SoftBank and Alibaba to pump $445 mn into Paytm Mall: Is it now equipped to battle rivals Flipkart and Amazon?

Flush with cash, will online retailer Paytm Mall change the market dynamics of the e-commerce sector? Paytm Mall, the e-commerce division of digital wallet firm Paytm, has secured some $445 million from Japan's Softbank and China's Alibaba. Paytm Mall's operator, Paytm E-Commerce Pvt. Ltd has secured $400 million or about Rs 2,600 crore from Softbank, and $45 million or around Rs 292 crore from Alibaba.

The transaction will value Paytm E-Commerce at roughly $1.9 billion, according to a Reuters report. Alibaba, which currently owns 36.3 percent of the Indian e-retailer, will remain the single-largest shareholder of Paytm E-Commerce but with a relatively smaller stake of just over 30 percent after the latest investment is completed in four tranches, the report added.

Paytm’s plan is to double down on what it is currently doing, Amit Sinha, chief operating officer, Paytm Mall told Firstpost. Funds raised will be deployed to beef-up technology and build superior logistics, among other things. “A large part of our shoppers are not tech savvy. Our task is to build technology for shopkeepers that will in turn enrich the experience of shoppers and customers. Another task is to provide training for shopkeepers so that they are able to use our technology,” Sinha said, adding that the fund infusion is an affirmation that their business model -- of not operating a warehouse or holding inventory -- is working.

SoftBank and Alibaba to pump 5 mn into Paytm Mall: Is it now equipped to battle rivals Flipkart and Amazon?

Paytm mall logo. Pic courtesy, Reuters

The fresh round of funding should provide Paytm a competitive edge over the other two players in the country, Flipkart and Amazon. However, Sinha said Paytm was not in any competition with others as its model is different. “We are not a retailer. We are a tech player providing a platform to 15 million shopkeepers to reach out to their customers. Our play is different from e-commerce players.” Incidentally, according to an ASSOCHAM-MRRS India report, the retail market in India is likely to reach $1.1 trillion by 2020 from $680 billion at present.

Paytm Mall's strategy will see it offer a ‘complete consumer spend’ across all categories. Sinha said the firm is  “looking at increasing shopkeepers on the platform from the current 15 million. For this we will look at those who are still spread in every nook of the country and also ensure that products are available locally."

Sinha said the company will take ‘some time’ before it becomes profitable. “We are in a major investment phase and there is an eye on what and where we are spending and as long as that fits into our long-term investment plans and technology, then it is justified."

Paytm could dominate the market

This latest round of funding will result in continued competition among the top three players in the country – Flipkart, Amazon India and Paytm. Each will try to increase their market share and reach, said Abheek Singhi, senior partner and head (consumer & retail practice), BCG Asia-Pacific. Singhi said that with an increase in competition, the focus would be on market creation and expanding one's presence.

With money being pumped by SoftBank and Alibaba, there is a possibility that Paytm Mall could dominate the e-commerce market, Paula Mariwala, Partner, Seedfund and co-founder, Stanford Angels. told Firspost. “I am sure the investors have a strategy with regard to e-commerce. They may use this investment to bring in their own portfolio companies,” she added.

The funding wasn’t unexpected as there were media reports that hinted at an infusion in Paytm.

On Monday, SoftBank, in a statement, said: “We believe Paytm Mall’s offline-to-online operating model, combined with the strength of the Paytm ecosystem, is uniquely positioned to enable India’s 15 million offline retail shops to participate in India’s e-commerce boom.”

According to the government’s Economic Survey 2018, the country’s e-commerce market has reached $33 billion, registering a 19.1 percent growth in the 2016-2017 fiscal. In the first half of 2017, the total start-up funding in India saw a 14 percent drop to $1.8 billion from $2.1 billion in the same period in the previous year. Interestingly, funding in B2B start-ups increased to 31 percent from 27 percent, according to a report in the The Hindu Business Line.

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Updated Date: Apr 03, 2018 19:20:05 IST

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