After eBay bought 5.5% of stakes, Paytm Mall is now closing down its warehouses in order to cut down the logistics cost. With an agenda of saving logistics costs and delivering orders faster, Paytm Mall has now switched to a hyperlocal business model.
With the help of eBay, the Indian e-market platform has adopted the O2O business model moving from its old discounting and cashback-led strategy. In July, the e-commerce giant eBay bought 5.5% of stakes of Paytm Mall and invested around INR 1,000 crores. The value of Paytm Mall rose from INR 12,000 crores to INR 20,000 crores after this grand investment from eBay.
With the application of this new model which is called as O2O (online to offline) model, the e-commerce platform has cut down their operational costs by 60%. Vijay Shekhar Sharma, the founder believes that Paytm Mall will show positive EBITDA within 2 years of time.
O2O model: How it works
In the O2O model, which is built on an Artificial Intelligence based technology, both the sourcing and the delivery are done by the local and their neighbouring retailers. Sellers who are already using Paytm payment services are signed up by Paytm and then these sellers list and sell their products on Paytm Mall. This strategy has helped Paytm Mall in lowering logistics costs and cutting down the warehouse charges as Paytm does not require a warehouse for operation.
As local shipping is reducing both time & cost of deliveries, this implementation has helped the customers too. Rudra Dalmia, VP and CFO of Paytm Mall said that the cost of acquiring sellers has gone down as most of them were already accepting payments using Paytm. Now the sellers themselves manage sourcing, delivery & returns of the products and Paytm Mall is only focused on providing them with technology support and training them to come online.