A Tale of Two Indias and Three E-commerce Models

How a zero-commission marketplace and asset-light logistics platform disrupted a $70 billion market.

India’s vast e-commerce market has splintered. For more than a decade, Amazon and Walmart-owned Flipkart dominated online retail, spending billions on sprawling warehouses, intricate distribution networks and logistics systems finely tuned for catalogue breadth and reliable next-day delivery. Their model prioritised selection and predictability, mirroring strategies that succeeded in the U.S. and China. That era has ended, just as the stakes get larger.

India’s e-retail market is projected to grow to $174-214 billion in gross merchandise value by fiscal 2030 from a current base of $70 billion in fiscal 2025, per consulting firm Redseer, driven by a shopper base of 250-270 million online citizens. The bulk of growth emanates from tier-two and beyond regions, which are projected to account for 51-52% of the e-commerce market by fiscal 2030, up from around 44% in fiscal 2025.

Flipkart and Amazon’s displacement is coming from two directions simultaneously.

In urban India, quick commerce firms like Eternal-owned Blinkit, Swiggy’s Instamart and Zepto are increasingly conquering consumption by promising deliveries within 10 to 15 minutes through neighbourhood “dark stores,” small depots optimised for hyperlocal fulfilment. These were not traditional e-commerce players but companies that grew from food delivery platforms or launched specifically for instant grocery delivery.

In smaller cities, towns and villages, Meesho, a 10-year-old marketplace backed by Peak XV, Meta and SoftBank, quietly built dominance while the giants fixated on metropolitan shoppers. The startup tapped into a pattern long established in Indian physical retail, where value-focused chains like DMart and Vishal Mart have thrived by serving price-conscious consumers in tier-two and tier-three cities.

DMart, founded in 2002, built a retail empire by offering everyday low prices and maintaining lean operations, a strategy that allowed it to profitably serve markets that organised retail had largely ignored. Meesho applied similar principles to e-commerce, recognising that India’s vast interior required a fundamentally different approach than the models designed for affluent urban consumers.

Meesho’s current success came only after multiple pivots. The platform started as an online shopfront for small sellers before pivoting to a reseller-based marketplace, the social commerce model that first brought it prominence. The Bengaluru-headquartered firm eventually transitioned to its current marketplace model only in 2021, after concluding that consumers were becoming more comfortable transacting directly online.

The result is a market that no longer resembles the concentrated duopoly that existed for over a decade until 2023. Amazon and Flipkart now find themselves squeezed between two models they cannot easily replicate because their expensive infrastructure, designed for catalogue breadth and next-day delivery, proves ill-suited for either 10-minute deliveries in dense urban areas or ultra-low-price commerce in India’s interior.

Amazon’s position in India has further weakened in recent years after regulators dismantled the arrangements that had allowed the Seattle company effective control over key sellers like Cloudtail and Appario through complex corporate structures. These entities accounted for a significant portion of sales on Amazon.in, and their removal has left the marketplace visibly thinner.

As an analyst told me, it’s highly unlikely that either of the companies will ever aggressively switch to a new model, because doing so would concede that nearly $30 billion that have been spent on them — and by them — was a strategic misstep.

Flipkart remains unprofitable fifteen years after founding despite ample opportunities to strengthen its position that were repeatedly missed, according to senior investors. The company could have acquired Delhivery to bolster its logistics network Ekart or purchased Ecom Express at a steep discount but declined both. It could have purchased Zepto, now valued at $7 billion, for less than $2 billion, but declined.

The company keeps verticals that are actually growing closely held because they help mask how poorly the core business has performed, one veteran investor said. PhonePe, its crown jewel, finally convinced Walmart to separate it from Flipkart and has filed to go public at roughly half of Flipkart’s private valuation.

Meesho’s ascent also reveals how profoundly different India’s retail economics are from those in other major markets. The startup announced its first-ever profit in July 2023 and generated positive last-twelve-months free cash flow of $67.4 million for fiscal 2025, becoming the first horizontal e-commerce platform in India to reach this milestone. By the 12 months ending June 30, 2025, the platform had served 213.17 million annual transacting users and processed 2.02 billion orders. Meesho now holds a 29-31% share of the e-commerce market by shipment volume, excluding hyperlocal, according to Redseer, making it India’s largest platform by that measure.

Yet its average order value hovers near $3.17, meaning the platform processes substantially more orders than Flipkart or Amazon while generating far less total transaction value. This is not a problem to be fixed but the fundamental design of the business — and the numbers show just how different Meesho’s customers are from those the two giants pursued.

Some 87.8% of Meesho’s 213 million annual transacting users live outside India’s top eight cities, places where low average order values can be profitably served. The startup unlocked this market by building for it specifically rather than trying to adapt models designed for wealthier urban consumers.

