2014 was the year of e commerce in India. The budding online
retail industry was able to rake in a whopping `1 trillion
in online sales. This approximately translates to around $16 Billion; a growth
of $4 billion from 2013. The forecast for 2015 is even better, with the Indian
e commerce industry expected to double its performance over the previous year.
The proof of this fact is the entry of several new players in the
e-commerce ecosystem. But, the e commerce market relies on continuous external
funding to remain successful. And not all the companies are lucky to be able to
receive such funding. This is where the story of Paytm comes in.
Paytm started off as an online payments gateway or facilitator;
somewhat similar to the globally successful PayPal in the United States. If you
make your payments online frequently, you may be aware of the company. It provides payment gateways for companies
like Expedia, apartment rental site Airbnb and app based cab company Uber.
In 2014, they very quietly started up an online market place too,
which was directly accessible from their app. That’s surprising. How does a
mobile wallet company enter into the e- commerce market all of a sudden? But
what’s more surprising is the fact that they did not sound the war bugles when
they did so.
The e-commerce market thrives and survives on constant media
advertising. So, what kind of an e-commerce company doesn’t publicize their
foray into the market? The answer is- A Very Smart one. Paytm knew that it
wasn’t big enough to grab attention so early. The company already had a
registered base of around 20 million customers. Those are more than enough to
get them started. And their primary business model of mobile payments would
enable them to get a hang of the new business.
It was a smart move. But, the company could not afford to keep
following this model for long. They knew that they would have to rely on
external funding sooner or later. Unless they did so, they would burn out of
the resources they were transferring from their payment gateway business.
And luckily, they managed to do exactly that. With the New Year,
the company is now gearing up for its first funding round. And that round also
brings in China’s Internet giant Alibaba.
Alibaba itself had a roller coaster year in 2014, when the
company’s first IPO in the United States, turned out to be the biggest IPO in
history, bringing in $25 billion dollars. Its online marketplace currently
sells over a billion products. Needless to say, it’s the largest e-commerce
company in Asia.
The big news here is not that Paytm managed to get a good amount
of funding for its e commerce business. The takeaway here is that the biggest e
commerce company in Asia has stepped foot into India. And that is just about to
heat up the market to a whole new level.
For starters, Alibaba will invest $575 million in Paytm. But,
eventually it is expected to own a 30 to 40% stake in the Noida based
company. But, the benefits of this deal
for Paytm do not simply extend to the e commerce business. The investment has
been made by the payment gateway arm of Alibaba, called Alipay. So, the company
will also get access to Alibaba’s payment technologies. That is quite an
achievement for the company, and also, a win-win situation.
However, for Paytm, the journey has just begun. They will be
facing an uphill task here on. Bigger sharks like Amazon, Flipkart and Snapdeal
have already matured to some extent in 2014. So, business will be challenging
for the company. And the first thing they will be focusing on is creating brand
differentiation.
The existing e commerce players in India have surely tasted
success, but, their business cycles are far from perfect. The biggest hurdle
that they face in India is providing low cost and efficient delivery to a
humongous market. The gaping hole in
their logistics channels is a serious problem.
The question that arises is, when the big players themselves are
struggling to make deliveries on time, how will Paytm be able to manage its
delivery channels. To get out of this mess, these companies will be focusing on
forging contracts and business relationships with their delivery channels, in
order to expect preference and priority over other players.
The year 2015 will not just be about which company provides the
biggest discounts. Rather, it will be focused on providing greater customer
satisfaction, through faster delivery, effective customer support and other
benefits.
The employment of this strategy will ensure that customers let go
on their hunger of discounts and cheaper than physical market products; and
instead focus on better overall satisfaction in the process of delivery of services.
The entry of Paytm has just strengthened the fact that the e
commerce industry in India has still a lot of space for new entrants; and the
year 2015 will be a projection of that belief. So, hold on to your seats, as
the game is about to intensify, and it will be fun to watch, what this year
bodes for the industry as a whole.
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