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Discussion on lean canvas and product-market-fit for 'Meesho'

In this section, we focus on creating a Lean Canvas for Meesho after its second pivot and then discusses its problem-solution and product-market fit.

Activity Prompt: Lean Canvas for Meesho

After reading Part C of the case, it's clear that the venture (now known as Meesho) has undergone another significant pivot. Previously focused on local retailers generally (Merishop), Meesho has now refined its customer segment and the problem it's solving.

The activity prompts participants to fill out a Lean Canvas for this new iteration of Meesho, specifically focusing on:

  • Customer Segment: Who is the target customer now?
  • Problem: What new problem are they solving for this refined segment?
  • Solution: What is Meesho's offering to address this problem?
  • Unique Value Proposition: What is the compelling message to this new customer segment?

Discussion on Lean Canvas for Meesho (Third Version)

The discussion reviews the Lean Canvas for Meesho's latest pivot (which is the backstory of the Meesho known today before its direct-to-consumer shift).

1. Customer Segment:

  • Sharpened Focus: The primary customer segment is now micro-entrepreneurs running virtual boutiques. This is a subset of the broader "retailers" segment they previously targeted.

2. Problem:

  • Meesho is now focused on solving supply-side issues for these women entrepreneurs. This is a shift from the previous focus on inventory and shop management software for all retailers.

3. Solution:

  • The solution involves creating a supply-side management system. This includes signing up suppliers, processing payments, and handling order fulfillment. This infrastructure supports the micro-entrepreneurs' businesses.

4. Unique Value Proposition (UVP):

  • "We will manage your supply side operations, so that you can focus on your customer." This UVP is directly targeted at the micro-entrepreneurs, highlighting how Meesho enables them to streamline their back-end and concentrate on sales and customer relations.

5. Revenue Stream:

  • The revenue model has become clearer: sales commission of 10-20% on every order. This provides a distinct path to revenue.

Has Meesho Achieved Product-Market Fit (PMF) with this Pivot?

PMF requires both demonstrated demand and profit potential.

  • Demonstrated Demand: Yes, there is clear and strong demand. Meesho is successfully bringing many entrepreneurs onto the platform and onboarding numerous suppliers.
  • Profit Potential: This is still uncertain.
    • While the revenue stream (sales commission) is clear, the company is likely not yet profitable. PMF is about seeing a path to profitability ("light at the end of the tunnel"), not necessarily being profitable already.
    • Key Metrics Analysis (Additional Data Provided):
      • Customer Acquisition Cost (CAC): Calculated as advertising expense divided by new suppliers/entrepreneurs. The CAC has increased from FY 2018-19 to FY 2019-20. This is a concern.
      • Revenue Per Entrepreneur: This is the total revenue divided by the number of active entrepreneurs annually. This number has shown a slight positive shift.
      • CAC vs. Lifetime Value (LTV): For a company to be profitable, the Lifetime Value of a customer (the total profit a customer generates throughout their engagement) must be significantly greater than the Customer Acquisition Cost (LTV usually needs to be 3-4 times CAC).
      • Meesho's Numbers: In FY 2019-20, CAC was around 1378, and revenue per entrepreneur was about 1245. This implies an entrepreneur needs to stay on the platform for at least 14-15 months just to recover the marketing acquisition cost, let alone other operational and technological costs. It would take an entrepreneur 3-5 years to become truly profitable for Meesho.
    • Positive Sign: At a unit level, revenue per transaction is greater than the distribution expense, which is a positive indicator, as distribution is their largest expense.
    • Conclusion: There is a potential for profit, but Meesho is not yet profitable. The increasing CAC is a worry, and the long payback period suggests more work is needed to solidify profit potential and achieve full PMF. The numbers indicate that while value is being created, the pathway to sustained profitability requires further optimization.

Meesho's Next Steps (at the time of the case)

To improve profitability and LTV, Meesho would need to:

  • Increase Revenue Per Entrepreneur:
    • Expand product variety on the supply side beyond just apparel (e.g., accessories, handbags, shoes) to encourage entrepreneurs to buy more, increasing commissions.
    • Train entrepreneurs to market products better, which in turn increases their business and thus Meesho's commissions.
    • Focus on increasing average order values and purchase frequency on the platform.

Meesho's Evolution (Beyond the Case)

The discussion concludes by noting that the case reflects Meesho's journey at a specific point in time. Since then, Meesho has pivoted again, moving beyond just supplying micro-entrepreneurs to directly serving the end consumer, going head-to-head with major e-commerce players like Amazon and Flipkart, leveraging its established network of unbranded apparel suppliers. This demonstrates the continuous iterative and adaptive nature of successful ventures.

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