Meesho operates a zero-commission marketplace, eschewing the transaction fees that form the lifeblood of competitors’ businesses. Revenue comes instead from advertising, fulfilment services, and data insights offered to sellers, and as of September 2025, Meesho remained India’s only scaled e-commerce platform allowing sellers to register without mandatory Goods and Services Tax credentials. The approach complies with regulations while unlocking access for the countless small, informal businesses that form the backbone of India’s retail economy.

Over 575,000 sellers transact annually on Meesho’s platform and over 80% of its gross merchandise value comes from fragmented supply, regional and unbranded products that are the mainstay of local Indian markets. These are items priced around the platform’s average, where the zero-commission structure and low-cost logistics prove essential for maintaining everyday low pricing.

Meesho holds no inventory, develops no private-label brands and crucially owns no logistics infrastructure. The platform sustains engagement through sophisticated algorithms promoting “discovery-led shopping” over conventional search, and in fiscal 2025, this discovery engine was not just a feature but the core driver of the business. Some 73.18% of all placed orders originated from the platform’s feeds or recommendations, not a search bar, according to the startup’s IPO prospectus, a model mimicking offline window browsing that keeps users browsing longer and increases the likelihood of impulse purchases at low price points, crucial when average order values are so small.

Meesho’s most consequential innovation may be Valmo, its proprietary logistics platform launched in 2022. Valmo orchestrates deliveries using a network of third-party partners rather than owned fleets or warehouses, coordinating multi-stage logistics and allowing independent operators to handle first-mile pickup, linehaul transport, and last-mile delivery. By the quarter ending June, Valmo handled 61.98% of Meesho’s shipped orders, up from 19.55% in fiscal 2024, operating via 13,678 active logistics providers. Industry analysis suggests Valmo achieves delivery and return costs up to 12% lower than established logistics players, savings that flow directly to the ultra-low pricing that defines Meesho’s value proposition.

Valmo is also available to sellers who are not on the Meesho platform, a strategy that extends its reach beyond the startup’s core business while profoundly destabilising India’s third-party logistics sector. The impact contributed significantly to the collapse of Ecom Express, once the country’s second-largest e-commerce logistics firm after Delhivery. Ecom Express had relied on Meesho for about 52% of its revenue, so when Meesho shifted volume to Valmo, the consequences were swift and severe.

Meesho’s shipped orders via end-to-end partners dropped from 922.32 million in fiscal 2024 to 824.43 million in fiscal 2025, while Valmo’s surged from 224.06 million to 763.51 million in the same period, and Ecom Express’s shipment growth collapsed accordingly. After filing for an $800 million initial public offering in August last year, Ecom Express instead laid off staff and shuttered delivery centres before being acquired by rival Delhivery for $160 million in April 2025, an 80% markdown from peak valuation.

Delhivery itself is feeling the pressure as its CEO acknowledged operational adjustments due to Valmo’s growth, and other major logistics providers including XpressBees and Shadowfax are facing similar challenges. The pattern reveals a fundamental dynamic in India’s e-commerce evolution. Infrastructure optimised for one model struggles to adapt to another, and just as Amazon and Flipkart’s warehouses were poorly placed for quick commerce, established third-party logistics networks found their economics unsuited for the high-volume, low-margin demands of scaled value commerce.

That’s not to say that Meesho isn’t facing challenges of its own. Cash-on-delivery accounted for 75.09% of shipped orders in the three months ended June 30, 2025, a practice that introduces staggering operational friction. According to the company’s prospectus, these cash-on-delivery orders have a success rate of just 75.55%, meaning nearly one in four fail, compared to a 96.33% success rate for prepaid orders.

This high-failure model increases risks related to cash collection, especially with Valmo’s smaller and more fragmented logistics providers who have limited working capital and operational sophistication, the company itself disclosed in its updated initial public offering prospectus. The platform’s low average order value necessitates continued extraordinary growth in order volumes to scale overall gross merchandise value significantly, requiring the company to process more and more orders just to meaningfully increase total business scale.

(Though not disclosed publicly, or reported previously, I understand that one of the ways Meesho is trying to cut its reliance on cash is by offering buyers credit lines – a recent initiative that is scaling quickly.)

India’s online market now appears increasingly polarised. Value commerce, led by Meesho, serves price-sensitive shoppers accepting multi-day delivery windows, while convenience commerce, dominated by quick delivery firms, targets affluent urbanites demanding near-instant gratification. Traditional e-commerce finds itself squeezed between these poles because quick commerce offers superior speed and Meesho offers lower prices, leaving the middle ground increasingly contested.

Meesho has held its ground while others stumbled, but the ground itself continues to shift, and success in India may hinge less on replicating global templates and more on mastering the country’s unique internal complexities. The infrastructure built for yesterday’s model will not serve tomorrow’s.

Meesho has filed to go public seeking to raise $484 million via fresh issue and will most likely list next month. One of its chief rivals has spent eight years hyping its IPO plans via controlled media leaks without ever filing.