Mistakes make a Meesho: What founder Vidit Aatrey learned from failed ideas

Meesho discovered its successful business model the hard way

There’s only one aspect in his journey to date where he can safely claim he met or even exceeded his father’s expectations. That was when he cleared the JEE entrance examination with a rank of 182 and made it into IIT-Delhi. Although his parents had faith that their bright older son would manage to study engineering, they never dreamt he'd make it into any IIT, the premier institute for would-be engineers, coming as he does from a family of mainly sugarcane farmers, tethered to their home state of Uttar Pradesh.

Barring this one aspect, almost all the other decisions that Meesho’s founder Vidit Aatrey has taken in his 31 years would go against the very grain of his family and how they envisaged their son’s future. Vidit’s father, a quality control officer at Delhi Jal board,  was keen that after he does his engineering, his son joins the IAS, something he himself could not do. That was why he chose electrical engineering at IIT as his father felt the subject aligned best with his future as an IAS officer.

But IIT Delhi turned out to be quite an eye opener for the young boy who’d grown up in Delhi’s Rohini, studying at a trust school called Sanatam Dharam.  He soon realized that very few engineers from IIT actually become engineers : most join consultancy, finance and other “cool” tech companies who represent what may be loosely called the “new” economy. He understood that it was possible to set up a “start-up” especially if one was from an IIT as many investors were willing to fund you. In general, IIT revealed many new truths, ideas, thoughts and possibilities, several of which he had never contemplated prior.

By the time he entered his fourth year. Vidit was volunteering some of his time teaching English to underprivileged kids, when he spotted a gap. There was no “naukri.com” equivalent for such kids who may not be qualified for the typical white collar office jobs but could fill many requirements. So his friends and he developed a tech platform called Pledge on which such students could find positions suited for them. This was his first taste of a startup, albeit in a small, limited manner.

Although Vidit had long abandoned his parent’s dreams of him joining the IAS, he still chose something reasonably staid as his first job : a much coveted management traineeship with ITC in their Chennai packaging unit. But even as he settled into his work, focussed on mundane thing like procurement and with a tortoise like pace, he could see his batchmates and friends leaping ahead in assignments and companies where product launches, new discoveries and quick promotions were happening all the time, instilling in him a kind of fomo (fear of missing out). That the tortoise eventually wins the race seemed of little consequence! 

So, when one of his seniors from IIT quit her job with Inmobi and suggested that she refer him to fill in, he jumped at the chance, again to the complete dismay of his parents. Who gives up a steady job with a reliable name like ITC to join some unknown company somewhere. InMobi might as well 

Attached to the chief revenue officer, InMobi - which at the time was one of the few unicorns in India - gave him the chance to learn everything about running a tech enabled platform and make it a success. “My role was truly horizontal - right from helping with revenue generation to designing sales incentives to calling and coordinating meetings with possible clients'', explains Vidit. Within one year, he felt he’d learned “everything he needed to know” about running a platform like this. Moreover, he realized that the founders of InMobi were no different from him: they were from similar backgrounds and not born with any silver spoons; if they could do it, why couldn’t he ?

His father had the answer to that one. He explained to his son that they were Brahmins and did not have “bania” blood flowing in their veins. Resigning from his job - however vague InMobi might sound to his parents - to set up his company sounded to them like the last straw : something only someone not in his right mind would do. They were watching all their dreams for their son shatter right before their eyes. No IAS, no ITC and a job with some unknown company, they’d swallowed all but this was taking things too far. His father refused to speak to him for weeks.

Meri Shop = Meesho

But believers in destiny and the 1900-odd employees of Meesho today should raise a toast that despite his parents' strong apprehensions and misgivings, the young man stuck to his guns. Since he himself lacked the computer and tech expertise, Vidit got in touch with a former IIT roommate who was then working as a computer scientist with Sony in Japan and convinced him to quit his job to come and start a business with him. As the two brainstormed, they finally hit upon something he feels only those with their type of lower middle class background and exposure could have. 

Everyone around both of them had always bought everything from small shops and kirana stores. Yet there was no way to reach these stores online. You had to physically go to them to conduct business. This to them felt fundamentally flawed. 80-85 percent of retail happened through these small stores, yet they had no online presence. That’s when the seed of Meesho was sowed : literally short for “Meri Shop”. Vidit and his co-founder spent days and weeks in small stores to observe and understand how they conducted their business, their hurdles and challenges while looking for solutions for these. In the initial year - it was registered in 2015 - while they built their tech platform and the basic framework of the business, they bootstrapped the company but as it began to pick up, they began to raise funding.

