Paytm Mall: A hammer in search of a nail

It is a typical Wednesday summer evening in Delhi. Hot. Dry. Crowded. The place is Sarita Vihar. Specifically, a Red Tape store.

On the face of it, it doesn’t look like a busy day. But just then, a 30-something-year-old man walks into the store and starts looking at shoes. He is smartly dressed. In jeans and a shirt. He mumbles something about needing a size 10. The salesman points to a rack stacked with shoes and steps back. The man looks at the merchandise. Likes one. Picks it. Turns it over. Nods. Takes his phone out, taps on the Paytm* app scans the Paytm QR code kept next to the shoes on the rack. It says: “Get exciting offers on sports shoes!”

Registering the app

The app registers that this is the Sarita Vihar store. The man then picks the shoe he wants and taps the icon: Buy for almost immediately, a code is generated. Incoming: Text message, email, and of course, the exact code on the app itself. The man walks over to the billing counter and repeats the code. The guy at the counter feeds the code into the system. All clear. The salesman packs the shoes neatly in a box and hands it over to the man. Nobody says anything. The man walks out of the store.

It would be fair to say that the Red Tape store in Sarita Vihar is seeing a slew of such customers.

This, of course, is Paytm Mall’s new business idea and the company’s latest adventure, offline-to-online (O2O).

Human beings are complex animals. Technology companies chasing Gross Merchandise Value (GMV), more so. And this is not to be said lightly. Because in a normal world, this is how the above transaction would have unfolded. The man enters the shop. Picks a shoe he likes. Pays at the counter. Either in cash or with a debit or credit card. Picks the shoe. Fin.

But, where’s the fun in that?

If more and more Indians are to shop online, beyond the 50-60 million urban consumers who currently already do, Paytm believes O2O is the way forward. And if there’s one company that can truly make digital commerce happen, across the length and breadth of the country, Paytm believes it is them. This is that story. The story of Paytm’s billion-dollar bet on Paytm Mall. Only last month, Paytm Mall raised $450 million (Rs 3,000 crore) from the company’s existing investors, Japan’s SoftBank Group and China’s Alibaba Group Holdings.

Another matter altogether that before Mall, there were wallets. And there, first, let’s get the dead out of the way.

Mobile wallets are dead. Long live mobile wallets!

Future Plans

Second, let’s ask the question, so what’s next? What next when you have spent a significant part of your organizational history solving for how to incentivize users to use wallets. How to incentivize Uber, myriad shopkeepers, and restaurants to accept payments from Paytm wallets. And in the process of doing that, you’ve acquired millions of users, lost millions of dollars of investor money and also realized that what you’ve built is nothing out of the ordinary.

Everyone and their uncle is in on what you do—payments. Your first-mover advantage counts for nothing. Millions of dollars in funding that can be deployed to entice users to come back is neither sustainable nor something that can pass muster as a strategy.

After eight years of being at it, Paytm (One97 Communications) reported a consolidated loss of Rs 900 crore ($133 million), as of March 2017. Factor in an exceptional item in the books of accounts and the company’s total loss is about Rs 1,259 crore ($186.4 million). That’s 7% more than the Rs 1,178 crore ($174.4 million) reported in the previous year.

Valued at more than $7 billion, Paytm’s losses are more than the company’s actual revenue. As of March 2017, Paytm’s revenue was only Rs 828 crore ($122.6 million).