On Friday, Indian social commerce company Meesho implemented a personnel reduction of 15%, resulting in the elimination of 251 positions. This cost-cutting measure aims to strengthen the company’s financial position and confront the “economic reality.” Approximately a year ago, Meesho had already downsized its workforce by around 150 employees. Meesho, headquartered in Bengaluru and backed by investors such as Fidelity, Prosus, SoftBank, Sequoia India, and Meta, expressed its intention to achieve sustained profitability through a leaner organizational structure.
The separation package for affected employees includes a one-time severance payout based on tenure and classification, continuous insurance benefits, job placement assistance, and accelerated vesting of Employee Stock Ownership Plans (ESOPs). Meesho emphasizes its commitment to supporting those affected by the layoffs and acknowledges their contribution to the company’s growth.
These job losses follow Meesho’s efforts to reduce its cash burn rate over the past year. The company’s executive team recently informed brokerage firm Jefferies that they are nearing zero cash burn and targeting EBITDA breakeven in 2023.
Meesho experienced significant growth, expanding by 10 times from 2020 to 2022, propelled by favorable conditions during the COVID-19 pandemic and aggressive investments. However, the changing macroeconomic landscape prompted Meesho to expedite its path to profitability through Project Redbull, while adjusting its gross merchandise value (GMV) growth goals to a 30% year-on-year increase. Meesho’s CEO, Vidit Aatrey, acknowledged that the company made mistakes in over-hiring and could have operated with a leaner organizational structure. He emphasized the need to align costs with the revised business projections while acknowledging the enduring impact of the economic reality.
Meesho founded seven years ago, focuses on serving sellers predominantly based in smaller cities and achieved a GMV of $4.5 billion in 2022, a remarkable nine-fold growth in one year. The company targets a customer base that values affordability over brand names, particularly appealing to low to mid-income customers in tier 2+ markets. While there is also traction in metro and tier-1 cities, Meesho faces challenges due to its comparatively low average order value (AOV) o f less than 350 Indian rupees ($4.5), contrasting with established platforms where the average purchase value exceeds 1,000 Indian rupees ($12.2). Overcoming these challenges is crucial for the growth of the Indian e-commerce sector.
