The Internet of Things (IoT) is changing the way consumers shop online, and businesses are

scrambling to figure out how to use consumers' 24/7 interconnectivity to their advantage.

Alibaba- a pioneer in the online-to-offline (O2O) marketplace- soon realised that giving cashback to
attract customers was a short-term strategy which won't help Sharma make Paytm Mall a third big
player in the fast-growing Indian e-commerce market poised to touch $84 billion in 2021 from $24
billion in 2017.

Paytm Mall's losses mounted and in the financial year 2018, the company posted a loss of nearly Rs
1,800 crore on revenue of Rs 774 crore. According to Forrester Research, the market share of Paytm
Mall almost halved in 2018- to 3 per cent from 5.6 per cent in 2017.

The largest investor in the company, Chinese ecommerce behemoth Alibaba, realised then that
Paytm’s volumes, driven largely by cashbacks, would not be a sustainable business. Paytm’s pure-
play ecommerce business required massive investments in warehousing and logistics for scale, and
cashbacks in such a scenario were proving to be a drag.

A deep dive into the reasons why Paytm Mall, which was among the fastest domestic internet firms
to grow into a unicorn, failed to take off revealed that despite the backing of heavyweight investors,
its ecommerce strategy was driven by a short-term vision largely dependent on cashbacks.

“Running a digital payments company as opposed to a commerce platform is extremely different.

This overlap may have led to some cost synergies but not necessarily better business,” a former
executive at the firm said. “They did not build basic capabilities in supply chain, logistics, which are
the essentials for running a consumer-facing ecommerce business,” said another person in the
know.

Neil Shah, an analyst at Counterpoint Research, said: “Paytm Mall was not able to crack exclusive
partnerships in the mobile and electronics category. They lagged behind in overall customer support
and service which ultimately impact the stickiness of the platform.”