India’s social commerce market was still at a nascent stage when covid-led business slowdown hit in March 2020
Out of the handful of Internet startups in social commerce, Meesho’s mechanism to ensure a minimum income for resellers helped clutch its business back after covid-19 disruption
Using a mix of microloans for resellers and doubling down on retailing essentials, Meesho ensured survival not just of the organization but also its useer base
Alongside larger ecommerce giants such as Flipkart, and Amazon, a parallel e-commerce model has emerged in India. It is centered around drop- shipping, a retailing model where a seller doesn’t have to keep any inventory. They instead ‘resell’ products from suppliers who store their inventory in warehouses or factories. These resellers usually sell to a recurring and loyal base of customers, who find interest in long-tail products. The idea is to sell large volumes of rare products to customers, hence the supply of such products come from specialised manufacturers. But when covid-induced lockdown was announced in the country, Bengaluru-based Meesho, which offers a social selling platform, connecting suppliers and resellers, found itself heading towards a complete supply chain disruption for almost 4 months.
Founded in 2015 by Sanjeev Barnwal, and Vidit Aatrey, the company currently has a network of over 2 million resellers, of which 80% are women. Meesho’s resellers usually depend on WhatsApp, and Instagram to discover buyers for products. Most of these products are sourced from suppliers of non-branded items in India spread actress 100 of cities. To survive the pandemic, Barnwal and Aatrey had to rewire their entire supply chain network to sell daily-use products in the homecare and sanitary product category. These categories weren’t usually sold on Meesho, but the company decided to sell them in order to keep the business of their resellers alive. What they achieved in the next few months makes them our choice for this unique survivor story. In this story, we will trace the journey of the entrepreneurs who waged a war against the pandemic-induced slowdown and emerged victorious against heavy odds, setting an example for the entire startup community.
Edited excerpts from Inc42’s interaction with the Meesho cofounder and chief executive officer Vidit Aatrey:
Inc42: A pandemic-led business disruption is something that many founders and management leaders were not prepared for unlike in expected situations like a stock market crash, a funding slowdown. How does a tech founder prepare for a humanitarian and business crisis at the same time?
Vidit: The moment there was an announcement of a nationwide lockdown, the first thing on our mind was how to ensure continuity in our business. Unlike other ecommerce companies in India, who store their own inventory and have control over it, we operate on a pure marketplace model. As a company, we have always helped small businesses grow, and due to this, we never kept a single piece of inventory in our own warehouses. But due to lockdown, it became difficult for us to get products delivered. Things were difficult even when there was partial relaxation was given by the government on the movement of vehicles. Many suppliers who sold their inventory with us depended on Meesho for a majority of their income. Covid affected the majority of their income. So for the first few weeks, our entire focus was on setting up a minimal logistics network. This was quite a challenge as each state had different rules around entry and exit of vehicles.
For our women entrepreneurs (re-sellers), most of their income came from the fashion category, but these products could not be shipped in the country for a while because fashion not listed on the essential categories list. So our business priority was to help recover some income for these resellers. That’s when we started moving supply of essentials to our resellers, and this was the category that we had never sold before. This includes masks, personal care, sanitisers, and we even started selling grocery. We also came up with a plan to sell home-made masks made by our own resellers. A lot of our sellers chose to stitch masks at home, and we bought this inventory from them and sold it in the market ourselves. Since we knew there was heightened demand for masks, we were able to generate sizable income selling these homemade masks. We had 1000s of women entrepreneurs participate in that program, where we even had our logistics team go and pick homemade masks from home.
However, not everyone was able to participate in this makeshift strategy. So we came up with a micro-credit strategy to ensure that our resellers had some minimal income. Under this plan, we provided small loans worth Rs 5,000 to our resellers. Since we had all the bank accounts and earning details of our resellers, we were able to provide these loans without any formal underwriting or documentation process. We can say that these decisions established a stronger bond and trust with our user base even during uncertain times
Inc42: How did you react to the thought of going into a lockdown?
Vidit: In the first week (of March), all of us spent most of our days on Zoom calls discussing challenges in operations. We had realized that there would be a lockdown and after brainstorming with the leadership team, we arrived at some basic principles to come up with a business back up plan. The first principle was to ensure that our women entrepreneurs (re-sellers) had some income to survive the lockdown. In this, we decided to involve every Meesho member as well as our resellers to get ideas.
In42: What was your communication with investors, cofounders and other stakeholders regarding the impending crisis?
