Amazon plan to wheel away Cloudtail basket By Cioreviewindia Team

Amazon plan to wheel away Cloudtail basket

Cioreviewindia Team | Saturday, 12 March 2022, 07:46 IST

Amazon India is set to discontinue the services of its top seller—Cloudtail—in the next one month, as India’s regulatory watchdog approves the ecommerce giant’s bid to fully acquire the parent Prione Business Services, bringing to an end the contract between the American company and Infosys founder NR Narayana Murthy's investment office Catamaran Ventures, people in the know said. The contract was slated to expire by May 19, 2022 but Cloudtail is expected to shut sooner, they added.

Catamaran holds 76% in Prione, with the rest held by Amazon. Previously, the Jeff Bezos-owned company held 49% but was forced to trim its stake in 2019 to 24% in order to comply with the new foreign direct investment (FDI) regulations for ecommerce.

The price at which Catamaran is selling its stake to Amazon could not be immediately ascertained.

Amazon is unlikely to set up another joint venture to house a seller similar to Cloudtail, those aware of the thinking within the American company said.

“With CCI’s approval in place, the formal process of the transaction will happen and could be done in about a month. Cloudtail will not operate as a seller on the marketplace once the shares are transferred to Amazon,” said one person cited above. “Currently, there is no plan to set up another joint venture to mimic a Cloudtail-like seller firm.”

Prione Business Unaffected

Existing regulations prohibit an entity running an online marketplace and its group companies from owning equity in any of the sellers on the platform or having control over their inventory.

An Amazon India representative declined to comment on the matter. An email sent to Catamaran didn’t elicit any response till press time on Friday.

Prione’s existing business of onboarding sellers to the Amazon India marketplace through its fleet-on-street team will continue as is, sources said. As per a report in December that Prione’s business will likely remain unaffected by the proposed transaction.

The current inventory held by Cloudtail — one of the largest sellers on Amazon India — will need to be distributed to other vendors and sellers. This exercise is expected to begin closer to the Amazon-Catamaran transaction closing, according to people aware of plans.

While Amazon India has been trying to reduce its dependency on Cloudtail following tightening of FDI rules in ecommerce, it still remains one of its largest sellers. Its closure is likely to have a significant impact, given its critical role in enabling Amazon India to speedily service a bulk of consumer orders.

Cloudtail's current employees, numbering up to 1,200, will be treated as Amazon’s employees once the transaction closes. “Cloudtail and Prione will be Amazon’s assets and liabilities,” sources said. A significant number already work closely with Amazon and are likely to be appointed in different positions within Amazon or Prione.

However, it is not clear yet if Amazon will absorb all the staff. At the time of Amazon and Catamaran’s joint announcement on December 22 over the stake sale, Prione chief executive Pankaj Jathar had told Cloudtail’s employees that they will continue to be an “integral” part of the joint venture unit Prione.

Major Seller

In 2014, Amazon and Murthy’s Catamaran set up Cloudtail, which soon emerged as one of the largest sellers on the local marketplace. In the fiscal year 2021, its revenue jumped by over 45% to Rs 16,639 crore, with a profit of more than Rs 182 crore.

At one point of time, Cloudtail was clocking more than 50% of total sales on Amazon India before the government tightened rules in 2016, stipulating that a single seller cannot account for over 25% of total sales on an online marketplace. As a result, Amazon India started working with more sellers to diversify its seller base.

Smaller online sellers and offline traders would also complain to the government that Amazon was partial to large sellers such as Cloudtail. The US ecommerce major struck a joint venture with Patni Group in 2017 to set up Frontizo Business Services. While Frontizo is involved in offering customer support services to Amazon India, its subsidiary Appario Retail is another major seller on the Amazon India marketplace. Appario Retail reported revenue of Rs 14,628 crore in FY21 with a profit of Rs 54 crore.