Ecommerce app Meesho says it’s profitable, but there are lingering questions

In The Checkout this week, we look behind the headline numbers of two ecommerce players: India’s Meesho and Indonesia’s Tokopedia. [Read from your browser]( The Checkout 🛒 --------------------------------------------------------------- Welcome to The Checkout! Delivered every fortnight, this free newsletter breaks down the biggest stories and trends in ecommerce. You can find past issues [here]( or [sign up here]( to receive future newsletters. Also, If you’re not a subscriber, get access by [registering here](. IN FOCUS In today's newsletter, we spotlight: - The controversy over Meesho’s recent [announcement of its first-ever profit]( - Tokopedia’s march toward profitability - Whether TikTok Shop should [build its own in-house logistics arm]( --------------------------------------------------------------- Hello {NAME} The Indian Premier League (IPL), a yearly cricket tournament, has grown into a behemoth. Media rights to the event are the world’s [fourth highest]( after the National Football League, English Premier League, and Major League Baseball. I don’t play cricket, but I first found out about the IPL over a decade ago, when the law firm I worked for was representing a client embroiled in a dispute over the right to broadcast the tournament online. Even back then, some of the characters involved seemed larger than life. The IPL has since gone from strength to strength. No surprises, then, that it has attracted sponsorships from top corporations - plus startups trying to build a name for themselves. Brands including Byju’s, PharmEasy, Unacademy, and Meesho have sponsored the IPL. However, some have faced challenges afterward, leading to a joke in VC circles that being an IPL sponsor is an indication of a “troubled unicorn.” In Meesho’s case, its losses in 2022 were US$392 million, up more than 6x from the previous year, which led it to drop out of the IPL sponsorship and lay off 15% of its workforce. All that cost-cutting seems to have made an impact as earlier this month, Meesho’s founder boasted that it had become the first [horizontal ecommerce company]( in India to turn a profit. However, some investors have expressed concern due to a lack of transparency over Meesho not providing sales numbers for recent months, as is common practice. My colleague Rachel explores these developments in this week’s Big Story. Meanwhile, in the Hot Take, I look at the latest results posted by Indonesian tech major GoTo, and in particular, zoom in on its ecommerce business: Tokopedia. -- Simon  --------------------------------------------------------------- THE BIG STORY [Investors remain cautious despite Meesho's profitability claims]( This August, the India-based ecommerce platform reported a sliver of a profit. But questions remain on whether it can sustain this.  ---------------------------------------------------------------  THE HOT TAKE GoTo’s ecommerce unit inches closer to profitability even as growth slows Here’s what happened: - Tokopedia, the ecommerce arm of Indonesian super app GoTo, saw a negative adjusted EBITDA of [Rp 229 billion]( (US$15 million) in the second quarter of 2023, an 86% year-on-year improvement. - However, Tokopedia’s gross transaction value (GTV) dropped 13% year on year to 58.7 trillion rupiah (US$3.8 billion). - GoTo attributed the decline to fewer transactions from “low-quality users” as blanket incentives were reduced. Here’s our take: Tokopedia continues to inch its way toward breaking even, at least on an adjusted [EBITDA]( basis. In its most recent quarter ending June 30, its adjusted EBITDA was -0.4% of GTV, better than the margin for GoTo’s on-demand services (-1.2%), which include Gojek’s ride hailing and food-delivery assets. This means that at least for the most recent quarter, ecommerce is more profitable than the on-demand unit. Together, both businesses account for over 80% of GoTo’s total gross revenue in the quarter. In a statement about the earnings, GoTo CEO Patrick Walujo said that the group remains on course to reaching positive adjusted EBITDA this year. He also recognized that breaking even “is not the end goal,” emphasizing the importance of “sustainable and profitable growth.” Tokopedia intends to achieve this by pulling several levers. First, it plans to make the platform more attractive to both merchants and consumers by adding more payment methods, improving personalized discovery, and offering more engaging advertising features. Second, services such as GoPayLater - its buy now, pay later offering - and new cash loan products are expected to keep users within the GoTo ecosystem. Third, deepening the collaboration between Tokopedia and GoTo Logistics (GTL) is expected to reduce overall logistics costs. GTL combines Tokopedia’s fulfillment unit and Gojek’s ecommerce same-day delivery unit, and now reports results as a separate entity under the wider group. GoTo said that GTL, which currently handles 20% of Tokopedia’s deliveries, has reduced logistics costs by 15%. The group expects these costs to fall further as more deliveries are handled by its in-house unit. With competitors like Shopee and Lazada having [over 40%]( of their orders fulfilled by their in-house logistics arms, GTL has more ground to cover. See also: [TikTok Shop’s logistics dilemma: to build or not to build]( Like fellow ecommerce platforms, Tokopedia is being challenged by a strong contender, TikTok Shop, which has been “aggressively [expanding]( in Southeast Asia.” The social media giant is posing a growing threat to the region’s ecommerce incumbents like Shopee and Lazada. However, as a whole, GoTo Group might be more insulated from such a threat due to its diversified businesses, which also include ride-hailing and food delivery. For now, these sectors aren’t facing the same level of disruption as ecommerce - at least not in Indonesia, where the [ride-hailing]( and [food delivery]( markets are essentially a duopoly, with Grab and GoTo together controlling over 90% of each market. Currency converted from Indonesian rupiah to US dollar: US$1=15,310 rupiah.  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ [Sea Group logs minimal revenue growth in Q2, misses estimates]( Shopee continued to be the biggest money maker for the group, generating US$2.3 billion in revenue for Q2 2023 compared to total revenue of US$3.1 billion. 2️⃣ [AnyMind posts strong profit bump in Q2, beats projections]( The ecommerce enabler, which is listed on the Tokyo Stock Exchange, attributed the growth to improvements in its gross profits and expenses. 3️⃣ [Bukalapak confirms laying off less than 5% of employees]( Affected staff include those from customer service, its Mitra business, and the product and engineering team. 4️⃣ [Indonesian conglomerate Astra completes acquisition of OLX local unit]( With the acquisition, Astra now fully owns OLX Indonesia - which operates an automotive classifieds unit - through its subsidiaries. 5️⃣ [Alibaba posts solid 70% income growth in latest quarter]( Recent restructuring efforts have unleashed “new energy across our business,” driving growth, the company said. FYI 1️⃣ [TikTok Shop’s logistics dilemma: to build or not to build]( Top ecommerce players in Southeast Asia have in-house logistics for both last-mile delivery and fulfillment. Should TikTok Shop follow suit?  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preference center. See you in a fortnight! [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. 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