Meesho has built a profitable e‑commerce business on ultra-low order values by serving value-conscious Tier‑2 and Tier‑3 India, using a zero‑commission marketplace, ad revenue, and its own logistics platform Valmo to cut costs. This blog breaks down Meesho’s pivots, numbers, and “secret” business model in simple language, based on Sahil Khanna’s video plus verified data.
Meesho at a glance
Meesho is a horizontal e‑commerce marketplace focused on unbranded, affordable products, with a very low average order value compared to Amazon and Flipkart. The company reported revenue from operations of about ₹7,615 crore in FY24, with sharply reduced losses and positive free cash flow, marking it as one of India’s first large horizontal e‑commerce players to hit profitability at the PAT level for a full financial year.
- Founded: 2015 by IIT Delhi alumni Vidit Aatrey and Sanjeev Barnwal (originally as “Fashnear”).
- Focus: Value commerce for Bharat – Tier‑2, Tier‑3 and beyond, with most orders under ₹500.
- Milestone: Turned PAT profitable around July 2023 and sustained profitability in FY24.
From Fashnear to Meesho
Meesho started as Fashnear, a hyperlocal fashion discovery app that listed nearby boutiques and delivered clothes like a “Zomato for fashion”. Founders quickly realised that fashion buyers often travel across the city and shopkeepers want customers from anywhere, not just neighbourhoods, so the hyperlocal model could not scale.
In late 2015, the startup rebranded as “Meesho” (short for “my shop”) and shifted from hyperlocal delivery to enabling small sellers across India to go online. This pivot set the foundation for Meesho’s later reseller and marketplace models targeting small-town India.
The social reseller model
Meesho’s early breakthrough came from social commerce: anyone could become a reseller, share product links on WhatsApp, Facebook or Instagram, and earn a margin. Manufacturers listed products on Meesho; resellers added their own margin over the base price and Meesho handled logistics, cash‑on‑delivery and returns.
This model was especially powerful among homemakers and women in Tier‑2 and Tier‑3 cities, who used their trust networks (friends, relatives, neighbours) to sell online without capital or inventory. It solved two big problems at once: it reduced Meesho’s acquisition cost (because “aunties” did the selling) and built trust in online shopping where people were still afraid even of cash‑on‑delivery.
COVID, organic traffic and a new evolution
When COVID hit in 2020, incomes in small towns dropped and discretionary fashion spending fell, which hurt the reseller‑led fashion business. At the same time, Meesho had already built brand recall, and more customers started coming directly to the app to buy, not just through resellers.
By 2021–22, Meesho had evolved into a large marketplace with both reseller‑driven and direct purchases, while also briefly experimenting with groceries and FMCG distribution through resellers. The FMCG push required heavy cash burn in a thin‑margin category where rivals were also burning money, so Meesho scaled this down sharply and refocused on its core value-commerce positioning.
Pivot to zero‑commission marketplace
Meesho then pivoted to a pure marketplace where sellers list directly and sell to end customers, but with a twist: 0% commission for sellers. Unlike Amazon or Flipkart, which traditionally charge commissions and fees to sellers, Meesho offered free listing and no sales commission to attract price‑sensitive sellers and the lowest prices for customers.
Instead of making money from seller commission, Meesho monetises in two main ways:
- Logistics margin: Meesho aggregates huge order volumes, negotiates low shipping rates with logistics partners, and charges sellers slightly more than its cost per shipment.
- Advertising (seller monetisation): Sellers pay to promote their listings and rank higher in search results, similar to ad products on Amazon and Flipkart.
This model means Meesho can stay seller‑friendly and low‑price on the surface while still creating a solid revenue engine in the background.
How Meesho makes money today
Meesho’s current business model combines multiple revenue streams, which together make low‑ticket e‑commerce profitable:
- Logistics spread: Meesho pays third‑party logistics providers a negotiated rate and charges sellers a slightly higher “shipping fee,” keeping the spread as revenue.
- Seller ads: A material share of revenue comes from sellers paying for visibility and performance ads on the platform.
- Value‑added services: Ancillary services around fulfilment and seller tools also add to monetisation.
In FY24, Meesho’s revenue from operations grew about 33% to ₹7,615 crore, while losses narrowed dramatically and free cash flow turned positive at roughly ₹197 crore, indicating that this monetisation mix works at scale.
Ultra‑low order value, massive volumes
A key part of Meesho’s secret lies in going after small, frequent, low‑value orders instead of big baskets. Industry data and commentary suggest Meesho’s average order value is roughly ₹400–₹500, far below players like Amazon and Flipkart where typical AOVs are 4–5 times higher.
