Paytm Mall faces tough time,as e-commerce business not scaling up

Paytm money, a part of the Paytm umbrella company is now gearing up to start the process of working with the stock exchanges to offer investing and trading products as, they have received the required approval from capital market regulator Securities and Exchange Board of India (SEBI) to start its next offering — Stock Broking.

The officials of the company earlier confirmed on the receivable of the broker membership of exchanges BSE and National Stock Exchange. At the same time, in a recent met to take stock of the business of Paytm Mall(commence entity), it raises all the eyebrows of the investors ,where they had burnt roughly $150 million to $200 million in the September-October period — the traditional Diwali sales window — on the cashbacks and marketing.

It is absolutely true in part of Alibaba, realised then that Paytm’s volumes, driven largely by cashbacks, would not be a sustainable business. Paytm’s pure-play ecommerce business required massive investments in warehousing and logistics for scale, and cashbacks in such a scenario were proving to be a big concern.

Paytm has raised $650 million in a span of two years from Alibaba, SoftBank and SAIF Partners, with Alibaba group (including Ant Financial) eventually holding a 42% stake in Paytm Mall and around 37% stake in Paytm’s parent entity One97 Communications.

The data says, Amazon and Flipkart has dumped billions of Dollars for capitalising the Indian market but seems their investment are already fading ,in the same line Paytm’s investors thought are very well can capitalised with the competitions, with the arm of Paytm, seems it was a wrong decission. Alibaba was clear it wasn’t going to dump billions of dollars into Paytm Mall because that was never the plan, this is where the company got carried away and Alibaba did not see longterm growth opportunities in ecommerce. Rather, their big plan was on the digital payments sector, with commerce as one of the big use cases.

The fact is Paytm Mall, has failed to take off revealed that despite the backing of heavyweight investors, its ecommerce strategy was driven by a short-term vision largely dependent on cashbacks or cash burn.The reason could be running a digital payments company is different then to run commerce platform, which is completely different. Reason could be ,for building basic capabilities in supply chain, logistics, which are the essentials for running a consumer-facing ecommerce business.

This journey of Paytm mall has reached to the loss of Rs.1,787.55 crore on total revenue of Rs774.86 crore, in FY 2018. as per the filings. Interestingly, in the same period, Paytm Ecommerce transferred Rs405 crore in royalty fee and Rs307.27 crore in customer access expenses to One97 Communications, its holding company, helping the payments business notch up revenues. Secondly, the sources said, they expected losses to go up 40-50% for FY 2019, driven by high marketing and promotional expenses in Paytm mall.

Reason could be , as most of the companies were selling in the e-commerce space, post the regulations of the Govt. of India, the brand owners are now going for the expansion of the off-line retail out lets. By end of 2019 and early 2020, the industry to witness about addition of 30,000 more retail outlets to come-up by various companies, starting from Mobile phones, electronics products to various global fashion brands to address the customers look and feel approach's per the report of VARINDIA.

It shut down its national ecommerce shipping business, which entailed onboarding sellers and shipping products across the country, broke contracts with sellers, logistics and warehousing partners, cut marketing spends and trimmed cashbacks by almost 80%.

As a result, multiple sources said, the company’s shipments fell from 1,50,000 per day in October last year to 50,000 in January and to as low as 35,000 daily orders as of March this year. From clocking $400 million to $450 million in GMV during the last quarter of 2018, numbers fell 60-65% as cashbacks were cut and operations scaled down, according to three sources. Market share also came down by almost half to 3% last year, from 5.6% in 2017 at a GMV of $1 billion, according to data by Forrester Research.

Behind Paytm Mall’s toils to keep the doors open Total visits to Paytm Mall dropped to 5.6 million in March this year from 45 million in October last year, as per data by SimilarWeb, a digital market intelligence platform. App Annie data also show that the company’s active users halved to 4 million in March from 8 million in October. The company’s market share is also estimated to have fallen to 3-4%, according to Counterpoint Research.Resulted, more than 100 people across Paytm and Paytm Mall were handed pink slips or transferred to adjacent businesses during the first two months of this year, sources said.

The company has decided to narrow its focus to a wholesale platform, since running the marketplace is not everyones cup of tea, and now going with their vision of getting back to push to build an online-to-offline (O2O) model, enabling small and authorised merchants to sell online.