Exactly two years back, Paytm Founder and CEO Vijay Shekhar Sharma, keeping Alibaba model in mind, took a plunge into the burgeoning e-commerce space where Amazon and Flipkart (now owned by Walmart) were two dominant forces. Nurturing a little grudge that he never had a chance to study at the Harvard University, Sharma de-merged the e-commerce business into a separate entity by the name of Paytm Mall to address India’s large online retail opportunity with cashbacks.

Confident that the growing number of smartphone users would help it sail through, the new entity started off with the same shareholding as the parent company of Paytm – One97 Communications Limited- and raised $200 million from SAIF Partners and Jack Ma-run Alibaba Group Holding Ltd. Paytm Mall managed to raise over $650 million from Alibaba, SoftBank and SAIF Partners. Alibaba- a pioneer in the online-to-offline (O2O) marketplace- soon realised that giving cashback to attract customers was a short-term strategy which won’t help Sharma make Paytm Mall a third big player in the fast-growing Indian e-commerce market poised to touch $84 billion in 2021 from $24 billion in 2017.

Paytm Mall’s losses mounted and in the financial year 2018, the company posted a loss of nearly Rs 1,800 crore on revenue of Rs 774 crore. According to Forrester Research, the market share of Paytm Mall almost halved in 2018- to 3 per cent from 5.6 per cent in 2017.

Sharma, however, is still optimistic and wants to run Paytm Mall in the face of massive competition which, the analysts feel, is the end-game as his focus should be on the digital payments market which Alibaba always wanted his to excel in. Over the past few years, Paytm has been bleeding massively in online retail business and there is no respite in sight.
Over the past few years, Paytm has been bleeding massively in online retail business and there is no respite in sight.

In a mega deal in India’s e-commerce space, the world’s retail giant Walmart in May last year announced it was buying 77 per cent equity stake in the country’s largest e-tailor Flipkart for $16 billion. After the two US retails giants, Reliance Industries last year announced to enter the e-commerce space with an aim to transform the lives of around three crore merchants across the country, enabling them to do all that large enterprises and e-commerce giants are able to do with the help of technology. For Paytm Mall, the news of Reliance entering the e-commerce ring was like a nightmare.

Credit: Economic Times