There was no one else. I was the delivery boy. I was the person who was onboarding supply and throughout the day Sanji and I will sit in different shops and just observe and at the end of the day we'll come together and say what did we learn. So this is like an economy that existed that both Sanji and I had no idea of. That's when we decided that we will now move away from a reseller model to now a consumer model.
Hello and welcome to Legendary Pivots. This is our special series with Seed to Scale where we explore how some of India's top founders reinvented their businesses. We double down on their crucible moments to see how they built outsized outcomes. Today we are joined by Vidit Aatrey, the founder and CEO of Meesho. Vidit, thanks for doing this. So Vidit, take us back to 2015. You decided to quit your job. So did Sanji. What was the first idea that sort of came to your mind that you were trying to build? Was it just the two of you? Did you raise any money before you started working on an idea? Because 2015 was fairly mature. So how was it?
Actually, it's not like we tried many ideas before we started Fashioner, which was our first business. And the reason for that is when we got together, we said we want to work on an idea that qualifies for two things. One is we want to work on a problem that we relate with, right? And second, we wanted to work on a problem that we believe can have impact at a very large scale. Building a company is generally very hard, takes a long time, so you want to do that if the impact is worth it. So we started with these two things and eventually we landed on something. Both of us come from middle-class backgrounds. We bought from small businesses all our lives. We are in Bangalore and Delhi, see everyone buying online, and you go back to our village in Uttar Pradesh for me and for Sanjiv Jakan, and there are not enough people who were either buying or selling. So we said there's some disconnect here. Can we really bring e-commerce to Bharat to everyone? To the families that we have back in small towns, back in villages, and we believe that would be a very large opportunity and we relate with it. So that's when we started with a mission of really bringing all consumers and all kinds of businesses in India online.
Understood. With Fashioner, you were trying to do it on a more hyper-local level and connect the local shopkeeper to the locality. How long were you with that idea and what were the signals that later on made you think let me build a product around the sellers, so to say? What was the transition like?
So we had this idea, we said we'll make it happen. And we said the first step is let's just go and speak to small businesses who are not selling online. And we will discover the problems and we'll solve for them. A very problem-solving approach to this. So we went to HSR, we went to Koramangala and spoke to a lot of these shops. We said hey why are you not selling online? And these guys will say hey, my customers are people in this locality, right? And they come to me automatically. If you can bring them online in some way, I will sell online. My products may not be relevant to everyone in the country, but they are very relevant to people in this area. I have served them over many years. So we said makes sense. And that's when we said okay, fine, we have to build a commerce model that serves people locally. And that's when Fashioner was born. A way for consumers to discover businesses around them and buy from them. The first category we focused on was apparel and fashion. That's why it was called Fashioner. And we did that for four or five months.
And this was just you and Sanji or did you have a...
Just both of us. So Sanji will code and I will do deliveries on my bike. So there was no one else. I was the delivery boy. I was the person who was onboarding supply because you're still learning, right? Pre-product market fit. We didn't want to build a team, scale things. We did that for four or five months and we understood something which was a very simple learning but very painful. Hey, we built this business without speaking to consumers, right? We only spoke to these businesses. And eventually when we started to build an app and get consumers on that, consumers will say hey it's an e-commerce app with very limited selection because it's only with shops that are around me. Whereas if I go on any other e-commerce app I get selection from across the country, right? So why should I buy from an app which has such limited selection? Which is a very normal and common-sensical insight and we basically missed it. So we said this is not going to work. A seller may want to sell to people locally but a consumer would want selection from everywhere, right? Otherwise they'll walk and go to the shop.
So we basically did that and then we moved to the other model. We said this way of bringing these small businesses will not work. So we went to a lot of these shops, sat there morning to evening. A lot of them were very very nice to us. They'll feed us tea and this and that. They'll play with the kids. And throughout the day Sanji and I will sit in different shops and just observe. And at the end of the day, we'll come together and say what did we learn? And one very interesting thing which was coming again and again was a lot of these shops had consumers who were on their WhatsApp groups. So people will walk into a shop and the shopkeeper will ask them for the WhatsApp group and say every time I have new selection I'll just post here. And if you want something you just let me know. I will send it from my shop and you can get that product at home, you don't need to come here. And then we saw that again and again in many shops in Bangalore doing that. We're like this shop is already online, it's just the shop exists on WhatsApp, right? And then we said why is not 100% of the sales happening on WhatsApp? And we realized some pain points. One is I post a photograph and by the time someone says I want this it is sold in the offline shop. Second, collecting payments, this was pre-UPI, was very hard. So we said we'll solve for these problems but enable more and more commerce to happen on WhatsApp. So that was like the first version of Meesho because Meesho means 'my shop'. We wanted to give a shop to that shopkeeper.
