There was never a doubt about the fact that Paytm Mall’s Gross Merchandise Value (GMV) was built on cashbacks. So much so that the owner of Paytm group companies Vijay Shekhar Sharma has gained a reputation of being the Cashback King of the country.
Now, this empire built on cashbacks is now falling and being replaced by O2O. Entrackr had exclusively reported the development few weeks ago.
The company has cut down on its cashbacks by over 80 per cent in multiple categories like electronics, grocery, fashion etc. It has also strategically shifted from warehouse based model to online to offline segment.
The steps were taken as the company did not want to earn more loss making revenue – where the revenue is proportional to how much the company spends on customer acquisition.
It also wanted to improve upon its unit economics, as it felt that instead of sending products across the country via warehouses in few cities, O2O would help with the logistics and nurture both the company and its merchants.
VSS claims that O2O segment has turned net positive in a few particular markets, and this is the path company has chosen for its focussed growth.
However, in the shorter run, these steps have severely impacted the company’s sales, as expected.
The sellers are unhappy about the steep decline in the sales. As per a statement of a seller given to ET, the groceries saw 90 per cent slump in sales.
This decline makes sense when we look at it from a customer point of view.
For them, it is not just that the cashbacks are gone, they have been converted into vouchers that are only applicable on products and services available on Paytm itself. For e.g.: movie tickets and mobile recharge. To top that, a shipping charge has also been introduced.
For the general public that uses the facility of e-commerce, the hit is multifold. Amazon and Flipkart will not be able to offer huge discounts due to the new FDI rules enforcement, Paytm has decided not to give huge cashbacks.
The population that was had become habituated to these cashbacks and discounts will see a drastic change in prices on e-commerce platforms, and is likely to shift back to earlier method of purchasing, i.e. offline. There will not be a huge difference in costs, and the uncertainty around the product quality will also go away.