Cloudtail, the largest seller of Amazon India is learnt to be luring multiple smaller sellers of Amazon to sell their products to it instead of selling it directly on the website of Amazon. The idea is to offer the small sellers a fixed amount for specific set of products and then push the same products on Amazon under the banner of Cloudtail.
Interestingly, the development happens even as the government is trying to reduce over-dependence of marketplaces on their preferred vendors. To ensure that, the government in December also announced the foreign direct investment (FDI) guidelines which essentially bars a single vendor from selling more than 25 percent of the total products sold on the marketplace. It also stops marketplaces from owning stakes in any of the sellers that sell on their platform.
India doesn’t allow FDI in inventory based e-commerce business and only promotes a marketplace model wherein multiple sellers sell their products through these e-commerce platforms.
While in principle every seller is well within its rights to source products from manufacturers, dealers or even other sellers, this move doesn’t quite go well with the spirit and the intent of the recently announced Press Note 2 or the revised FDI guidelines which wants to promote smaller sellers sell online, claim sellers.
“The focus of Amazon has shifted from marketplace to running a retail operation through Cloudtail. Sellers have now very few options to sell goods and therefore are aligning with the likes of Cloudtail for short term profits. From our experience, in order to lure sellers, Cloudtail is paying upto 30% higher prices and also selling goods at lower cost. However, in the long run this will get reversed,” a spokesperson of All India Online Vendors Association told Moneycontrol.
“Small sellers do it for short term gain since they know Cloudtail will be able to sell their goods fast because Amazon gives preferential treatment to Cloudtail,” the spokesperson added.
Cloudtail is a joint venture between NR Narayana Murthy’s Catamaran Ventures and Amazon Asia. According to media reports, Catamaran Ventures recently also increased its stake in Cloudtail’s parent company Prione Business Services to 76 percent from 51 percent earlier in order to comply with the revised norms.
Amazon declined to comment saying that Cloudtail takes its own decisions and Amazon cannot comment on its behalf. Prione, the parent firm of Cloudtail on the other hand, did not respond to media query.
According to sellers on a Facebook page by the name of Amazon India sellers, there are multiple ways to partner with Cloudtail. Sellers can keep the products in their own warehouse but can still have the product sold under the name of Cloudtail. Earlier Cloudtail just used to buy the products from the sellers but now they are also open to authorising the warehouse of the seller from where he can directly ship the product under the name of Cloudtail. Once Cloudtail comes on board, sales as well as returns is the responsibility of Cloudtail. Sellers mostly get paid out on net sales.
Sellers also claim that Amazon charges very little commission from Cloudtail as compared to the commission charged from any other seller on the platform. The commissions for a regular vendors may range between 16-26 percent or more depending on different categories. This is a huge amount as compared to 5-8 percent that Amazon is learnt to be charging Cloudtail. Many sellers also say that it is difficult to compete with a giant like Cloudtail. So if an offer comes they accept it as a goodwill gesture.
“In simple terms, if Cloudtail is interested in your product category and you reject it, then it will approach some other seller. So better to go with Cloudtail,” posted a seller on the same social media page.
A senior industry executive on the basis of anonymity said that Prione was set up with the idea that it will help small businesses get online. Whether Cloudtail could rope in sellers already online under this garb was unclear.