Understood. This is the business model on which you went to YC. And then what happened? This scaled up I'm assuming after the VC round. You must have scaled this up pan-Bangalore. Was Bangalore the first market?
So we started with Bangalore but again it was an app on Play Store so we saw people across the country downloading the app and setting up stores. And we saw a lot of people, a lot of people wanted to be online. So we saw a lot of people signing up, starting their shops, but we used to always see not so great retention. And when we go deeper, we realize people are just not disciplined, right? Like for you to update your inventory every day. That shopkeeper has to say something sold, I have to go and update that it's not there. And they will do it for a few days and then they will go back saying this is only a small percentage of my business on WhatsApp. And even if people have a bad experience ordering something which doesn't exist, it's okay. They'll buy something else. So we also realized a lot of these businesses were existing small businesses who have been offline for decades. So for them to change their behavior of how they sell was very hard.
Got it. And how did they ship at that point in time?
So they will most likely, as I said, mostly they will send someone from the shop to the house because most of these customers are close by, so within a few kilometers radius. So shipping is not happening through some delivery service.
And you have to collect payments also at the same time.
Correct. So we were giving them a way to collect payments online because if you want to take a commitment and not sell it to an offline customer, you want to know that this product is sold.
So people could buy online or they could buy when someone comes to the house and gives the product.
So we did this, as I said it scaled very well. We went to YC but the retention was not the greatest because the behavior of these people was not so consistent. Our consumers will buy a few products and then the seller does not fulfill them saying I don't have inventory left. It's a bad experience and consumers will not come back to this product again. Now at this point in time we had a very interesting discovery. We said who are the people among all the people who signed up on this app who are using it regularly? We found a small percentage of users who will sign up and use it every day, many times a day, for months. So there's something different about them as compared to the ones who are essentially not retaining as much. Sanji and I started to call them up and say can I come over to your place? We want to see how are you different from the shops that are not retaining. And we realized a lot of them were women homemakers who are running these online boutiques from their home. So they are native WhatsApp businesses. They don't have anything offline. Till that time we had no idea that there is a segment that exists. So we discovered it. Some of them will call themselves WhatsApp boutiques. Some of them will call themselves resellers. All of them created this name. So this was like an economy that existed that both Sanji and I had no idea of.
And they were using our app because they were only selling on WhatsApp, right? So for them good customer experience leads to good retention. Hence their business grows. There's no offline business. They will very diligently update inventory, collect money, give a very good customer experience to these consumers who are buying. And here they are not selling to only consumers in their area. They're selling across the country because WhatsApp has no limitations. You could have friends everywhere. So we basically found this. We said this looks very interesting. And when we went deeper, they had lot more problems than an existing offline shop. A lot of them were new to business. They had no existing wholesaler or distribution relationships. They did not know many times how to ship the product to that customer. We said can we solve for this? And this looks like a new behavior which we believe will become bigger and bigger. And that's when we pivoted to Meesho 2.0 which was focused on enabling resellers like them to start selling to customers on WhatsApp across the country. And that business obviously just took off really well.
And at this point in time when you were discovering these women selling online, where were they getting their inventory from? What was different about them versus a shop? Why were people buying from them? What was the profile? And by the way, you would know, I remember when I was growing up all of us saw this. A lot of women used to run boutiques from their house.
