This article is written by Visa Kannan, a partner at Saison Capital, and originally posted here. Republished on TheLowDown with the author’s permission.

Businesses have to constantly grow and part of this growth usually comes from expanding into new geographies or offering new products and services. The decision to expand is usually taken after thoroughly analysing the new market and figuring out what white spaces exist for the product or service. What frameworks does one use to analyse the competitive dynamics of a market? This is a question relevant to investors analysing a market prior to making an investment decision or companies looking to expand.

I wanted to use Meesho’s expansion into Indonesia as a case in point to discuss one such lens that should be used to understand the dynamics of a market.

In March 2020, Meesho, the pioneering social commerce platform in India forayed into Indonesia. In an interview published at the time, Prateek Agarwal, the man charged with leading the expansion was fairly optimistic about their prospects and pointed to the following factors based on their internal research:

  • Social commerce as a behaviour is much more mature in Indonesia than what it is in India. People spend more time on social platforms
Daily time spent on Social Media (GWI Report 2019)
  • Average disposable income of Indonesians is higher than that of Indians
PPP-adjusted per capita income China, Indonesia and India (2021 World Bank)
  • Resellers face the same problem that they face in India i.e., access to an assortment of products at cheap prices

All of these points are very sound. Any company in its place would’ve likely chosen to tread down the same path. An analysis of the market along these dimensions would’ve resulted in seeing this gap in the market:

The perceived gap in the Indonesia market in March 2020

When asked about competition from ShopeeLazada etc., Prateek emphasised that they didn’t see these platforms as competition because these platforms provided solutions for the end-consumer while Meesho focussed entirely on the reseller. From a reseller standpoint, there was no competition in Indonesia.

And yet, one year later in March 2021, Meesho shut down its Indonesia operations. So what happened?

The Job To Be Done Framework

One of my favourite anecdotes in the corporate world is “Hiring a Milkshake” by Clay Christensen:

“A fast-food restaurant chain wanted to improve its milkshake sales. The company started by segmenting its market both by product (milkshakes) and by demographics (a marketer’s profile of a typical milkshake drinker). Next, the marketing department asked people who fit the demographic to list the characteristics of an ideal milkshake (thick, thin, chunky, smooth, fruity, chocolaty, etc.). The would-be customers answered as honestly as they could, and the company responded to the feedback. But alas, milkshake sales did not improve.

The company then enlisted the help of one of Christensen’s fellow researchers, who approached the situation by trying to deduce the “job” that customers were “hiring” a milkshake to do. He discovered that 40 percent of the milkshakes were purchased first thing in the morning, by commuters who ordered them to go.

Most of them, it turned out, bought the milkshake to do a similar job…they faced a long, boring commute and needed something to keep that extra hand busy and to make the commute more interesting. They weren’t yet hungry, but knew that they’d be hungry by 10 a.m.; they wanted to consume something now that would stave off hunger until noon. And they faced constraints: They were in a hurry, they were wearing work clothes, and they had (at most) one free hand.

The milkshake was hired in lieu of a bagel or doughnut because it was relatively tidy and appetite-quenching, and because trying to suck a thick liquid through a thin straw gave customers something to do with their boring commute.

Understanding the job to be done, the company could then respond by creating a morning milkshake that was even thicker (to last through a long commute) and more interesting (with chunks of fruit) than its predecessor.”

Meesho’s Job To Be Done

Using the Job To Be Done framework is a useful way to understand why resellers/customers in India were choosing to buy from Meesho. The job Meesho was doing for its customers was providing low-priced fashion products. Before Meesho came along, these kinds of products were not available online. The leading fashion marketplaces (such as Myntra) were catering to a very different segment of customers.

See the difference in average prices for a search term “kurtis” on Meesho and Myntra:

First row of search results on Meesho for the term “kurti” (October 2022)
First row of search results on Myntra for the term “kurti” (October 2022)

The highest priced product on Meesho is still lower than the lowest priced one on Myntra! This is what Meesho’s product and services were being “hired” for by the customer. They had managed to bring online a supply of low-priced fashion products.

This particular job was already being done in Indonesia by Shoppe, Lazada and Tokopedia. Search for “women’s blouses” on shopee.co.id and you will find that the prices range from INR 300 to INR 550.

First row of search results on Shoppe for the term “women’s blouses” (October 2022)

To add to this, unlike the marketplaces in India (Flipkart and Amazon), c2c (customer to customer) sales are very common on Shoppe, Lazada and Tokopedia. The platforms have features like live chat, live stream, instagram importer features etc. which enable this c2c selling behaviour.

So the job that Meesho wanted to do for customers in Indonesia, Shoppe was already doing that. This experience and the clarity around the value it was providing was one of the triggers for Meesho to aggressively relook at its reseller business in India and aim to go 100% direct in India as well.

Often times an experience such as a failed expansion, product offering or rebranding is needed to get a company to introspect on what job it’s really doing from the customer’s perspective and becomes useful learning for companies charting similar paths.

What are some lenses you have used to evaluate market dynamics while analysing a potential space? Do write in at visa@saisoncapital.com or let me know in the comments.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.