India's Meesho cuts 251 jobs to 'accelerate timeline to profitability'
Meesho cut 15% of its workforce, or 251 roles, on Friday as the Indian social commerce startup pares its expenses to improve its financial health and confront the "economic reality."
This is the second round of job cuts at Meesho, which eliminated about 150 roles a year ago. The Bengaluru-headquartered startup -- backed by Fidelity, Prosus, SoftBank, Sequoia India and Meta -- said in a statement that it is looking to "work with a leaner organizational structure to achieve sustained profitability."
"We are committed to ensuring all those impacted have our full support and will be provided a separation package that includes a one-time severance payment of 2.5 to 9 months (depending on tenor and designation), continued insurance benefits, job placement support and accelerated vesting of ESOPs. We remain grateful for their contributions in building Meesho," a Meesho spokesperson said in a statement.
The job cuts follows Meesho aggressively trimming its cash burn in the last year. The startup is "nearing zero cash burn" and is targeting to achieve EBIDTA breakeven in 2023, its leadership team recently told brokerage firm Jefferies.
"We grew by 10X from 2020 to 2022, helped by Covid tailwinds and aggressive investments. Even as we tracked to our plans, the macro climate undeniably and considerably changed. As a result, we have had to accelerate our timeline to profitability as part of Project Redbull, while readjusting our GMV growth goals to 30% YoY. While our cash reserves buffer us well for these harsh circumstances, we need to stay highly prudent on the cost front," Meesho co-founder and chief executive Vidit Aatrey told employees in an email seen by TechCrunch.
He added: "As leaders, we made judgement errors in over-hiring ahead of the curve. At the same time, we could have run our org structure in a more effective and lean manner overall. Our spans and layers were inflated, and this could have unintended consequences on our speed to execute. While we are confident that Meesho business will stay strong, the economic reality is here to stay. We are now faced with the hard truth of aligning our people costs with the new projections for our business."
The seven-year-old e-commerce startup, whose sellers are predominantly based in smaller cities, drove a GMV of $4.5 billion in 2022, a nine-fold growth over a year, the startup told Jefferies.
Meesho is attempting to serve an audience that is too sensitive to price and don't mind unbranded products. This value proposition has "resonated well with the low to mid income customer cohorts from tier 2+ markets, forming the bulk of the consuming class in India although there is traction seen in metro/tier-1 as well," Jefferies wrote.
Compared to traditional platforms, where the average order value by a customer is about 1,000 Indian rupees, or $12.2, Meesho's AOV stands below 350 Indian rupees, according to Jefferies and people familiar with the matter. This small basket size presents unique challenges and opportunities and unlocking it is key to expanding the e-commerce market in India, analysts say.