Homegrown payments company Paytm, launched an ecommerce consumer app in 2016 called Paytm Mall. Almost two years into the business, the Alibaba-backed firm failed to take off.
In fact, reports suggested that Paytm Mall burnt $150-200 million in September-October period of 2018 to maximise the sales during Diwali, which obviously did not go down well with the board.
CNBC-TV18’s Megha Vishwanath caught with Paytm chief executive officer, Vijay Shekhar Sharma at TiE Delhi’s India Internet day to find out what went wrong with this unicorn and how they are now mending ways.
Q: Let me start by talking to you about raw masterclass on starting up where you spoke about the importance of not having a fixed business model. Tell us for the benefit of our viewers and for young entrepreneurs who are listening to you, what do you mean by that?
A: I think entrepreneurs go to start a business and inevitably the business takes shape over a period and you figure out whether the most value is created in business or adjacent business. Then at the same point of time, if a market is small, you dominate the market and you find out something else is a better business model. If you look at the history wherever and whenever companies sort of fix their business models, those business models get attacked and companies get vulnerable and they sometimes disappear also. In case, the company may not have disappeared but the business totally, like in the case of Nokia, Blackberry and then you can talk about many companies technology wise went through it. Therefore, the very fact that you should have a fixed business model is a fundamentally flawed pitch itself as I would say that entrepreneurs and the real businessmen continue to discover what a correct business model is and where their company can continue to relevant. I am a big fan of what Reliance is doing and I am a big fan of what Mukesh Ambani does. He is incredible at what he built and then said that this is going towards the next generation, where we will be far more relevant if we are in a different business. Continuous relevance in a new age remains the key performance indicator (KPI) of a business.
Q: But the downside of that as well, let’s for instance talk about Paytm Mall. The initial idea of Paytm Mall in 2016 versus when you actually did check on the cash flows, the cashback model and the amount of money that you have burned in trying to pivot and build out a business model – that was big learning, right?
A: We as Paytm stand for the offline shop. We stand for a shop who is in the physical world and want to accept payment. The logical extension was that we will give them an opportunity to sell online and that was the initial idea. For that, we recruited tonne of people who came from the Internet industry. So, the business did include elements of warehouse led commerce, where the sellers were given choices to store things in the warehouse and that effectively put us in direct similar business models like other people in the market.
Q: But that was never the ambition to compete with Flipkart or Amazon?
A: That’s exactly what we did last six months back and actually we are doing much better numbers than year-on-year and we are much more profitable or at much less cost. So, it is actually a much better business now.
Q: So corrected course and back on track or is it something that would eventually fizzle out?
A: Back in course, back on track and actually challenging the existence of the online models.
Q: What are the tweaks now? I know we fixed about not having a business model but what is Paytm Mall’s business model?
A: We had online sellers, everybody could sell then and we found out everybody should not be allowed to sell as there are fraudulence sellers who circulate the transaction, which means that consumers are not coming but they are getting the gain. Therefore, we moved to the only brand trusted sellers and then we moved to the third stage, where the shopkeeper as a seller is coming. So, the continuous existence of shopkeeper as a seller is a better business model as that guy has skin in the game versus online exclusive guys. So, I think the business model that we now have, which is the shopkeepers will be the one who will sell. So, if you are in Mumbai and you are ordering in Malad, the item would come from nearby Malad. It’s just what rationally should have been.
Q: Is this model now free of cashback or do you still continue the cashback?
A: We will continue to give cashbacks.
Q: As you said ‘tumhari jeb se nahi ja raha per tumhari jeb mein jayega?
A: Correct and the answer is that the seller and the brand want to offer an incentive for the consumer and we would extend those.
Q: Talking about your newer efforts. Moving from digital India to making cashless transactions here, you have taken that plan to Japan with PayPay. Talk to us about that?
A: What our team has done in Japan is extraordinary. I want to share that we started six months back and we have 6 million customers and we have half a million merchants there and incidentally, that is a perfectly only offline business model. So, it only works in an offline store. It is online P2P, we just launched last week and it is a QR code. If you go to Japan, just like Paytm, you have PayPay QR codes. The learnings and capability that we learned here is incredible. I think in Masayoshi Son, we found a true partner who could give us access to that market, obviously additional money. So PayPay is like a success model that we want to wishfully replicate in a few other markets.
Q: What are the next markets that you are targeting?
A: I think our ultimate ambition would be to go to the US market. I have said it often, but we cannot go to the US market until the time we have learnt how to run businesses in different geographies. So, Canada should be our double attention this year.
Q: What are the timelines there?
A: I would say this year end. Before 2020, we should be ready for the US market.
Q: Quick comment on Apple’s move of getting into the Apple Card space since you said you want to get into the US market and Apple is also getting into that space?
A: It just proves that the business model is correct. There is a way to say it that every company which is going in that business proves that your business intent is correct. The thing about Apple launching card is that what they have done, you have seen Paytm Postpaid here in India and I am very happy that when we saw Apple Card product, I was like this is the product that we sort of thought in advance before even Apple was publically able to launch.
A: My to-do list is that we dominate payments in this country. We want to invest a huge amount of money in taking payments in tier-5 and tier-6 cities. So, we are on the course of 11 million merchants and we wish that we will cross 25 million merchants in this year itself and that is what is the huge target that we are taking. Incidentally, we have also created business models where these consumers and the merchants have an opportunity to create some other use cases like money. Paytm Money has taken off a great start and we will get into few more line items this year. Insurance is one of my favourite ones.
Q: As I said, when we were chatting offline right at the start, 2018 was quite an interesting year for you. Lots of ups, a few downs and a few controversies, but talk to us about 2019. Are there going to be fresh starts in this year or more course correction along the way? What is on your to-do list?