Friday 11 September 2015

Paytm’s target: Profitability by 2017

Although we never forgot Paytm, it wasn’t one the prominent names in the ecommerce industry until probably this year. Apart from plans to offer unique products to customers and onboard more sellers, more services like collateral free loans to sellers and training platform for new sellers have been announced.
With backing from Alibaba, the ecommerce player is aggressively targeting profitability, inching closer to it with each new initiative. While everyone is going gaga over GMV and sales, Paytm is looking at profitability to secure its position in the sector.
That too, as soon as 2017!
“We definitely want to be the first one to achieve breakeven. We are aggressive about growth and far more about breakeven and that’s why we have an asset-light model on marketplace,”said Paytm CEO, Vijay Shekhar Sharma.

Not taking the discounts route

Although etailers cut down on the steep discount offerings this year, they are still largely dependent on discounts and free shipping on their platforms to attract volumes in sales, at the cost of margins.
Paytm’s data science team has been asked to identify products that can contribute to margins. Generally, customers may be particular about the price of a certain product but not something associated with it. For example, customers may be touchy about the price of a television but not the cable that may be required with it. So it’s easier to tweak the margins from the cable; even if priced lower, it can still bring in significant returns.
“Our data science team has been able to point out that these are the SKUs (stock-keeping units) where we can ask the merchant to discount and these are others where we can run higher margins or spend money on our own,” said Sharma.
Non-branded fashion products are another category where it’s possible to play around on the margins.

Paytm’s route to profitability?

The ecommerce player wants to achieve profitability through the following:
  • Charging sellers
  • Enabling payments
  • Cloud platform for logistics players catering to Paytm sellers
The online retailer, also a mobile wallet provider, has already allocated Rs 2500 crore in the next one and half years for expansion in terms of customer acquisition, technology, logistics and resources. According to Sharma, they are looking at breaking even on the Paytm marketplace by taking away unsustainable discounts, following which profitability would follow for the platform as well as the merchants. 
Ideal thought process, can’t wait to see if it works. What do you think?

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