Average order value comparison (approx)
This low AOV model is viable only because Meesho has huge order volumes; it handled over a billion orders annually by FY24, with FY24 orders reported around 134 crore and strong growth continuing in FY25. High repeat rates (often cited around 80–85% of orders coming from repeat users) further stabilise demand and reduce marketing costs per order.
Chart: AOV – Meesho vs Amazon vs Flipkart
Below is a visual representation of how Meesho’s order value differs from its larger rivals, reinforcing why its cost structure and logistics strategy must be extremely efficient.
Average Order Value: Meesho vs Amazon vs Flipkart (Approx, FY23)
This big gap shows that Meesho wins not by making a lot per order, but by doing a huge number of small orders very efficiently.
Valmo: Meesho’s secret logistics weapon
To make small orders profitable, Meesho had to attack logistics cost, which is often the biggest expense per order. For this, Meesho built Valmo (Value Movement), a software‑driven logistics infrastructure platform that sits between Meesho and multiple third‑party courier partners.
- Valmo routes each shipment to the most efficient courier based on price, serviceability and performance, reducing Meesho’s average shipping cost.
- By early 2024, Valmo was handling roughly 20–22% of Meesho’s order volumes and had already cut logistics costs by about 4–5%, with management targeting a further 5–7% reduction over time.
- More recent disclosures indicate Valmo’s share of orders has grown toward 50%+, further strengthening Meesho’s bargaining power and cost advantage.
A 5% logistics cost reduction on over a billion orders is massive in rupee terms and can be the difference between losses and profitability in a value‑commerce business.
Why Tier‑2 and Tier‑3 India loves Meesho
Meesho has deliberately built for “Bharat” instead of urban metros. Several factors explain its dominance in smaller cities and towns:
- Price point: Most catalogues are under ₹500, perfectly matching the budget of value‑conscious, unbranded buyers.
- Simple app & low bandwidth: The app is optimised for low‑end phones and modest internet speeds, making it usable on patchy 3G/4G connections.
- Cash on delivery and returns: COD remains a high share of orders (around 70% in some estimates), reducing friction for first‑time online buyers.
- Language and localisation: Regional language support and localised experiences help non‑English‑speaking customers adopt e‑commerce.
As a result, a majority of Meesho’s order volume comes from non‑metro regions, and at one point it accounted for close to half of all e‑commerce app downloads in India.
Growth, profitability and IPO plans
Meesho announced that it had turned profitable on a PAT basis around July 2023, a milestone later reinforced in its FY24 annual disclosures. In FY24, the company declared itself the first horizontal Indian e‑commerce player to achieve full‑year profitability and positive free cash flow, even as order volumes and revenue grew strongly.
By late 2025, the company is preparing for an Indian IPO with reported plans to raise several thousand crore rupees, at valuations materially higher than its 2021 funding round valuation of about $4.9 billion. Debate continues on whether this higher valuation is fully justified, especially as rivals like Flipkart, Amazon and ONDC experiment with zero‑commission or low‑commission models, but Meesho’s early mover advantage and cost controls are clear positives.
Challenges and future risks
Despite its success, Meesho faces several challenges going forward:
- Competition: Flipkart and Amazon are piloting lower‑fee models, ONDC is pushing an open digital commerce network, and Reliance’s partnership with Shein adds a low‑price fashion rival with a huge offline distribution network.
- Seller economics and quality: Many sellers complain that it is hard to earn high margins on Meesho and that intense price competition pressures product quality, which can hurt customer trust over time.
- Regulation: As with all large platforms, Meesho must navigate evolving Indian e‑commerce and consumer protection rules, including issues around product authenticity, returns and marketplace neutrality.
How Meesho manages these issues while sustaining profitability will be crucial to the long‑term success of its IPO story.
Key lessons for founders and marketers
Meesho’s journey offers clear lessons for startup founders, D2C brands and marketers:
- Keep pivoting until product‑market fit: Fashnear’s hyperlocal model did not scale, but the founders kept experimenting until they found a large, underserved market segment.
- Use trust networks to cut CAC: Resellers in small towns functioned like a distributed sales force, lowering acquisition costs and solving the “trust” problem.
- Win on unit economics, not hype: Logistics optimisation via Valmo, reduced marketing spend and ad‑plus‑logistics monetisation allowed Meesho to move from heavy losses to PAT profitability.
If you are building for Bharat or running a D2C brand, Meesho’s model shows that low prices plus deep operational discipline can beat big budgets and flashy branding.
Watch the full case study video here: Secret Business Model of Meesho | Case Study | Sahil Khanna – https://youtu.be/XWzVoCehLNQ
