Paytm Mall, the e-commerce arm of digital payments giant Paytm claims to be upping its game to turn EBITDA positive within 2 years. And it will be doing this by solving its logistic costs through an O2O (Online-to-Offline) model, where sourcing and delivery are done by local retailers.
According to the company, logistics is the largest contributor to overheads and accounts upwards of 30% cost of operations for any e-commerce company in India.
Under its O2O model, Paytm Mall has signed up with sellers who were already using Paytm payment services, therefore bringing them online to list and sell their products on Paytm Mall. This, the company claims, has helped drastically reduce cost as the company does not need to own and operate its own warehouse. According to an Economic Times report, Paytm Mall is shutting down its warehouses and adopting this hyperlocal model.
Secondly, the sellers use the local courier services for delivery, thereby bringing down the time and cost of deliveries.
Thirdly, Paytm Mall claims that the cost of acquiring sellers has gone down as most of these sellers were already accepting payments using Paytm.
Paytm Mall is targeting a GMV of Rs. 17,000 crore by the end of FY20
Srinivas Mothey, Sr. Vice President at Paytm Mall said, “Earlier many of our sellers were using our warehouse system for managing delivery. Now our sellers manage sourcing, delivery & returns themselves and we are focused on providing them with technology support and training them to come online. With this new model, we have dropped almost 30% sellers but have managed to save up to 60% cost. Therefore, we have become a technology provider in logistics instead of being a logistics service provider.”
With 3 lakh merchants on its platform, Paytm Mall claims to have the largest seller base in India who deliver the products to the customers themselves.