Strict FDI rules take a toll on Amazon’s largest seller Cloudtail


November 29, 2018

Written By Sagar Malviya & Writankar Mukherjee, ET Bureau

MUMBAI | KOLKATA: Amazon India’s largest seller Cloudtail crossed the Rs 5,000 crore sales mark in the year to March but growth tapered off significantly, indicating its fading role as the company seeks to comply with foreign direct investment (FDI) rules on marketplaces.

The government said last year that it will not permit a single vendor to account for more than 25% of sales on an online marketplace that has overseas investment.

Cloudtail, a joint venture between Amazon Asia and Infosys founder Narayan Murthy’s personal investment vehicle Catamaran, posted over a 24% jump in revenue to Rs 5,688.7 crore in FY17, according to its annual return.

That’s against a 300% surge to Rs 4,586.9 crore in the previous year when it accounted for over a third of the sales on Amazon’s shopping platform in India.

“With the restriction, it was very clear that growth had to be moderated. But Amazon would still prefer to channel their goods through a seller where they can control margins and inventory,” said Devangshu Datta, CEO, Third Eyesight, a consultancy firm. Amazon India declined to comment. Cloudtail didn’t respond to an email.

Cloudtail’s numbers pale in comparison with Flipkart’s biggest seller WS Retail, which posted sales of Rs 13,921 crore for the year ended March 2016. It hasn’t filed a financial performance report for the last fiscal yet but Flipkart has also been reducing its dependence on the seller, in which its founders used to own a stake.

After the government’s guideline, which ecommerce companies had to comply with by March 31, 2017, Cloudtail almost stopped selling mobile phones a year ago but continued with Amazon private labels in India. Smartphones constitute the largest category of India’s ecommerce sales and formed a big part of Cloudtail’s overall sales in previous years.

“With the smaller pace of growth by exiting smartphones, Cloudtail will surely comply with the FDI norms of one seller accounting for 25% of total transactions at Amazon last fiscal itself,” an executive said.

Another seller said Cloudtail’s gaze is on consumables such as FMCG, nutrition, apparel and televisions, which are the next focus areas for Amazon. Personal care, baby care and nutrition are also of interest. It currently sells Amazon exclusive television brands like TCL, Sanyo and BPL.

Source: economictimes