Decoding Meesho 'Zero Commission' Magic Trick And More That The IPO Reveals

For years, people questioned: "How does Meesho make money if they charge sellers 0% commission?" The assumption was that if you don't tax the transaction, you don't have a business. The RHP dispels this myth.

Meanwhile, many have expressed concern over Meesho's heavy reliance on Cash-on-Delivery (COD). In the last six months, 72% of orders were paid in cash. The issue with cash is that many customers change their minds upon delivery - leading to an approximate success rate of 80%.

However, dismissing Meesho because of this would be unwise. The company used cash payments to reach the "Bharat" user base - roughly 88% of its customers living outside India's top eight cities. This vast population was the target that other apps spent billions trying to capture and failed. Meesho succeeded by absorbing the hassle of cash payments.

Now, a shift is occurring. "Prepaid orders" (paid online) have increased from just 11.29% in FY23 to 28% now. The data indicates a significant efficiency gain in converting these users to digital payments, which boast a remarkable 96.39% success rate. This allows the company to reduce friction-related costs substantially.

Finally, looking at where the IPO funds are allocated, it’s clear Meesho is transforming from an e-commerce app into a tech conglomerate.

Nearly 44% of the IPO proceeds (Rs 1,400 crore for cloud infrastructure and Rs 480 crore for AI talent) are dedicated purely to technology. These funds will fuel the "BharatMLStack," an artificial intelligence engine already processing an astonishing 5.92 billion data points daily. This AI is so effective that it now determines what you buy – 74.57% of all orders on the platform are driven by AI recommendations rather than search.

All of this paints a picture of a very different business from what Indian markets are accustomed to, and it will be fascinating to see how the markets respond to this IPO. One thing is certain - Meesho is not a low-margin marketplace fighting a price war; it is a technology and logistics powerhouse powered by a zero-commission model that attracts and retains sellers and consumers alike.

Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.