Meesho's big bet on small towns

THE ABUNDANT PURCHASING power in India's smaller towns has put Meesho in a good place.

- AYANTI BERA

Business on the platform, which caters to the value retail customer, has been brisk. An assessment in late January by Alliance Bernstein had noted that Meesho was fast gaining momentum on the back of a high 85% retention rate.

Moreover, analysts estimate that in the 12 months to January, revenues grew at a strong 54% year-on-year. The rising revenues have helped the company earn an operating profit since July last year. It had already halved its losses in FY23, bringing them down to 1,675 crore on the back of a smart 77% jump in reported revenues to ₹5,735 crore.

Today, a good 60% of Meesho's sellers are from tier-II cities and beyond, while 80% of its orders come in from the same geography.

Indeed, India's small towns are where the action is.

As Anand Ramanathan, partner and consumer, products and retail sector leader, Deloitte India, points out, currently, around 70% of the orders originate in the tier-II and -III cities. "Around 40% of the revenues is generated in tierI cities, which leaves 60% for the rest of the markets," he told FE. Given the migration of people from semi-urban to urban, the shares, Ramanathan estimates, could stabilise at 50:50.

Within this, the value-retail space is a lucrative opportunity being eyed by many players. The space is expected to become more competitive in the next couple of years.

As Puneet Mansukhani, partner-digital advisory and retail sector head, KPMG in India, reckons, competition will be keen as more players move into the value-retail space.