When Mistakes Lead The Way

Although the two batchmates started in 2015, it was a while before they got even the basics right. Initially, even their model was not what it is today. To begin with, they tried to see if they could  help shop owners get their offline customers online; then they realized that was not easy as it meant changing habits and bringing technology into lives unfamiliar with it. “It was like a Swiggy or Zomato for local fashion, a hyper local model which we soon saw didn’t work”, he explains. They realized that they were limiting the selection for customers by offering only localized products; why limit to stuff which is available close to me. People care more about the variety than the pace of delivery.

Spending full days at such shops helped the duo realize that some of these shops were selling to their customers through WhatsApp back in 2015, not so common back then. They decided to launch some tools to facilitate these shops selling on WhatsApp and Facebook but soon realized that this didn’t work either as this means these shop owners have to adapt to  using new tools and technology, which doesn’t come to them easily. “These businesses are usually run by older people and they have a set way of doing things”, explains he.  So then they focussed on native small online businesses, people who started their business on WhatsApp or Facebook. 

That’s when they found the core of what their business is today : swathes of housewives and women selling lifestyle, beauty, fashion products through WhatsApp groups to their peers, kith and kin all over the country. For some of these, the main source of income during the pandemic for the family became what they earned through such sales as other family members including their husbands lost jobs and employment. Depending on how much time they invest, some are even earning upwards of Rs 25,000-30,000 a month through such sales.

Another mistake they made was when they decided to replicate their business in Indonesia three years ago on the assumption that all developing countries are similar and small business heavy. Very soon, they realized they had spread themselves too thin and that each country has its own dynamic that varies dramatically. Success in one region is no guarantee for success in another. They quickly wound up operations.

But perhaps the biggest learning has been not to blindly ape others. To begin with, Meesho decided to charge a commission on every sale on its platform as is the practice followed by large e-commerce companies like Amazon and Flipkart but it soon realized that this restricted the number of small sellers who work on wafer thin margins. Few could afford to pay such commissions and still make some margin. This prevented many small sellers from coming onto their platform so they did away with the commission. Most of the company’s revenue now comes from ads (currently almost 80 per cent of total revenue) and some from logistics - either by small businesses on the platform. In due course, advertising will be opened to brands who don’t sell on the platform as well. 

After a series of mistakes, the biggest learning along the way for the founders has been that “avoiding mistakes doesn’t work”  and that it is better to make mistakes, accept it, quickly learn from it and move on. This is what has made them what they are today.

Things Begin To Fall In Place

What they are today is an aggregator for small businesses to showcase and reach customers anywhere in the country, not just those around them. So if you are looking for unbranded, reasonably priced goods from all over the country, Meesho is the place to go.

The company with 1900 employees has raised Rs 8000 crore over several rounds of funding - the last round of funding was raised at a valuation of US $ 4.9 billion in September 2021. It has a half million sellers on its platform and recently touched its 100 millionth customer. 

The company is contribution margin positive but since it is still investing aggressively to acquire new sellers and buyers on its platform, it is not profitable. The plan is to turn “cash flow positive” by the end of March 2023 and to stop burning money from then on. Eventually at some stage the company will go public to allow its present investors to exit.  

“Turning cash flow positive will give us more control over our own destiny and journey” points out Vidit, a journey that his parents are now proud of as they can see for themselves the impact it is having. At half a million of the 60 million odd small shops and sellers (MSMEs), Meesho still has a long way to go before they can say they’ve got anywhere with the problem they set out to solve. As with any route that has not been navigated before, the two founders face myriad challenges on a daily basis but as the saying goes : a smooth sea never made a skillful sailor.

Shop Talk
 

The lessons Meesho’s founders learnt

A hyperlocal model for fashion limited the selection for customers

Customers care more about the variety than the pace of delivery

Tools to facilitate shops selling on WhatsApp and Facebook didn’t work because shop owners couldn’t easily adapt to new tools and technology 

Replicating their business in Indonesia failed because they had spread themselves too thin

Blindly aping others such as Amazon and Flipkart by charging a commission on sales doesn’t work for small sellers