Essay: Paytm analysis (inc. Porter’s)

Introduction
Paytm is India’s largest mobile commerce platform with a user base of 100 million. It started as a payment wallet for mobile recharge and payment of other utility bills and now it has integrated almost all the activities at one juncture thus providing easy accessibility, convenience and credibility.
It is the consumer brand of India’s leading mobile internet company One97 Communications. One97 investors include Ant Financial (AliPay), SAIF Partners, Sapphire Venture and Silicon Valley Bank. Their main mantra is simplicity which is reflected no only in the homepage design but also throughout the site and the app making it more user friendly.
The world is increasingly mobile: people want access from wherever they are, whenever they need it. At Paytm, you have the option of recharging and shopping from whenever, anywhere and are equipped with a secure online wallet called Paytm Cash.
Current business situation
The company has become a one stop solution for all transactions involving cash especially after demonetization.

• Launch of Paytm bank: It has recently launched its online payments bank which it claims to be India’s first bank with zero fee on online transactions, no minimum balance and free virtual debit card. It ensures safety of borrower’s money with a rate of interest of 4% and invests the money in government’s bond to further earn interest with a boost to developing the nation. 

Motto of the bank

• India’s largest mobile wallet: In the wake of demonetization, people began using terms like ‘Paytm Karo’ synonymously to lend cash and hence became the largest alternative for cash. It mobilized the dream of the government to make India a cashless economy and increased digitization.
• Currently $5.9 billion in value: Three investors in Paytm’s owner One97 Communications Ltd—Reliance Capital, SVB (Saama Capital) and SAP Ventures—have sold their combined stake of about 4.3% to the company’s existing investor Alibaba Group Holding Ltd and its payments arm Ant Financial. One97 was valued at about $5 billion in August-September 2016 when it raised about $60 million from new investor MediaTek.
• Paytm Mall: Paytm has successfully built its own online e-commerce marketplace for providing all the goods under the umbrella of the brand with exciting cashback offers attracting large amount of customers.
• Paytm Lifafa: It is also capitalizing on the Indian tradition of gifting envelopes, called ‘lifafas’ in Hindi, on special occasions, pushing it as a new age digitized gifting medium.

Competitors – Amazon, Snapdeal, Flipkart, eBay, Jabong, Shopclues, Myntra, Homeshop18

Competitor Analysis

Porters 5 forces Model

• Threat of new entrants- The threat of New Entrants is moderate.1. The cost of entering the business is low, lesser investment and infrastucture is required for entering. The business requires sync with banks, stores, conveyance shops etc. But the cost of creating awareness among the customers is very high. The creation of Brand name for the new entrant would require time and huge cost.
  2. The use of specialized expertise for safe and secure transactions. The new entrant required specialized expert team for running the business securely and protecting it from hackers, information rupture and spamming.
  3. The business would require large number of customer base and transactions to break even, it would have to work towards achieving economies of scale.
• Bargaining Power of Buyers- The bargaining power of buyer is very high.1. The buyer has a lot of options to choose, their are so many players in the market Amazon, Snapdeal, Flipkart, Myntra etc. The buyer is highly price sensitive and chooses the one that offers the best.
  2. The buyer has the ability to choose from any substitute. It depends upon the services and other benefits provided by the business.
• Existing rivalry among competitors- Competition is very high with existing players Snapdeal, Amazon, Flipkart etc. Because of the high number of competitors, the company has to spend a lot in getting the customers mind share. Paytm has to also provide innovative solution to the problems faced by buyers during the shopping experience to enhance the customers experience. The existing competitors enagage in a lot of price wars esspecially during their sales period.
• Bargaining Power of Suppliers- The power of supplier is low. There are many suppliers for the same type of products. Due to which the bargaining power of suppliers is low. The suppliers are highly benefited from selling online as a lot of cost is saved by selling through the online retail stores. So, the suppliers power is lesser as compared to online retailers.
• Threat of substitutes- The threat for substitute is moderate for online retail stores. The substitute for online retail stores are the physical stores. But the online retail stores has some advatages over the physical stores. The online stores require the customer to take out time specially for the shopping and it also requires more time and effort. Also the online retail stores provides many offers and discounts due to the economies of scale. But still the physical store provides touch and feel of the product to the customer which is essential for many customers. 