Yeah. And the way they secure inventory is they will go to Jaipur. They will go to Chandni Chowk if you're in Delhi, and they'll buy a lot of this interesting nice-looking stuff. They'll curate it, buy it and then come back home. And then from their house either they will organize a kitty party and sell to their friends, or they will set up this offline boutique and sell. And the new version of that was basically a WhatsApp group. So some of them were basically going and buying. Many of them, what the interesting stories were, they will not even go there themselves. Whenever the husband is traveling for work, they'll say please do few visits to these wholesalers and get their business cards. The husband will come back, give the business card to the lady, and she'll contact them on WhatsApp and ask them to keep sending new products. And then she will share these products with the consumers, but now she'll have very limited relationship, so very limited selection. So we said this is a big bottleneck. The first thing we solved in our Meesho 2.0 version was to enable access to supply for them. We will get you supply from all the big hubs in India. Surat, Jaipur, Agra, all the unique places, Banaras, selection that they could not get access to. Suddenly they have a lot more selection to curate from and sell on WhatsApp.
So how big were they at the time when they decided to go away from the reseller model? And what gave them the confidence or the audacity, as you put it, that their model was different as compared to let's say a Flipkart or an Amazon at that time?
So Meesho was at a 1 billion GMV sales number the time they decided to make this pivot, which is a large number. They had already raised growth capital. SoftBank had come in. So this was capital which was ideally supposed to be used to fuel a business that already had product market fit, which was a reseller business. And the business model was actually fairly different from Flipkart and Amazon. They didn't have inventory. They were going after very low-value items. Flipkart and Amazon sort of made their brand with some of the larger merchandise and smartphones and large appliances in tier one or tier three also. But Meesho was going after a sub-300 rupee category, a category where everybody had failed. We had Ro, we had Wunik, multiple such companies had started with the same target audience as Meesho and had not worked out in the past. Meesho essentially said that this is the timing that a marketplace like this would work and this is the model in which it would work, which meant zero inventory, zero logistics, completely drop shipping, and they were able to make it happen.
And tell me about your funding timeline on this as well. When YC happened you were at Meesho 1.0, I'm assuming you used some part of that money to test through the reseller model as well. So how did that materialize? Because the momentum sort of picked up right after that, right? So what was it like?
Yeah, actually we did not raise much money at YC, right? Like we went there and for some reasons we basically came back with not a lot of money from it. And our first model, we could see a lot of people are signing up but they're not retaining, there's no way to make money here, and if we don't basically get to product market fit, it may not exist very soon. So at that point in time when we discovered this insight around resellers, we said we have to go all in and scale it up. But we did not have much capital, right? The good thing was that the product market fit in this business was so strong. Like women, they will come, they'll get access to selection that they could not get otherwise, and they will come and take selection from us every day, order many times a day, and also tell their friends and family, hey if you want to start a business on WhatsApp, you basically take it from Meesho. So for many months we were doubling every month in our sales, in our volume, without spending a single rupee in marketing, right? Like we did not have anything to spend on telling people that we exist and you can come here. And every month we were doubling just because of word of mouth.
And how big was your team? Like from you and Sanji, how big was the team now when...
I think we were close to 20 people. Because again, we were running now the e-commerce operations, shipping, everything, doing deliveries for them. We were basically placing orders with the distributors and wholesalers. So you're doing everything end to end. So about 20 people.
And then the Elevate round happened and finally the business had enough capital to fund its growth and obviously the journey changed a lot then. Like in the next 12 months when we raised a Series A, we grew 100x. Because a business that has strong product market fit but was capital-starved, suddenly put some capital there and it just goes like crazy. So then we understood the potential of this is so much that this need is not of few women in Bangalore, right? But a lot more people across the country have the same need. They want to start a business of their own, they don't have access to supply, they don't have access to capital, they don't have access to a lot of tools that sophisticated businesses have. And we provided to them and it just started a revolution.
The first step is obviously there are people who were doing this offline and you got them online. The second thing that I think Meesho was able to do very well was inspire more women to actually start online shops. How did you go about that journey and when did you start seeing that behavior shift happen from a conversion to a market creation opportunity, so to say?
Either you make money through commissions, or you make money through advertising, you make money through offering services like logistics. We basically also thought that we will do it. Our big focus was not, it's not that it was taking so much mind space for us back then that we think about monetization. If you don't reach scale none of this will happen. Because e-commerce is a business of scale and we had to get to scale. So I would say in the early days it's not that we were thinking about all of this. But if someone asked us, we said hey once we reach scale we will do the same things that any e-commerce company globally does.
E-commerce was a fairly established overall market by the time Meesho started. So what stood out about its journey for you?
