Paytm is reportedly removing cashbacks from warehouse supplied items and directing them toward physical store supplies.

As Paytm Mall withdraws cashbacks sales slump by nearly 60 per cent
Atom E-commerce Tuesday, February 05, 2019 - 07:37
Written by  S. Mahadevan

In a clear reflection of how deep discounting and offers have been dominating e-commerce sales in India, Paytm’s e-tail arm Paytm Mall is seeing fall in sales once it withdrew its attractive cashback offers from many of its products online, reports Economic Times. According to one of the sellers on the platform, this drop in sales could be as high as 60%.

Brand loyalty among these e-commerce sites has been long debated. If a product is offered at a discount, people may show preference buy it. The moment the offer is withdrawn the buyers will switch loyalties. There’s no such thing as brand loyalty for these customers. Paytm could be learning it now the harder way.

The way the Paytm management wants to see this issue is that it is trying to make some adjustments in the structure of its business and trying to shift to a more holistic O2O model. This is being done to bring down the cost of courier/transportation, which proves quite high. Paytm believes if the costs attached to logistics and warehousing etc. are removed from the overall equation, it will be left with higher margins to share with the customers. Economic Times quotes founder Vijay Shekhar Sharma as saying that the company is removing cashbacks from warehouse supplied items and directing them toward physical store supplies.

Paytm has a different product mix to contend with as opposed to what the leaders Flipkart and Amazon do. Their revenues are largely contributed by sale of mobile phones and other electronics. Paytm has tried to associate with the country’s leading FMCG companies like HUL, ITC, Parle, Nestle and so on and trying to bring some exclusive offers.

Giving some details, the seller quoted in the report says that Paytm used to offer cashback of up to 35% on items like groceries which it stopped effective December 2 and since then there has been a reduction in the offtake by 90% on some of these grocery items.

Paytm Mall seems to have realized that many of these products are readily available in the retail outlets even in very small towns whereas the sellers on its platform hold all their inventory in select cities numbering not more than 20-25. This naturally adds a disproportionate cost on account of warehousing and transportation and then the last mile delivery.