Paytm's goal is to draw more users in, broaden its reach and use technology to make old-school retail more efficient.

(Bloomberg)—Indian online shopping site Paytm Mall is opening a New Delhi store, taking a page out of backer Alibaba’s playbook in exploring ways to use physical retail to boost its online business.

The country’s newest online retailer, owned by Paytm Ecommerce Pvt and backed by Alibaba Group Holding Ltd., is introducing a physical store co-branded with Red Tape shoes. Consumers can walk in, scan product bar codes, browse and make purchases via its mobile app.

From Amazon.com Inc. to Tencent Holdings Ltd., online retailers are investing billions on combining online and physical stores, aiming to use bricks-and-mortar networks to complement their core businesses. The goal is to draw more users in, broaden their reach and use technology to make old-school retail more efficient. Paytm Mall says its maiden store will offer same-day doorstep delivery as well as handle returns.

“India is too vast a country to be served by online-only retail and, given the rudimentary logistics infrastructure and customer preferences that vary from one district to the next, new retail will be the unique differentiator,” says Amit Sinha, Paytm Ecommerce’s chief operating officer.

Formed in April 2017, Paytm Mall is taking on established rivals including homegrown leader Flipkart Online Services Pvt, backed by SoftBank Group Corp. and Tencent, and Amazon.

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While Alibaba’s backing has proven a great learning experience, its own new retail strategy evolved from uniquely Indian conditions, Sinha said. India has 15 million retailers, and the size of the retail industry is projected to hit $1.1 trillion by 2020, he said. Paytm Mall itself is targeting 400 stores, mainly in consumer goods and fashion, by around this time next year.

Its parent is part of the Paytm Group, which also runs India’s largest digital financial services provider. Paytm Mall should handle a gross merchandise volume of $3 billion in the financial year ending March and is targeting $10 billion by March of 2019, Sinha said.

Alibaba owns and operates Taobao and Tmall, which hold the No. 1 and No. 2 spots on the Internet Retailer 2017 Online Marketplaces. Flipkart is No. 9, while Amazon is No. 1 on the Internet Retailer 2017 Top 500.

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