Indian social commerce company Meesho recently implemented a personnel reduction, cutting 15% of its workforce, equivalent to 251 positions. The move was aimed at reducing costs, strengthening the company’s financial position, and adapting to the current economic reality. About a year ago, Meesho had already laid off approximately 150 employees. The Bengaluru-based company, supported by investors like Fidelity, Prosus, SoftBank, Sequoia India, and Meta, expressed its intention to achieve sustained profitability by operating with a more streamlined organizational structure.
The separation package offered to affected employees includes a one-time severance payout ranging from 2.5 to 9 months, based on tenure and classification. Additional benefits include continuous insurance coverage, job placement assistance, and accelerated vesting of Employee Stock Ownership Plans (ESOPs). Meesho’s statement emphasized its commitment to providing full support to those affected and expressed gratitude for their contributions to the company’s growth.
These workforce reductions come as Meesho has actively worked to decrease its cash burn over the past year. The company’s executive team recently informed brokerage firm Jefferies that they are approaching zero cash burn and have set a goal to achieve EBITDA breakeven in 2023.
Meesho experienced significant growth, expanding tenfold between 2020 and 2022, thanks to favorable market conditions during the COVID-19 pandemic and substantial investments. However, the economic landscape has undergone considerable changes, prompting the company to expedite its path to profitability under “Project Redbull” while readjusting its gross merchandise value (GMV) growth targets to 30% year-on-year. Meesho’s co-founder and CEO, Vidit Aatrey, acknowledged mistakes in over-hiring and the need for a more efficient and agile organizational structure. He recognized the impact of these adjustments on execution speed and stressed the importance of aligning personnel costs with the company’s revised projections.
Meesho, a seven-year-old e-commerce startup, primarily caters to sellers in smaller Indian cities. In 2022, it achieved a GMV of $4.5 billion, a remarkable nine-fold growth compared to the previous year. Meesho’s value proposition, which resonates particularly well with price-sensitive customers unbothered by branded goods, has attracted a significant portion of the low to mid-income customer segments from tier 2+ markets. Jefferies notes that Meesho’s average order value (AOV) is below 350 Indian rupees, significantly lower than established platforms where customers typically spend over 1,000 Indian rupees per purchase. Overcoming the challenges associated with small basket sizes and effectively serving these customer segments is crucial for the growth of India’s e-commerce sector.