Most young startups in our country had not seen any crisis. The 2008 financial crisis had happened a decade ago, and prior to that, the dot com bubble had happened at the beginning of this century. This is why, the first thing that we (management) did was to gather information to decide our options because none of us had any experience of dealing with a global crisis. So, at that time (after March), I got on a call with almost all our board members and angel investors, to understand how to approach the current scenario. The second thing that I did was also speak to other founders in the tech industry to figure out what their reactions were. As soon as the lockdown hit, several founders in the tech industry came together to create multiple WhatsApp groups where we tried to get a sense of how to enforce Work From Home, how they were approaching financial security of the employees, and how they were approaching expense cuts.
Historically, during global crises, businesses end up hurting relationships with their customers, and vendors. Many companies also ended up spoiling their work culture. . So we were essentially trying to avoid these mistakes. We tried to make sure that we didn’t end up becoming too defensive trying to safeguard the future of our company. Hence our decisions focused on ensuring that we safeguarded our relationships and trust with our resellers and suppliers mainly.
Inc42: Did you set up an internal contingency team? Who were the people in your organisation who spearheaded the entire realignment strategy for the business?
Vidit: I don’t think there was one person who did better than others. As a company, we have always been aligned with our mission of empowering our resellers and especially the women entrepreneurs. Most of the employees in our startup are in constant touch with re-sellers. When the lockdown was imposed, our core business came to a sudden stop. So most of the workforce didn’t have much work to get done since transactions had stopped flowing in. So the finance team first stepped in began to come up with very creative ways of saving money. Our business team started to figure out how to set up a supply chain for selling essentials that we’ve never done before. And our product team began to build a new UI/UX flow to start selling essentials on our platform. Our tech team was trying to ensure that there was some minimal amount of engagement on our apps such as community chat messaging and mobile games. So there wasn’t one particular team of a set of employees who came together, but every other employee had pitched in for our business realignment.
Inc42: How did you deal with demotivation among employees and the management? And how did you deal with negative thoughts yourself?
Vidit: We’ve always had an all-hands meeting in the company, every week even before the crisis hit. In those meetings, we share updates about what’s happening in the business. And these meetings usually start with the story of one of our resellers. That’s one of the ways how we create awareness about what the company’s mission statement is. And during the lockdown period, a lot of our communication was clearly spelling out the realignment decisions and updating them about the impact of these new strategies. This way our employees understood that the company had not abandoned its mission even in the hour of crisis. This way, we tried to create some amount of optimism among our employees. But we also very clearly communicated that a lot of the realignment strategies were in fact experiments, and were not really proven to workout. But at least, we were trying to shut down a lot of negative thoughts among ourselves. And I think that communication really helped a lot in aligning everyone in the company, and building hope.
Inc42: When did you have to start thinking about these drastic steps such as pay cuts and downsizing? Did you have to layoff employees to cut the burn rate?
Vidit: We approached cost-cutting by proposing multiple plans based on four different projections on how our financials may look like. The budgeting we set (for the quarter) was obviously off and the revenue we expected for the year was not really an achievable target. We had prepared multiple plans based on whether a lockdown may extend beyond 3 months, and we had also built a (financial) plan in case the lockdown was to be extended to 6 or 9 months. We also did a scenario planning based on the expected drop in GDP in the future. And we tried to understand whether our product categories may see a demand drop if overall income levels shrunk for people. But in our case, we did not carry out pay cuts because apart from those three months (between March to May), ecommerce has generally done well after that.
Inc42: When did you finally get some sort of relief? Do you recall the exact moment when you felt assured that your business would be back on track?
Vidit: I don’t think there has been any relief at all for the last nine months. We have been through multiple phases where we had zero business. In this period we tried to build an essential product category, and then after the lockdown was lifted, we had issues getting our supply chain back in shape. Different states had restricted movement of vehicles and people depending on red, yellow, and green zones. Ensuring a smooth run for our supply chain through this maze was extremely tough.
Right after the lockdown, we had to prepare for the Diwali season, which is an important quarter for our segment. We had to figure out new suppliers for gifts, lighting, and other seasonal categories. We usually prepare for this season at least 4 months in advance, but this year , we didn’t have a lot of time in our hands. Since in the months before Diwali, we were focusing on trying to create revenue by boosting essential products’ supply, during festive season, we were required to quickly modify our supply chain for procuring and delivering products in seasonal categories. So, it took us a lot more heavy lifting to prepare for this season’s demand. And now, we are currently preparing for a new financial year. I don’t think I have had time to think about relief. We just have been trying to figure out how to keep the platform and supply chain stable, so that our final customers get their products shipped in time.
Now we are seeing a lot more women entrepreneurs onboarding our platform, reaching more than 7 million resellers. Our old entrepreneurs have been much more active in our platform, and all of them are doing around 20%-25% more business a month (compared to pre-covid level) since they have been able to get new customers. We are now trying to add more resellers in new geographies next year, especially in the remotest part of the country.