Services offered by Paytm

Paytm’s model is to basically offer everything which is possibly available under the sun.It’s current services include online recharges, utility bill payments, travel bookings, entertainment services etc.
Services

• Mobile,DTH and Data Card Recharge- DTH Recharge or Mobile data recharge, all can be done through a single step solution.Apart from this it also provides options for Metro Card recharge and Mobile Bill payments for various operators like Airtel,Aircel,BSNL etc.
• Quick Utility Bill, Insurance, Loan & Education Fee Payment- Utility bills may include electricity bills,water bills and gas bill payments to be made through an instant click.Also, it is providing the option of paying insurance premiums and gold loans online.Recently, many schools have also tied up with Paytm so that their fees can be paid online
• Entertainment Services- It offers a wide range of entertainment services starting from amusement parks, movies, theaters, events like concerts, carnivals
• Bus, Train & Flights Tickets and Hotel Booking- Paytm is replicating the model of Redbus and other travel booking websites by offering tickets for trains, buses and flights at cheap rates.
• Fintech products- Paytm is planning to expand it’s portfolio of financial products by launching credit products with the help of lending start-ups.Recently, fintech startup LoanTap has started disbursing loans to Paytm’s customers. 

Paytm Mall
Paytm Mall is the shopping app owned by Paytm which marks it’s entry into ecommerce marketplace.Paytm mall boasts of a whooping 1.4 million sellers on board across different categories like electronics, clothing,groceries, home furnishing etc.Paytm has a strict quality control procedure and that’s why it keeps only trusted sellers which pass strict qualification guidelines on it’s mall.
A screenshot of the Paytm Mall

Consumer Behavior

With this advancement in technology, things around us have drastically changed. As smart phones have become more affordable & prevalent, it caters to comfort & conveniences.
Paytm offers 3 basic services Online Recharge, Online Shopping, Wallet. All the three things have seen notable change in the consumer behavior. Internet is new elephant in the market and it’s no more in books but out roaring on the streets. Paytm stands for Pay through Mobile, initially perceived as typically online platform for mobile recharge, Paytm broke that barrier in 2014, when it entered the online shopping space. With its successful loyalty program of cash back on the transactions which can be used in further transaction, Paytm ensured the loyalty among the customers.
Paytm acquired the consumer behavior prediction platform Shifu in 2016 for $8 m
Let’s Analyzing the each offering of the Paytm separately,
1. Online Recharge- Initially people depended mostly on the retailers for the recharging the mobile phone which wasn’t convenient, and they many a times missed the best offer for them, that bridge was gapped by Paytm, initially there were trust issues with the online recharge platforms which has starts to fade away, now users are more convenience focused and they prefer recharging online rather going offline store. All these services are provided to customers at zero cost to customer.
2. Shopping-  Biggest problem with use of online platforms for shopping specially for clothes is assurance of quality and size fit, with the ‘no question asked return policy’ of ecommerce companies, customers now are accepting the online shopping as it offers them great deal in terms of varies and price.
3. Wallet- Demonetization came as angel for mobile wallet market, Modi’s vision of cashless economy aligns perfectly with the Paytm ’s goals. Initially user didn’t use the e-wallets as they were not accepted in market and merchants mostly demanded cash and cards. User had this thing new to learn and change is always faced with difficulties. But now wallet is accepted at various outlets in the market even a Gol-Gappa Wala on streets sometimes to a laundry guy in hostel at IMT accepts Paytm wallet. So certainly, acceptability of mobile wallet has improved many folds.
Observing the Market trends and taking to the customers gives us following change in consumer behavior-
1. Trust in online transactions has increased, People with familiarity to technology prefers using the online means for their convenience.
2. Word of expert in offline shopping is replaced by the user reviews and testimonies on the website.
3. Customer’s expectations have changes for example, if a customer wants to purchase something online at night and has a query, they expect to get instant answers. If they do not they choose another supplier from the myriad available online who can meet their immediate need.
4. New communication channels- In the past, a company provided customer service through emails –that did not get prompt responses – and phone calls. These two communication tools had their own challenges and favored the company more; it was at their discretion what information to give out. This age however, is very refreshed. Social media platforms and live chat place you right in front of your customer; you cannot sacrifice your customer to maintain your brand position. When you do not respond to a query, you damage your brand reputation because that information is accessible to millions of people.
5. Customer’s demands now the easy, visually appealing and great functional value platforms.
6. Instead of purchasing products, consumers today spend most of their funds on experiences, such as dining, health spas and vacations. Apparel and accessories sales have slowed down, compared to a few years ago where individuals spent more on clothing and handbags. Due to this shift in consumer preference, retailers are reinventing their businesses to accommodate lifestyle over materialization.
7. In recent years, a hybrid shopper has evolved. Today’s consumers already can try clothes on in a store and then order online via their computer or, increasingly, their smart phone. This combination of an offline, physical retail “showroom” and online ordering for home delivery is likely to intensify. And, if a retailer doesn’t have the capabilities to cater to its customers, competitors are just a click away.

