VSS
Earlier this month, Paytm, an online utility payments company, launched a mobile-only marketplace for physical goods, allowing users to purchase clothes and apparels via mobile. This is a fairly drastic shift for a company, but not unfamiliar for Paytm: Paytm itself was incubated within One97 (which is a mobile VAS company) launched in a fairly active online recharge market, added bus ticketing to its mandate, and now a mobile only marketplace.

In a market full of e-commerce marketplaces (Flipkart, eBay, Snapdeal, Shopclues, among others), why another one, and why only mobile? The other interesting development is the integration of the Plustxt messenger with Paytm, allowing buyers to negotiate with sellers for a bargain, so how do they define parameters for bargaining, and how does this scale across hundreds of thousands of merchants? There is also the fact that Paytm waited till it had a semi-closed prepaid license in place, and has to manage a shift of customers from a closed wallet to a semi-closed wallet. We spoke at length about the Paytm marketplace with One97 CEO Vijay Shekhar Sharma and here’s part I of the interaction:

MediaNama: Why have you launched a marketplace?
Vijay Shekhar Sharma: If you look at a logical flow, it’s been about going from building a robust back-end to building a sincere front-end product for consumers. In 2010, we did a payment offering called Paytm Payments. We never launched it publicly. We found out that the only way to launch our product in the market was with us as the merchant, because merchants don’t necessarily focus on the product. We launched our recharge services as a part of showcasing our payment platform, and we learned that there is a lot to do on payments. In 2010, we decided that there will be a mobile commerce play for One97, and we have been building towards that.

MediaNama: But when you launched, there were other recharge players in the market as well.
Vijay Shekhar Sharma: We might have detected the trend at an optimum time. When we launched, RechargeItNow and Freecharge were fairly large competition. If we did x, 5x was RechargeItNow and 3x used to be Freecharge. Internet used to have more searches with these (and related) keywords. We launched in a tough environment. We’ve had our ups and downs, but we know that today, with 3 lakh orders in a day, we are now in the top spot.

MediaNama: How do the margins work in recharge? Was there always a plan to go beyond that?
Vijay Shekhar Sharma: In 2010, I met Jack Ma in Hong Kong, and I can’t tell you how inspired I was by his story. One97’s platform does 580 million unique users a month, with 60 billion transactions a month, and I love the idea of hitting a million a day. Taobao is the only platform I knew that was built with that scale in mind. Knowing that mobile and marketplaces will be the play in India, I had a plan in 2010-11, to have a mobile only marketplace. To make sure that it happens, you have to do one thing at a time. We started with a payment gateway, made it into a platform, loaded a wallet on top of it and acquired consumers. We had to do a digital goods marketplace before we could do physical goods.

MediaNama: What do you think of the proliferation of marketplaces and payment gateways? We’ve had marketplaces launch payment gateways and vice versa. You’re a payment gateway that has launched a marketplace…
Vijay Shekhar Sharma: We know that payments on mobile is still to be solved at scale. Payment gateways and marketplaces have always been linked: eBay- Paypal, Alipay-Taobao, you get extraordinary synergies. One thing I don’t know is, who is solving the customer problem where the customer is headed. It is not doubt that more people will launch marketplaces. True winners will be who does it for more people, more number of times a day.

MediaNama: In a market where customers are chasing price, how do you ensure that customers will purchase from you?
Vijay Shekhar Sharma: Consumers want value for money. They aren’t just chasing price as an item. Else, everything that was cheapest would have been bought, and there would have been no inflation. Price is the most important part of the value, and we will ensure that consumers pick up, using our bargain feature, what is better than the best available price or value. Our merchants, who will experience consumers like they do over the counter, will be able to convince the customer. A mobile native product is what we’ve built. A mobile Internet site cannot have a chat between a merchant and a buyer. We have added the Plustxt messenger that is a live chat between consumer and the merchant. It’s like you go into the market, and discuss whether the product is available in another colour, about the warranty, price and features. When you bargain for a price, the merchant will be able to offer anything as a bargain: free shipping, cash back, extra value add in terms of bundling. Bargains can be of any kind.

