Some sellers have given Meesho negative reviews and ratings on its app and stopped processing orders through the platform
Meesho compensates its sellers for products returned by customers, and the misuse of its lenient policy prompted the change
Logistics and fulfilment costs were the largest expense for Meesho in FY22, growing 4.4X to INR 2,829 Cr from INR 632 Cr in FY21
Some sellers have given Meesho negative reviews and ratings on its app and stopped processing orders through the platform, ET reported citing merchants from Surat.
Meesho has made the change after receiving feedback from third-party logistics partners. Since returns make up a significant portion of the total logistics costs, the ecommerce unicorn’s move would make sense from a business perspective.
The move also comes when tech companies and startups across India and the world are firing employees and cutting costs amid a prolonged funding winter. Meesho, on its part, has tried to reduce operating costs and conserve cash.
Under the new policy, the SoftBank-backed ecommerce platform has introduced some technical changes, including the introduction of new barcodes and video verification of the product packaging. Meesho started implementing thorough checks on returned products at the beginning of the year.
According to logistics companies cited by ET, the misuse of its old policy at the hand of sellers prompted the policy change. However, a Meesho spokesperson speaking with Inc42 denied the same, adding that third-party logistics providers do not have any influence on the ecommerce platform’s return policy.
“Our policies on the returns side are fair and competitive. Sellers can only raise claims within 7 days of receiving the returns,” added the spokesperson.
It is prudent to mention here that Meesho compensates its sellers for products returned by customers.
Before this, Meesho was more lenient with the returns, but sellers would not accept the returning products and instead claim compensation after some time, knowing that a large volume of products was being returned. By implementing stricter checks, Meesho is trying to curb that, which has angered sellers.
The matter becomes more complicated by the fact that the platform’s key verticals – fashion and accessories – usually have a high return rate.
On average, about a quarter of all fashion items bought on ecommerce sites get returned. To keep that in check, Meesho also introduced a new policy which allowed buyers to buy or sell the products they wish to return at a discount without having to return them.
New Return Policy To Curb Reverse Logistics
As mentioned above, return logistics make up a significant portion of the total logistics costs. Further, sellers Inc42 spoke to noted that in general, reverse logistics (returns to sellers) is more expensive than forward logistics (shipping to customer).
In FY22, Meesho’s losses surged almost eightfold to INR 3,247 Cr. Logistics and fulfilment costs were the largest expense for the ecommerce platform, growing 4.4X to INR 2,829 Cr in FY22 from INR 632 Cr in FY21.
In short, logistics costs accounted for 43% of all expenses Meesho incurred in FY22.
“The recent changes in our policy provide greater transparency across the logistics chain and puts the power back in the hands of our sellers. For instance, sellers now have the flexibility to choose their preferred courier partner for order returns based on their specific needs. Any policy change undergoes a rigorous assessment and all changes are made to ensure a better experience for our users and sellers,” the ecommerce platform’s spokesperson added.
However, some sellers are facing technical issues in implementing the new policy, with some sellers claiming that they did not receive compensation despite receiving tampered products from customers. This has caused some disgruntled sellers to band together on WhatsApp groups and voice their concerns against Meesho.
The startup, which last raised $570 Mn in September 2021, recorded a 68% jump in sales with around 33.4 Mn orders during last year’s festive season sales.
Meesho has pivoted a fair few times over its lifetime. Starting as a social commerce startup, the company pivoted first to a reseller model and in 2022, it shifted to a marketplace model in a bid to find a better product-market fit and take on Amazon and Flipkart in India’s ecommerce space.
Update | January 23, 2023, 2:45 PM
The story has been updated with comments from Meesho.