Meesho losses surge 7X to Rs 3,247 cr in FY22 as expenses rise

The widening losses come in the wake of its efforts to challenge bigger rivals such as Flipkart and Amazon India.

Unlike the big ecommerce players, Meesho does not charge sellers a commission on the sale of merchandise. It makes money by charging an advertising fee. Sellers that spend more to advertise on Meesho get better promotion on the app, such as higher placement in search results.

The company’s total expenses rose five-fold to Rs 6,607 crore from Rs 1,337 crore as advertising, salaries and other expenses grew during the financial year. Employee benefit expenses grew 3.4 times to Rs 509 crore in FY22, from Rs 149 crore in FY21.

Meesho’s logistics and fulfilment costs grew 4.4 times to Rs 2,829 crore in FY22, from Rs 632 crore in FY21. Advertising expenses grew more than six times to Rs 2,579 crore from Rs 424 crore as the company aggressively promoted its app on television during the Indian Premier League.

The startup has since been trying to reduce its burn. ET reported on June 2 that it is expected to cut costs and extend its cash runway as it struggles to raise funds in a tough macroeconomic environment.

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It introduced new policies – such as a no returns for goods sold at a reduced price, and pickup from the nearest delivery centre – to reduce last-mile and return costs.
Meesho had a meteoric rise, especially during the funding boom in 2021, as the reseller model of selling fashion and apparel through intermediaries gained significant traction in India’s smaller cities and among low-income households.

But in 2022, the SoftBank- and Meta-backed company changed its positioning and increasingly started selling to the end consumer. This required it to invest significantly in customer acquisition as it took on the likes of Flipkart and Amazon.

Meanwhile, both these companies have entered Meesho’s turf. Flipkart has launched an app similar to Meesho’s, called Shopsy, while Amazon has invested in the reseller app Glowroad, which was first reported by ET on April 22.

Meesho last raised funds in September 2021, when it raked in $570 million at $4.9 billion valuation. The company has made multiple attempts to raise more funds since then, and even held talks with Google, but has failed to stoke interest from investors.