offer has “resonated well with the low to mid income customer cohorts from tier 2+ markets, forming the bulk of the consuming class in India, although there is traction seen in metro/tier-1 as well,” according to Jefferies.
According to Jefferies and sources familiar with the situation, Meesho’s average order value (AOV) is less than 350 Indian rupees, in contrast to established platforms where a customer’s average purchase value is over 1,000 Indian rupees, or $12.2. According to experts, this tiny basket size poses certain difficulties and possibilities, and overcoming them is essential to growing the Indian e-commerce sector.
