Noida based etailer Paytm, incurred a loss of Rs. 372 crore in 2014 after shifting to ecommerce platform. But the heavy loss hasn’t deterred the company one bit as it is looking to invest a staggering Rs. 500 crore to expand its logistics network.
In the financial year 2015-2016, Paytm spent Rs. 200 crore on logistics. In the coming fiscal year, it is planning to invest Rs. 500 crore, which is more than double compared to this FY. The funds will be utilized to build fulfillment centres across the country and to tie-up with more delivery partners.
Sudhanshu Gupta, AVP, Business at Paytm shared, “We are aggressively investing in increasing our logistics services for merchants and aim to have 50 third-party fulfilment centres by the end of this year from 19 now.”
Snapdeal is busy setting up huge warehouses in various cities to maintain their growth. A week back Flipkart poured $100 Million (Rs. 666 crore approx.) into supply chain and expressed desire to double its warehousing capacity. Amazon is building a global delivery network and recently invested Rs. 1,980 crore, a major portion of which will go in creating fulfillment centres and warehouses.
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But unlike other players, Paytm will rely on third-party warehousing & courier partners.
Gupta explained the reason behind this strategy, “We will stick to third-party FCs (fulfilment centres) and courier partners because this is a more scalable model. It takes less investment and we are able to take advantage of their goodwill. Hence it is better to partner or strategically invest in them rather than trying to build a special vertical for this.”
Investing in existing third-party delivery partners rather than building a logistics network from scratch does seem more practical. Maybe that’s why Paytm’s founder Vijay Shekhar Sharma is confident that his company will break even by 2017, way before its rivals.
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