Why Paytm’s E-commerce Business Failed To Thrive

Paytm Mall, the Alibaba-backed e-commerce firm, has been apparently facing immense pressure due to the highly competitive e-commerce landscape in India with the presence of well-established and adequately-capitalized online ventures — Jeff Bezos-controlled Amazon and Walmart-owned Flipkart. In order to acquire a sizeable customer base, Paytm and Paytm Mall have been invariably collating the deals with attractive cashbacks and lucrative offers.

The practice of extending cashback offers along with the customer’s purchase had turned out relatively well in the beginning, but going ahead, it became an undying drive to customer’s buying psyche. According to the initial discussions, the investors of Paytm have agreed to put in more funds with regard to the incorporation of Paytm Mall on the grounds of monetizing Paytm’s customers towards e-commerce business.

The Chinese e-commerce giant Alibaba, Paytm Mall’s one of the biggest investors, had realised that high volumes in the business fuelled by the cashback deals and other offers will not be sustainable in a longer stretch as Paytm Mall spent up to $200 million on cashback offers and marketing campaigns in the Sep-Oct period of 2018 to maximize the sales around the festival of Diwali, ET reported citing unnamed sources. The board members of Paytm Mall were in shock when they met in December 2018 to assess the financials of the business, the report added.

“To fight the big e-commerce majors was a strategy drawn up by the company, not as much by the other shareholders,” ET report said citing an unidentified source. “They did not build basic capabilities in supply chain, logistics, which are the essentials for running a consumer-facing e-commerce business,” the newspaper report said mentioning an anonymous person aware with the developments at Paytm Mall.

According to the regulatory filings, Paytm Mall has garnered about $650 million within two years from Alibaba, SoftBank, SAIF Partners. For the financial year 2018, Paytm Mall had registered a net loss of Rs 1,787.55 crore on collective earnings of Rs 774.86 crore. According to the ET report, the losses of Paytm Mall are expected to escalate by 40-50 percent in the financial year 2019 due to the expenses on marketing and promotional activities.

From the beginning of this year, Paytm Mall has started reducing marketing expenses, downsizing the quantum of cashbacks, ET report said. Further, the entity has closed its national e-commerce shipping business, broke contracts with logistics and warehousing partners, sellers.

Following the cut in offers and decreased cashbacks, Paytm Mall’s shipments have dropped to 35,000 as of March 2019 as compared to 1.5 lakh per day in October 2018, the newspaper reported mentioning various unnamed sources.―Times Now

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