paytm_marketplace

MediaNama: As a product you have messaging that connects merchants with consumers, but operationally, do you have a call centre doing this, or actual merchants?
Vijay Shekhar Sharma: In a long term scenario, it will be a merchant who will be live. Today, some merchants are live, but not all. All merchants need help: it is 24×7, and shops aren’t open 24×7. Secondly, bargaining requires some training for the messenger interface. We have taken care by having our team talk on behalf of the merchants, like salesmen. The bargain limits are set by the merchant. Shop owners have multiple sales men on the shop and they have a sense of the bargain, which the merchant tells them.

paytm_marketplace_bugs

MediaNama: What is the feedback from merchants? How do you define parameters for discounts?
Vijay Shekhar Sharma: Normally, till today, a merchant has a dumb catalog, and a coupon somewhere online. Instead of a coupon based system for customer acquisition for savvy customers, here you are talking to a person who can offer what you want.

Consumers are happy to talk to a human on the site. He understands what you’re saying, and offers you deals like Rs 200 cash back.

MediaNama: How do you define the parameters for bargaining?
Vijay Shekhar Sharma: Right now, we have an understanding which stock to be pushed, and for how much. A t-shirt vendor said that if a customer is buying 2 t-shirts, we can offer something more.

MediaNama: How many merchants do you have? How does this scale?
Vijay Shekhar Sharma: We have 250 merchants and 100,000 items. The necessity is that every merchant has to be bargain okay. It means that our merchants have to agree with the bargain feature.

MediaNama: So, again, how does this scale as a process? It’s understandable bargaining for 250 merchants and 100,000 items, but how does this work for 10,000 merchants? Language and comfort with technology would be considerations.
Vijay Shekhar Sharma: How does a shopping mall work? The idea is to have millions of merchants. Millions of channels will be doing it. Our system is DIY, and we’ve spent more time on the back-end than the front-end. The true product exists for merchants. Our business model is based on merchant empowerment. No one should be asking for a manual to read. We have made this bottom up.

Our roadmap includes that merchants will use the mobile app. Language is a consideration, but we haven’t reached a level where that is necessary. I believe that there will be large enough merchant base which is out there who will love to have their catalog ported on our market system, without language being a consideration. Second is that the bargaining can happen on mobile messenger. If you know how to attach an image on WhatsApp, you know how to attach a coupon for a consumer. It’s that simple.

MediaNama: How do you ensure that the merchant will deliver, since you’re not warehousing like Fulfiled by Amazon? What is your selection process for merchants?
Vijay Shekhar Sharma: We are not keeping our scope to include physical logistics yet. We have to do a good job of other components, training merchants, getting consumers and getting catalog. We are strict about getting those merchants who are selling online. We would love to open a DIY, but we haven’t opened that for merchants. We are choosing our merchants, and there is no active invite.

MediaNama: So how have you gone about the process of selecting merchants?
Vijay Shekhar Sharma: Our pitch is very simple. Our question is: how many orders are you fulfilling in a day, in a month. Our fulfilment team monitors, and the our system also alerts us.

MediaNama: What will you need to do to expand to 10,000 merchants. Since they may not all be as reliable, how will you ensure that deliveries are made? Would you get into warehousing and managing logistics?
Vijay Shekhar Sharma: We are a technology company, led by mobile. I wish that we don’t increase our scope to that level that we have to open our own warehouse. That is not our expectation. Our expectation is to build an incredible merchant and consumer facing platform. When it comes to those other human components, we will be about governance and being the interface between merchant and consumer. Our approach will be: no questions asked, immediate refund. The money will be available immediately for purchases via the Paytm wallet. Our expectation is that by being a savvy technology company we can bring it down to lower error percentage and superior customer satisfaction.. The rerund requires wallet as a payment system, else it is unreliable.

MediaNama: Are you doing Cash on Delivery?
Vijay Shekhar Sharma: We don’t do cash on delivery or logistics. People are fine with no cash on delivery. They need to trust the platform. 3 lakh orders a day without cash on delivery is what we do. We are not a reseller. We have no intention of buying inventory. We are not a logistics company.

MediaNama: Would you look at enabling logistics for merchants?
Vijay Shekhar Sharma: We are partnering with logistics companies and integrating them with our platform for merchants to use. Instead of trying to create our own workforce, we will integrate a partner.