Paytm tapping FMCG segment

Paytm, the country's largest mobile commerce platform, is tapping the fast moving consumer goods (FMCG) channel to acquire more customers and step up its transaction rates, especially in non-metro and rural parts.

The Noida-based company has signed a deal with FMCG major Emami via the Kolkata-based company's Fair & Handsome brand. Under the agreement, for every Fair & Handsome sold via Emami's distribution network, a percentage of the product value will be credited to the consumer, in the form of digital cash in Paytm wallets. This is likely to be done through a promo code, which can be then used on Paytm to earn digital cash.

The association with Emami, for six months at this stage, would cost about Rs 30 crore for Paytm; the other promotional needs would be taken care by Emami, it is learnt. ''This tie-up would enable us to acquire more customers at a lower cost," said Shankar Nath, senior vice-president at Paytm, while declining to comment on the deal value.

At present, 80 per cent of transactions at Paytm are rom mobile devices. While the average cost for acquiring a customer at Paytm is about Rs 50, it would be reduced via the tie-up.

"We are in talks with several other brands as well and those could fructify in the coming months. While mobile users are a focus, a lot of this traffic would come from rural areas as well. Transaction values could be relatively smaller but it boosts the volume," Nath added.

The active user base and rate of transactions are two key metrics for investors rating the various aspects of a company, including valuation, during fresh funding.

Last week, Paytm announced an entry into pure-play mobile commerce with plans afoot to fight it out with segment giants such as Flipkart, Amazon and Snapdeal. It unveiled a zero-commission mobile app marketplace, targeting small and medium-size firms, that allow merchants to sell directly to consumers. A new Paytm app also enables users to transact and instantly chat.

According to Vijay Sekhar Sharma, chairman at Paytm, the mobile marketplace will push its total transaction value to about $4 billion by the end of 2015. Half of this would come from mobile commerce and the rest from its existing e-commerce wallet business.

From about 33,000 merchants on its network today, Sharma is aiming to have 100,000 on the Paytm marketplace by the end of the year. It expects to grow the number of stock-keeping units (essentially, units sold) to 100 million, from 8.5 million at present.

Ant Financial, an affiliate of Chinese e-commerce giant Alibaba Group Holding, has 25 per cent stake in Paytm and is investing about $575 million in the company, in tranches.