Why did Paytm Mall Fail? Detailed Analysis of Rising & Fall of Paytm Mall￼3 min read
Paytm (an acronym for “pay through mobile”) is an Indian digital payments and financial services company, based in Noida. It was founded in 2010 by Vijay Shekhar Sharma under One97 Communications.Recently Paytm has removed a shopping feature from the Paytm app and this shopping feature was linked to the Paytm Mall. Paytm Mall, an e-commerce platform that serves as a one-stop-shop for a variety of products, experienced a rapid rise and fall during its brief existence. What were the factors that contributed to Paytm Mall’s meteoric growth and subsequently precipitous decline in this article as we move ahead?
What is Paytm Mall and its Past?
- Paytm mall was started in 2017, an e-commerce platform like Amazon and Flipkart, etc., and the main USP (Unique Selling Point) of this company was Cashback.
- The cashback feature was not established much at that time and Paytm Mall was getting advantage of this. Amazon and Flipkart were focusing more on discounts whereas Paytm mall was focusing on cashback.
- Alibaba and the SoftBank were impressed by Paytm mall and invested Rs. 2900 Cr. for the stake of 28.34% and 19.86% respectively.
- After this investment the valuation of the company becomes $2 Billion (Rs. 15,000 Cr.), the company also stated that by 2018 the GMV (Gross Merchandise Value) of the company will become $9 billion (Rs. 67,500 Cr.). GMV refers to the total value of merchandise sold over a given period
- The company was trying to increase its seller base from 75,000 to 3 lakh, and also same-day-next day delivery strategy i.e. from 6% pin codes to 30% pin codes.
- The valuation has increased from $2 billion to $3 billion in 2019 but now the valuation of the company is only $13 million as of March 2022, from Rs. 21000 Cr. to Rs. 100 cr.
Reason for the fall in Valuation:
- Short Term Vision: The strategy of the cashback was short-term, and the company’s perspective was that by giving cash back they will retain the customer but the company misses the most important part which is the customer experience. When the company stops providing cashback the customer starts shifting to another app that has a good experience.
- Multiple Strategy: The company was focusing on its e-commerce platform whereas the main aim of the company was to strengthen its online payment platform, all these are interlinked but the company was not able to focus on both.
- Financials – In FY19 the revenue of the company was Rs. 968 Cr. whereas in FY21 Rs. 277.4 Cr. the fall is huge, and the losses in FY19 were Rs. 1171 Cr. whereas in FY21 it was Rs. 503 Cr.
- Withdrawal of Stake by Investors: Alibaba and Ant Financial have withdrawn their stake from Paytm Mall for Rs. 42 crores which is much less than the amount they have invested, when the company was asked to explain this then the company stated that there is no effect on valuation due to this withdrawal.
- Both the company has withdrawn their stake as Paytm mall has joined their hands to be part of ONDC (Open Network Digital communication). It is a platform created by the government to reduce the monopoly of one or two e-commerce companies and also to give equal opportunity to local vendors.
- Another reason for the exit of Alibaba and Ant Financial could be that they were more interested in companies’ online payment platform business whereas the company was more focusing on the e-commerce front.
- Paytm is different from Paytm mall, they are not partners neither subsidiaries nor promoters, and they only use one brand name which is Paytm.
What Should Investors Do?
The fall in Paytm price is not because of the Paytm mall as this two are different. The future of Paytm Mall is now dependent upon the ONCD. An investor should wait and watch what will be the future of the Paytm mall.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.