When Paytm Mall started, it took a cue from its investor Alibaba and aimed to become a digital universe for everything.
As part of its initial offers, the company started giving cashback to attract customers.
According to Pavel Naiya, Senior Analyst, Devices and Ecosystem at Counterpoint Research, it was a short-term strategy and gaining royalty in the long-term in a price-sensitive market like India was an uphill task which depends on multiple factors, including service delivery, exclusive offerings and additional product bundling, etc.
"As cashback disappeared, so did the customers," said Naiya.
Paytm Mall stopped fighting the low-margin, high cash burn e-commerce battle, and began altering its strategy to become an O2O (online to offline) platform for small sellers.
The announcement by Reliance to enter the fray was really worrisome for Paytm and its owners.
"Reliance is working on creating the world's largest online-to-offline New Commerce Platform," said Mukesh Ambani, Chairman and Managing Director, Reliance Industries said at the "Make in Odisha Conclave" in November last year.
With a deep footprint in over 10,000 Reliance Retail outlets pan-India, Reliance has a definite edge over all other retails players out there.
Reliance has capital, an unending capacity to scale up, massive retail footprint and resources to beat the competition. Mukesh Ambani aims to become the top retail player in the country and can easily do that like he has done with Reliance Jio," Satish Meena, senior forecast analyst at Forrester Research, told IANS.
One thing that has always worked in Reliance's favour is their deep discounting strategy and this will be the key differentiator with their ecommerce platform too.
"Paytm Mall faltered owing to adopting a wrong model. It is looking at a very difficult time ahead as unlike China, India is yet to mature for the online-to-offline (O2O) marketplace," Meena said.
Thomas George, Senior Vice President and Head of CyberMedia Research (CMR) went a step further.
"I will not be surprised if Paytm could be an acquisition target for Reliance or Alibaba to pursue their India e-commerce business opportunity," George told IANS.
Alibaba never saw long-term growth in the e-commerce sector in India so they placed their bet on the burgeoning digital payments sector which, according to Google and Boston Consulting Group, will be worth $500 billion by 2020.
Paytm Founder and CEO Vijay Shekhar Sharma thought otherwise and the result is for everyone to see.
"Reliance is looking at toppling Amazon and Walmart-Flipkart from their top positions. Paytm Mall is just a small competitor in comparison," said Meena. (IANS)