India is grasping at China's e-commerce success

Eternal

20/11/2025 03:29

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.

By Ujjaini  Dutta

BENGALURU, Nov 20 (Reuters Breakingviews) - Alibaba 9988.HK floated in New York in 2014 with profits in tow. A decade later, India’s e-commerce leaders are in the red. The planned Mumbai listing of a marketplace boasting the country’s largest active shopper base is a reminder that investors' expectations of a lucrative China-style internet boom are yet to materialise.

Founded in 2015, Meesho serves India's value conscious: some 88% of its 213 million users live beyond the country’s top eight cities. The platform runs on a zero-commission, low-cost fulfilment model for sellers. Its revenue grew 26% in the year to March while adjusted losses more than halved. Older marketplaces Flipkart - owned by Walmart WMT.N and eyeing its own IPO - and Amazon AMZN.O, are also still chasing scale over profits.

That makes sense, up to a point. Online spending in India accounts for just 6% of retail sales, compared with more than 35% in China as of 2023. Alibaba had over 900 million users when it last disclosed the number in 2022. Yet India’s e-commerce battleground is far more crowded than China’s was in 2014, when Alibaba mainly faced JD.com 9618.HK and relied on outside partners to take care of warehousing and delivery in a high-margin "asset light" business model at the time. By contrast, Meesho and its deep-pocketed rivals now jostle with niche fashion and electronics players, plus quick-commerce outfits like Eternal's ETEA.NS Blinkit and Swiggy's SWIG.NS Instamart promising to deliver everything from onions to speakers to the doorstep within ten minutes.

With so much competition, Indian companies are spending heavily on besting each others' infrastructure and on customer retention. Meesho racked up logistics and fulfilment costs equal to 74% of revenue in the year to March, with another 7% going on advertising and promotions. IPO proceeds will bankroll marketing, cloud infrastructure, its logistics network and salaries for new and existing machine-learning and artificial intelligence talent.

India's e-commerce leaders also lag in diversifying revenue. At the $380 billion Alibaba, newer ventures including cloud computing and business software now make up roughly 30% of total sales. Branching out into different businesses looks rarer in India: when Walmart bought Flipkart, for instance, it spun out payments arm PhonePe into a separate entity. The latter revived its fintech ambitions only last June with the launchof Super.money, a homegrown payments app.

At a mooted $8 billion valuation, Meesho would trade on 7 times its revenue, more than twice the multiple of Alibaba. But the flattering comparisons stop there.

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CONTEXT NEWS

Meesho is seeking to raise up to 42.5 billion rupees ($480 million) in its initial public offering through the issue of new shares, according to its prospectus dated October 18. The e-commerce company is targeting a December listing, The Economic Times reported on October 19, citing people familiar with the situation.

Meesho says it is India's largest marketplace in terms of number of placed orders and annual transacting users in India in the twelve months to end June.

E-commerce penetration in India remains low https://www.reuters.com/graphics/BRV-BRV/myvmqknjnvr/chart.png

(Editing by Una Galani; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on DUTTA/ujjaini.dutta@thomsonreuters.com))