Paytm to become one of India’s first profitable online firm by 2017

With the Indian eCommerce industry collectively making a significant presence on the global platform, firms, at individual levels too are leaving no stone unturned to mark their contribution.

Paytm CEO Vijay Shekhar Sharma told The Economic Times, "We definitely want to be the first one to achieve breakeven. We are aggressive about growth and far more about breakeven and that's why we have an asset-light model on marketplace."

The major eCommerce players like Flipkart and Snapdeal have aggressively chased growth of gross merchandise value, or gross sales, by discounting products deeply even if it meant giving up margins.

However, as they begin to earn benefits from economies of scale and pressure to inch towards better margins mounts, companies have pulled back on discounts and free shipping.

According to industry experts, an impeding slowdown in late-stage funding is also likely to make companies chase margins harder.

Alibaba-backed Patym, as part of its strategy for profitability asked its data science team to identify products that can add to margins, without turning away buyers who may be sensitive about the price of an associated cable. Auxiliary items such as battery packs, cables and phone cases have hefty margins even if they are priced lower.

"Our data science team has been able to point out that these are the SKUs (stock-keeping units) where we can ask the merchant to discount and these are others where we can run higher margins or spend money on our own. Wherever brands are not specific or standardised, there is a lot of margin," said Sharma.

The firm is looking forward to earn profit by charging sellers, enabling payments and creating a cloud platform for logistics players who service the sellers on Paytm.

"Our target to turn profitable by 2017 seems achievable. Next year, we should be able to achieve breakeven. Before we do that, our net contribution margins have to breakeven when the discounts are taken off from the merchants and consumers," Sharma said.

If reports are too be believed, Flipkart too is eying profitability in the next two years, In an interview with the business daily last week, Flipkart's head of commerce Mukesh Bansal said that the company's business model is getting "structurally better" almost every quarter and its per-unit economics are twice as efficient as any other large player in the market. Bansal said Flipkart also benefits from economies of scale and is not dependent on financing for the "eventual path to profitability." He, however, did not specify a timeframe in which it will become profitable.