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Vidit Aatrey-led ecommerce unicorn Meesho has shut the operations of its grocery vertical Meesho Superstore in most of the cities, except Nagpur and Mysore.

According to Inc42 sources, Meesho had shut the majority of its Superstores last week.

The startup has shut Superstore operations in over 90% of cities it operated in, which led to many on-roll and off-roll employees losing their jobs.

According to Inc42 sources, the shutdown of the operations has impacted over 300 on-roll and off-roll employees. The laid off employees included city launch managers, pricing team leads, warehouse managers, sales executives, sourcing executives, market intelligence executives, among others.

Meesho Superstore was operational in six states – Karnataka, Telangana, Andhra Pradesh, Gujarat, Madhya Pradesh, and Maharashtra. After raising $570 Mn last year, Meesho had said it would expand Farmiso (now Superstore) to 200 cities. However, the total number of cities it was actually operational in, is unclear. 

“We were fired on the spot without any notice. We received mail from the (recruiting) agency mentioning that our term of employment has ended abruptly,” a former off-role employee, whose contract was terminated on August 16, said. Inc42 has seen the termination letter. 

“I received a call and was informed that my role was no longer required and tomorrow would be my last working day,” added a former on-roll employee. 

Meesho offered a two-month salary as a severance package to the laid off employees. Besides, it has also absorbed some of the on-roll employees in its core business, the sources said.

Detailed questionnaire sent to Meesho did not elicit any response, despite a reminder. 

Problems With The Business Model

According to most of the sacked employees, low revenue and a high cash burn were the two major reasons behind the startup’s decision to wind up operations in most of the cities. 

“The business was not working right. There was no money coming in, this is why they decided to shut operations in most of the cities,” one of the sources said.

“We were burning a lot of money for this business. Meesho started business in six states without proper planning. The supply chain was an issue, so was the logistics,” another source added. 

Meesho Superstore runs on a commission model. Meesho onboards grocery stores who act as a pickup point for customers, enable these stores to come online, and provide required inventory for its customers.

The Superstore business model doesn’t support home delivery and the customers have to collect the ordered items from the nearest pickup point, which are ideally local kirana stores.

The startup had to offer heavy discounts to these grocery stores to onboard them, leading to high expenses, a source said. 

The startup has also reduced its team strength in Mysore and Nagpur locations and it’s likely that it will shut operations in these cities as well if they fail to get business, one of the sources quoted above said. 

Currently, the ecommerce unicorn is piloting home delivery in Nagpur and Mysore for its Superstore business.

The latest development is in sharp contrast to the plans announced by Meesho for its grocery business, called Farmiso, earlier. The company, in the first week of April this year, rebranded Farmiso to Meesho SuperStore and claimed that the business will be expanded to 12 states by the end of this year. At that point of time, it was operational in six cities. 

While announcing the rebranding of Farmiso to Superstore, Meesho also said that it would be integrated into its core app. However, the sources said that integration of Superstore has happened only in some pincodes. 

Soon after this announcement, Meesho laid off around 150 Farmiso employees due to ‘role redundancy.’

The Search For A Perfect Business

Meesho was founded in 2015 by Vidit Aatrey and Sanjeev Barnwal. Within a couple of years, it became the poster boy for social commerce in the Indian startup ecosystem, and raised millions of dollars from investors. 

The startup has raised over $1.1 Bn till date and counts marquee investors such as SoftBank, Sequoia Capital, Facebook, and Fidelity Management among its investors. In 2021 alone, it raised $870 Mn in two rounds at a valuation of $4.9 Bn. 

However, in late 2021, Meesho decided to enter the B2C business as its social commerce business was plagued by high marketing cost, dependence on influencers, and lack of training for resellers to sell products. It also started Farmiso as a pilot in Karnataka in 2021, before expanding it to other states.

It must be noted that Meesho posted a loss of INR 498.6 Cr in FY21. While its revenue from operations stood at INR 792.8 Cr, its expenditure during the period was at INR 1,337 Cr.

With the entry in B2C ecommerce segment, Meesho joined the likes of Snapdeal who are trying to grab a portion of B2C ecommerce market, which is dominated by Flipkart and Amazon. However, there are questions on the startup’s plans and ability to compete with the deep-pocketed and established players.

While Meesho saw rapid growth over the last few years, the frequent pivots without a steady revenue and a high cash burn rate raise questions about its future. As per media reports, the startup is struggling to raise a new round of funding.

According to a recent The Morning Context (TMC) report, the ecommerce unicorn is evaluating to raise a new round of funding at 25% below its last validation. However, founder Vidit Aatrey later on Twitter denied any such valuation cut.

Prior to the TMC report, Reuters in May reported that Meesho was looking to raise a debt round after it failed to secure a fresh fundraise of  $1 Bn. At a time when many startups are facing a funding crunch due to the ‘funding winter’, which is expected to last for the next 18-24 months, it is imperative that Meesho gets its house in order.