Meesho Announces Layoffs of 251 Employees Due to Over-hiring

Meesho, the e-commerce unicorn backed by Softbank, is terminating 251 employees, which accounts for roughly 15% of its workforce, marking its second round of job cuts in slightly over a year. Vidit Aatrey, co-founder and CEO, informed the company’s staff of the decision through an email on May 5th, citing a difficult macroeconomic climate.

Last year, Meesho was one of the few new-age companies that downsized its workforce due to challenging funding circumstances. It laid off 250 employees from its grocery arm, which was renamed Superstore from Farmiso. The current job cuts are the first for Meesho’s primary business model, the marketplace.

Furthermore, CEO Vidit Aatrey stated that the company’s leadership made errors in judgment by hiring excessively in anticipation of demand. He also acknowledged that the organizational structure could have been more effective and lean.

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Meesho CEO Vidit Aatrey has acknowledged that the company’s organizational structure was not effective and efficient, and over-hiring ahead of demand created unintended consequences for the company’s speed to execute. The company has thus announced the termination of 251 employees, approximately 15% of its workforce, in an effort to align with new projections for the business. The affected employees will receive personal emails and one-on-one conversations with their managers, while outgoing workers will have access to Gmail and Slack channels until Sunday evening.

Meesho has confirmed that it is letting go of 251 employees, or 15% of its workforce, in an effort to achieve sustained profitability and a leaner organizational structure. However, the company is committed to supporting the affected employees and will provide a separation package that includes a one-time severance payment ranging from 2.5 to 9 months, continued insurance benefits, job placement support, and accelerated vesting of ESOPs. The package also includes full pay for the notice period and an additional one month, and a tenure-based payment of 15 days’ pay for each completed year of service. The company will also extend family insurance coverage until March 31, 2024, and allow departing employees to remain shareholders through relaxed ESOP vesting norms.

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Earlier reports have shown that in addition to the recent job cuts, Meesho has reduced its cloud expenses by 50 percent. In fact, the company had already decreased its monthly cash burn to around $4 million, a 90% reduction, as per a December interview with the Chief Financial Officer, Dhiresh Bansal. Analysts at Jefferies who spoke with Meesho management reported that the company is close to zero cash burn and is aiming for EBITDA breakeven by the end of CY23, with a cash buffer of about $400 million.

Meesho CEO Vidit Aatrey emphasized the need for cost-cutting measures in a recent email, despite the company’s strong cash reserves. Meesho has raised over $1 billion and has a valuation of $4.9 billion. According to Jefferies analysts, Meesho is the leading e-commerce platform in India with a GMV of around $4.5 billion and a 7% market share, even though it faces competition from Walmart’s Flipkart and Amazon. The analysts also noted that Meesho is growing much faster than the market.