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• ByStartupStory     |    December 9, 2021

Meesho plans ‘price drop’ amid scrutiny on e-commerce discounts

Ecommerce platform Meesho told sellers and suppliers earlier this week that it would give a “price drop” of its own in a sale on Thursday.

Why it matters: Meesho’s decision comes at a time when larger, foreign-owned e-commerce platforms such as Amazon India and Walmart’s Flipkart are being scrutinized by regulators for offering steep discounts, among other things. Meesho, though founded in India, is backed by foreign investors such as SoftBank and Fidelity.

Under India’s laws, foreign-owned e-commerce marketplaces cannot directly or indirectly influence pricing on their platforms. Offline traders in India have long been complaining to the government about e-commerce discounts hurting their sales.

The details: Meesho told sellers that it will offer a minimum 2% “price drop” from its end during the sale. “Since Meesho is contributing to the price drop, we expect a similar price drop from your (sellers’) end too. Let’s together bring the best price for our customers,” it said in the note, which ET has reviewed.

The company, which turned into a unicorn earlier this year with an over $1 billion valuation, added that it expects a 3.5x growth in sales in one day of the event.

A spokesperson for Meesho told us that the company was not discounting the prices of products on the platform. “We are compliant with FDI norms in the country,” the spokesperson added.

After the government tightened the rules around online discounts in 2019, Flipkart and Amazon India stopped offering direct discounts to consumers. Most of their pricing incentives are now through brands and sellers.

Vidit Aatrey and Sanjeev Barnwal co-founded Meesho in 2015, which has now raised around $900 million this year and is valued at $4.9 billion.

D2C e-commerce play: Meesho, which has raised around $900 million this year, has also entered direct-to-consumer e-commerce, looking to challenge Flipkart and Amazon India. Flipkart in turn has entered the social commerce business through Shopsy. Singapore’s Shopee also entered India recently and is said to be gaining early traction.

Google’s Meesho bet: In October we reported that Google was in talks to invest $50-75 million in Meesho. The investment, part of a larger funding round, will value the company at $4.9 billion. The previous month, Meesho had raised $570 million from Fidelity and Eduardo Saverin’s B Capital. Google’s investment will take the round size to more than $600 million.

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