Pioneer of social commerce in India - Meesho
Startup
Interestingly, Meesho was Facebook's first start-up investment in India. So what made this social media giant cut Meesho a cheque? To understand that let’s first do a deep dive into social commerce. Social commerce, which combines commerce with social media, is in its infancy but has the potential to become mainstream. Meesho, the pioneer in India, has already clocked USD 1.4 billion GMV.
Comparison with China suggests significant potential...
In a matter of 5 years, the social commerce GMV in China shot up 25x from under USD 10 billion in 2015 to USD 250 billion in 2020. A lot of unique social commerce models such as Pinduoduo, Kuaishou etc. have scaled up in the last five years.
Value proposition
There are 3 very distinct advantages of social commerce over conventional e-commerce:
Product discovery & personalization: This is especially relevant in long-tail categories such as fashion, accessories, beauty products etc.
Trust between the seller & buyer: This increases a consumer's comfort in buying even unbranded products online.
Faster adoption of trends: Real-time understanding of customer demand behaviour helps to plan the supply chain.
Increased adoption to drive growth
E-commerce penetration is still lagging social media penetration and should catch up going forward. While WhatsApp has 400 million+ monthly active users (MAUs) in India, online shopping on traditional platforms such as Amazon/Flipkart is still reportedly restricted to ~100 million MAUs, based on Zomato DRHP.
Combining commerce with social media can drive adoption of online commerce and drive future growth for offering. What remains to be seen is, can it successfully expand beyond its current fashion and apparel segments.
Four models at play largely
Social reselling: Resellers buy from large merchants and sell on social networks (Meesho, Glowroad, Shop 101)
Group purchase: Consumers come together to buy in bulk & get better rates (DealShare, Mall91, CityMall)
Video-based: Video content is used to create awareness; influencers are also used to connect with (prospective) buyers (BulBul Shop, SimSim)
Customer-to-customer: Sale of product from one end customer to another (OLX, Quikr, Popshop by Meesho, FB Marketplace)
The poster child of social commerce
Meesho enables 15 million resellers on its platform across 5,000 towns & cities in India, providing them:
access to the large product assortments from thousands of suppliers,
support infrastructure for logistics & payment,
training and mentorship, and
personalised & curated business insights.
Meesho makes it possible for anyone to start an online store by offering its platform which already has a wide selection of catalogues to curate from, with no capital investment or inventory requirement. ~80% of Meesho's resellers are women who are generally looking for a secondary income for the family.
Focus on price
You won’t find your typical Nike and Tommy Hilfiger brands on Meesho. Meesho is targeting the audience from Tier III+ cities. They’re focused on reducing the price of the commodity. Unlike Flipkart and Amazon, they don’t own their warehouses or delivery network. That saves them a tremendous amount of capital. Consequently, they’re able to offer a 0% commission rate to their suppliers (For context - this is more than 15% for Flipkart and Amazon).
As things stand today…
Of late, Meesho’s growth has been tremendous. They’re eating up into the market of Flipkart and Amazon! In response, Flipkart has come up with a Meesho-like application called Shopsy. With Flipkart also having raised a ~USD 3.5 billion round, the competition to capture non-metro India is only going to get higher.
Recently, a blog about Meesho “ghost orders” also went viral and we posted a short video about the same. Meesho has clarified that they’re continuously identifying and removing these fake resellers from their platform. Such orders constitute less than 0.01% of all orders on their platform and do not affect their mission of democratising internet commerce for everyone in the country.
With a USD 300 million+ warchest from its most recent round of funding, Meesho has the firepower to test multiple offerings and lead the social commerce play in India.
What’s happening in South Africa?
Global Politics
Last week, South Africa saw its worst violence since the end of Apartheid 27 years ago. The civil unrest has already claimed 276 lives, seen hundreds of shops being looted, factories set on fire and government buildings vandalized. The protests started after the arrest of the former President, Jacob Zuma, for contempt of court. Firing stun grenades and rubber bullets had to be used to contain the situation.
Arrest of former President Jacob Zuma
Mr. Zuma faced corruption charges during his term as the president of South Africa from 2009 to 2018. After his resignation, a government-mandated commission started investigating these allegations. Despite an order from South Africa’s Constitutional Court, Zuma repeatedly denied testifying.
On June 29, 2021, the same court sentenced him to 15 months in prison for contempt of court. Soon after the arrest, sporadic protests started in Zuma’s hometown KwaZulu-Natal and soon spread to the Gauteng province, home to the country’s largest city - Johannesburg.
Are the riots just about politics?
The protests soon turned into a mindless series of looting and arson, devastating supply chains on which food, fuel and medicines depend.
Two ministers went on record stating that the rioting may have erupted due to Zuma's imprisonment but has now been taken over by a criminal element. According to experts, socioeconomic grievances and frustration with the state made these protests scale so quickly. The government also believes that former senior staffers of South Africa's State Security Agency, who are loyal to Zuma, are stoking the violence.
President Ramaphosa’s response
On July 12, 2021, the current President, Mr. Cyril Ramaphosa, deployed South Africa’s army to back up the overwhelmed police and other law-enforcement agencies. So far 25000 troops have been deployed, the largest since the end of white minority rule in 1994.
Although Mr. Ramaphosa has avoided calling out Mr. Zuma or his supporters by name, he said that “The events of the past week were nothing less than a deliberate, coordinated and well-planned attack on our democracy."
Zuma’s link to India
The Gupta family migrated from U.P to South Africa in 1993 and today owns coal mines, computer manufacturing business, newspapers and a media outlet in the country.
Zuma’s ties to this family, their influence on his cabinet choices and use of a chartered plane, reserved for heads of states and diplomatic delegates by the Gupta’s for the family wedding in 2013 (famously dubbed the local media ad Guptagate), are amongst the severe corruption charges against Zuma.
Rise in anti-Indian sentiment
Among areas affected by the rioting are Durban, Pietermaritzburg and Johannesburg, all of which have a sizable population of Indian expats. Thousands of businesses owned by members of the Indian community have been destroyed. So far 20 deaths have been reported in Phoenix, an Indian township north of Durban.
External Affairs Minister Dr. S Jaishankar called on his South African counterpart Dr. Naledi Pandor on Wednesday to express concern over the Indian community. Pandor assured that the Government of South Africa is doing its utmost to restore normalcy.
The situation now
While the violence is under control, for now, the economic cost in KwaZulu-Natal alone is estimated at 20 billion rand (USD 1.37 billion). 161 shopping malls, 11 warehouses and eight factories were extensively damaged. The extent of the damage in Gauteng is still being looked at. The establishments that have been destroyed will have a direct impact on thousands of jobs. In KZN alone, 150,000 jobs may be at risk.
Fight against Covid-19 disrupted
The country might soon be running short of basic provisions due to the disrupted supply chain. With lockdowns having pushed the economy into its deepest recession and unemployment at 33% as of March end, the country is in the middle of the third wave of Covid-19, with only 2.5% of its 60 million population fully vaccinated. The much needed Covid-19 vaccination drive has also been brought to a standstill.
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