Paytm Mall solves the logistics cost in e-commerce with its Online-to-Offline model

Paytm Mall is targeting to become EBITDA positive within 2 years on the back of its innovative approach to solving the logistics cost. In India, logistics is the largest contributor to overheads and accounts upwards of 30% cost of operations for any e-commerce company. Paytm Mall has successfully controlled this cost with its innovative O2O (Online-to-Offline) model, where sourcing and delivery are done by local retailers.

Under its O2O model, Paytm Mall has signed up with sellers who were already using Paytm payment services, therefore bringing them online to list and sell their products on PaytmMall. This has helped Paytm Mall on multiple fronts. First, it has drastically reduced the cost as the company does not need to own and operate its own warehouse. Secondly, the sellers use the local courier services for delivery, thereby bringing down the time and cost of deliveries. Thirdly, the cost of acquiring sellers has gone down as most of these sellers were already accepting payments using Paytm. With 3 lakh merchants on its platform, Paytm Mall has the largest seller base in India who delivers the products to the customers themselves.

Srinivas Mothey, Sr. Vice President at Paytm Mall said, “Earlier many of our sellers were using our warehouse system for managing delivery. Now our sellers manage sourcing, delivery and returns themselves and we are focused on providing them with technology support and training them to come online. With this new model, we have dropped almost 30% sellers but have managed to save up to 60% cost. Therefore, we have become a technology provider in logistics instead of being a logistics service provider.”