Vijay Shekhar Sharma’s Paytm Mall has found a way of saving logistics cost and delivering its orders faster. In a win-win situation, the company is appointing local retailers to ship and deliver orders, thus cutting down delivery costs and improving upon shipping time. Called O2O model (Online to offline), the innovation has helped Paytm Mall bring down operations costs by 60% and the company now hopes to exhibit positive EBITDA within 2 years. “In India, logistics is the largest contributor to overheads and accounts upwards of 30% cost of operations for any e-commerce company,” Paytm Mall said, adding that the e-commerce platform has controlled the cost with O2O model.
Under this model, both sourcing and delivery are done by local and neighbourhood retailers. While many sellers used Paytm’s warehouses for managing deliveries, the company is shutting down warehouses and its sellers “manage sourcing, delivery & returns themselves,” Srinivas Mothey, Senior Vice President at Paytm Mall said. Paytm provides technical support and training to these sellers. The company has also lost 30% of its sellers.
How O2O works
Paytm signs up with those sellers who are already using Paytm payment services. These sellers then list and sell their products on PaytmMall. While the move has helped Paytm Mall in cutting logistics cost, it also helps in slashing warehouse charges as Paytm does not need to own and operate them. Further, “the cost of acquiring sellers has gone down as most of these sellers were already accepting payments using Paytm,” Paytm said. The same has also helped the customers as local shipping brings down the time & cost of deliveries.
Meanwhile, e-commerce companies like Jeff Bezos’ Amazon are also working on a technology where shipping centres will be brought near the customers in order to save the delivery time. “The companies are shortening their supply chain and moving suppliers closer to consumers, Vijay Vaitheeswaran, US Business Editor for The Economist said in a recent podcast.
Paytm Mall has 3 lakh merchants on its platform, making it the largest seller-base company in India. Founded in 2017, Paytm Mall is backed by Softbank, Alibaba, SAIF and Alibaba’s Ant Financial.