Paytm is now selling stuff at lowest rates , in most cases even lower than amazon or flipkart.Here’s how it does this: -
1) It raised $635 from companies like Alibaba and SAIF( Ratan Tata as well) .
So, yeah it has hell lot of money to burn.And paytm has been doing it in the best possible way.
2) The stuff that you buy from paytm is actually costliest when the paytm cash is excluded so in a way you pay them 10-20% extra of what you would have paid to amazon or flipkart.Now they keep that extra cash for around a week before they give you the cashback( infact for a longer period till you buy something from that cashback) .Yes, they earn interest on that.( might not be very huge chunk but still it counts)
3) Now, they give you the cashback and ensure two things.Customer satisfaction and loyalty-( yes of course customer is mostly loyal to the cheapest best option available) . Second they ensure you’ll buy back from them. You’ll buy back from them for two reasons: - a) Of Course you have their cashback( could go to upto 3k-4k paytm cash) you have no other option. b) When you buy the second time you’ll again get cashback.Hence the product would again be the cheapest to be found anywhere else.
Consider the following case: -
You bought something for Rs 1000 & paid 200 extra for the same( compared to amazon) You got 300 cashback.Paytm kept that 300 for say 15 days( the duration after which you use it again) and earned Rs 2-3 as interest.( very less right! imagine when it accumulates) .For giving you a cashback of 300, it sacrificed it’s profit of around 100( but also made a big chunk from its sale) .
You came back for buying something.Again it sacrificed its some of its profit( but still earned the interest and of course the profit on new item) .The cycle continues, and yeah paytm might not end up getting that much profit as amazon/fkrt but still it is getting customers continuously which no other site can guarantee( that a customer buying once will come back) .Also in the process you’re using its virtual currency and popularising that as well.O’ yeah double game.