At its core, Meesho’s “miracle” of profitability with an AOV of just ₹269 and average delivery fees of ₹37, even for nationwide shipments. This stands in stark contrast to competitors like Amazon (₹1,200 AOV) and Flipkart (₹1,800 AOV), or even food delivery services like Zomato, which struggle to profit on short-distance orders valued at around ₹500. The analysis, presented through narrated insights, charts, and real-world examples, raises key questions: Why is Meesho’s AOV so low? How do they keep delivery costs minimal? And is this sustainable, or just a gimmick to hype their upcoming IPO? Drawing from Meesho’s investor disclosures and industry reports, the video provides a compelling case study on leveraging India’s economic diversity and logistics inefficiencies.
Understanding India’s Segmented Economy: The Foundation of Meesho’s Strategy
To grasp Meesho’s success, the video begins by segmenting India’s population into three economic tiers, a framework that highlights the platform’s targeted approach:
- India 1: Comprising about 12 crore people with an average annual income of ₹12.75 lakh. This affluent group prioritises branded products, fast delivery, and premium experiences.
- India 2: Around 30 crore individuals earn ₹2.55 lakh on average, forming a middle-income bracket.
- India 3: The largest segment, with 100 crore people earning ₹85,000 or less annually.
Meesho doesn’t chase the high-end India 1 market. Instead, it focuses on what the video calls “India B” – the 91% of the population (combining India 2 and 3) who are value-conscious shoppers. These consumers aren’t loyal to brands; they seek deals, are willing to wait 5-7 days for delivery, and prefer unbranded, affordable items like regional fashion (e.g., salwar kameez sets) or everyday essentials.
This strategic pivot unlocks a massive opportunity. Branded products often cost 2.2 to 3 times more than their unbranded counterparts – for instance, fashion items are 2.4x pricier, furniture 3x, and beauty products 2.2x. The unbranded market in India is estimated to be 10 times larger than the branded one targeted by India 1. By catering to discovery-based shopping – where users browse for value rather than specific brands – Meesho taps into a “goldmine” of underserved demand. The video emphasises that this isn’t about underselling; it’s about aligning with the realities of India’s income distribution, where the majority can’t afford premium e-commerce.
In 2025, this approach paid off handsomely: Meesho’s net merchandise value (NMV) grew by 44%, orders surged 50%, and it became India’s largest platform by order volume and transacting users. The low AOV isn’t a flaw; it’s a deliberate choice to dominate the mass market.
The Delivery Cost Conundrum: From Losses to Efficiency
One of the video’s most intriguing sections tackles Meesho’s biggest historical pain point: delivery costs. In FY23, for every ₹100 earned, Meesho spent ₹84 on logistics, resulting in staggering losses of ₹1,671 crore. Fast-forward to 2025, and those losses plummeted 93% to ₹108 crore, thanks to slashing average delivery fees to ₹37 per order.
How did they achieve this? The video contrasts Meesho’s asset-light model with the heavy infrastructure of Amazon and Flipkart, which own warehouses and fleets. Early on, Meesho relied on third-party logistics providers like Delhivery and Shadowfax, but the fees of ₹55 for a ₹50 delivery made profitability impossible. The breakthrough came from recognising India’s fragmented logistics landscape: 90% of it is unorganised, and 40% of trucks return empty after deliveries, wasting capacity.
Enter Valmo, Meesho’s in-house logistics software (not a physical fleet). Described as the “Uber of logistics,” Valmo connects small, independent operators – like a local trucker named Sharma Logistics – to fill those empty returns at discounted rates. It tracks packages digitally without owning assets, enabling end-to-end efficiency.
The video breaks down a hypothetical order journey from Ahmedabad to Mumbai to illustrate:
- First Mile: A local bike rider picks up 100 packets from sellers for about ₹10 per order.
- Sorting: Items are processed at low-cost local hubs (no rent or heavy investment).
- Middle Mile: Trucks handle the long haul at ₹4-5 per kg (via road, versus ₹80-120 per kg for air). By utilising empty backhauls, costs drop dramatically.
- Last Mile: Local delivery agents complete the process for ₹10-20 per order.
Total cost per parcel: ₹20-40, with delivery times of 5-7 days (or longer in remote areas). This slow-but-cheap model suits India B shoppers, who prioritise savings over speed. Valmo’s innovation lies in aggregating small players, rerouting packages dynamically, and minimising overheads. However, the video notes that 62% of orders still rely on external partners like Shadowfax, adding some dependency
Risks and Fragility: Is Meesho’s Model Built to Last?
While celebrating Meesho’s achievements, the video doesn’t shy away from potential pitfalls. The asset-light approach is efficient but fragile:
- Logistical Risks: Dependence on independent partners means vulnerabilities to breakdowns, delays, or capacity shortages, especially in rural areas. Dynamic rerouting helps, but it’s not foolproof.
- Financial Vulnerabilities: With such low AOV and thin margins, there’s little buffer for external shocks like fuel price hikes, increased returns, or regulatory changes.
- Market Shifts: If competitors enter the unbranded space or if India B’s preferences evolve toward faster delivery, Meesho could face pressure.
The video concludes that Valmo represents a true “hidden superpower” – an innovative solution to India’s logistics inefficiencies rooted in demographics and unorganised sectors. However, its long-term viability will be tested by time and market dynamics.
Lessons from Meesho’s Profitability Miracle
Meesho’s story, as unpacked in Think School’s insightful case study, is a testament to strategic adaptation in a diverse market. By focusing on value shoppers, unbranded goods, and hyper-efficient logistics, Meesho transformed from a loss-making entity into a profitable leader without massive capital investments. This isn’t just about e-commerce; it’s a broader lesson on understanding economic segmentation and turning inefficiencies into opportunities.
For investors eyeing Meesho’s IPO, the video urges reviewing the Draft Red Herring Prospectus (DRHP) and conducting due diligence. Whether this model is a sustainable goldmine or a temporary edge remains to be seen, but it undeniably shakes up the narrative of Indian e-commerce. If you’re interested in similar analyses, Think School’s channel offers deep dives into other business successes, like Dhirubhai Ambani or Milky Mist.
This case study not only explains Meesho’s “shocking” turnaround but also inspires entrepreneurs to think beyond conventional models. In a country as varied as India, profitability might just lie in serving the masses with smart, scalable solutions.