Effect of demonetization

In November 2016, when the Indian economy was dealing with demonetization, Alibaba backed Paytm witnessed a Gross Merchandise Value (GMV) of USD 3 billion for that year. While all the industries were battling unprecedented change in the economic scenario, Paytm took an advantage of the situation and rolled out social media campaigns ‘Ab ATM nahi, #PaytmKaro’ (Don’t use ATM, use Paytm). The effect of demonetization on the company can be witnessed in a video that went viral on internet. The video has founder Vijay Shekhar Sharma boasting about Paytm’s success post demonetization with sheer enthusiasm and vigor.
The company saw 300% growth within six days of the prime minister’s demonetization announcement. It witnessed over 7 million transactions worth INR 120 crores a day, enabling them to cross USD 5 billion of GMV sales which was four months ahead of their target. The digital payments app added five million new users and served forty-five million users within ten days of the demonetization drive. It waived off 1% transaction fee on the transfer of money to bank for its merchants to enable the shift towards digital payments.
Such growth has been achieved due to Paytm wide reach of 8,50,000 offline merchants spanning in 1,200 Indian cities. It has presence in almost all the merchant segments, namely petrol pumps, restaurants, hospitals, pharmacies, autos, taxis, kirana shops and many more. Amongst all the competitors given its reach, Paytm turned out to be the best alternatives.
As soon as demonetization was announced, Paytm started advertising aggressively urging the customers to use Paytm- ‘Ab drama band karo, #PaytmKaro’ (Stop being melodramatic, use Paytm). Such advertisements sparked loud protests on social media and also faced the wrath from several politicians. Paytm put a full front page congratulating the prime minister on taking the boldest decision in the financial history of the independent India. Despite having no political affiliation, such a move led to political crossfire and criticism.
Recommendations
Currently Paytm Mall is fighting to gain the third position in the e-tail (online retail) space, after Amazon and Flipkart. By raising USD 1.4 billion in May 2017, Paytm looks out to various acquisitions to achieve this position in the Indian online retail space. News of acquiring BigBasket.com enables head on Alibaba v/s Amazon fight in the online groceries retail segment. Also, plans to acquire Via.com will help Paytm enter the online travel and hospitality business. As per these findings, the recommendations are as follows:

• Currently, backing by Alibaba has ensured that Paytm has a strong hold in the retail market. But it is time to generate substantial revenue to become profitable. For this, a priority membership should be unveiled for its present customers. There’s no doubt that Paytm is leading the digital payments app and its users are hooked to the retail offerings, so such an offering for nominal price of INR 499 per year will entice the users to gain priority treatment.
• Paytm’s leadership should aim at building a one-stop trusted platform for online retailing. For this, structured approach towards acquisitions and ventures into new segments should be adopted. The news of acquisition of Little and Nearbuy did not align to a structured approach for gaining a competitive advantage over Amazon and Flipkart.
• Due to the push towards digital economy, tier II and tier III cities have become an attraction target segment for most e-tailers. To cater to these segments, a wider presence of logistics network via merchants should be established by Paytm.
• The point of differentiation for Paytm is its digital wallet and now Paytm bank. But with government’s UPI facility and Google entering into this segment via Google Tez, Paytm needs to act immediately to counter these offerings. For this, a differentiated offering that ensures depositing cash directly to the Paytm wallet can be useful.