Meesho has cut 15% of its workforce, or 251 positions, as the Indian social commerce startup cuts costs to improve its financial health.
This is the second round of job cuts at Meesho, which cut about 150 jobs a year ago. The Bengaluru-based startup, backed by Fidelity, Prosus, SoftBank, Sequoia India and Meta, said in a statement that it is looking forward to “operating with a leaner organizational structure to achieve sustainable profitability.”
“We are committed to ensuring all affected have our full support and a severance package will be provided which includes a one-time severance payment from 2.5 to 9 months (depending on term and appointment), ongoing insurance benefits, placement support and expedited ESOP grants. A Meesho spokesperson said in a statement.” We remain grateful for their contributions to building Meesho.”
The job cuts come on the heels of Meesho significantly cutting back on cash burn last year. Its leadership team recently told brokerage firm Jefferies that the startup is “near zero cash burn” and is targeting EBIDTA break-even in 2023.
The startup told Jefferies that the seven-year-old e-commerce startup, whose sellers are mostly found in smaller cities, brought in $4.5 billion in 2022, a nine-fold increase over a year.
Meesho tries to serve an audience that is very price sensitive and doesn’t mind off-brand products. This value proposition “resonated well with lower-to-mid-income customer groups from Tier 2+ markets, making up the bulk of India’s consumer class although there is traction in the metro/Tier 1 as well,” writes Jefferies.
Compared to traditional platforms, where the average customer order is around 1,000 Indian rupees, or $12.2, Meesho’s AOV stands at less than 350 Indian rupees, according to Jefferies and people familiar with the matter.
“We delivered 10x growth from 2020 to 2022, aided by covid tailwinds and strong investments. Even as we tracked our plans, the macro climate changed undeniably and dramatically. As a result, we had to accelerate our schedule to achieve profitability as part of the project. Redbull, with readjusting our GMV growth targets to 30% annually. While our cash reserves protect us well for these harsh conditions, we need to be very careful with cost,” Meesho co-founder and CEO Vidit Atre told staff in an email. .
He added: “As leaders, we made errors of judgment in over-staffing ahead of the curve. At the same time, we could have run our organizational structure in a more efficient and agile way overall. Our distances and layers have been inflated, and this could have unintended consequences for our speed of execution.” While we are confident that Meesho’s business will remain strong, the economic reality is here to stay. We are now faced with the difficult reality of aligning our personnel costs with the new expectations of our business.”