Malviya & Shambhavi Anand, The Economic Times
Mumbai/New Delhi, 21 December
Amazon’s largest seller Cloudtail surpassed the
country’s largest department chain Shoppers Stop by revenues which grew
fourfold during the year to March 2016, highlighting the growing
popularity of online buying as well as of Jeff Bezos’ company in India.
This has also posed an unusual problem for the world’s largest online
retailer which has to slow down sales of its Indian joint venture firm
to comply with government norms.
Cloudtail, a JV between Amazon Asia and Infosys founder Narayan
Murthy’s personal investment vehicle Catamaran, posted over 300% jump
in revenues to Rs 4,591 crore. This is slightly higher than the
consolidated revenue of Shoppers Stop at Rs 4,582 crore and almost
twice that of the Tata-owned Trent that logged sales of Rs 2,397 crore
during the same period. A year ago, Cloudtail had clocked sales of Rs
1,145 crore. Its net loss too has narrowed to Rs 30 crore from Rs 32
Cloudtail is just a merchant on Amazon but essentially the kind of
growth it has seen would not have happened without Amazon’s support,”
said Devangshu Dutta, chief executive, Third Eyesight, a consultancy
But for all its success, Amazon is scrambling to reduce its dependence
on Cloudtail which as of now accounts for over a third of the sales
that take place on its shopping platform in India. That’s because
government regulations announced earlier this year do not permit a
single vendor to account for more than 25% of sales of an online
marketplace where foreign money has been invested.
Amazon, Flipkart and other similar marketplaces have to comply with
this guideline by March 31, 2017.
Over the last few months, Cloudtail has almost stopped selling mobile
phones. Smartphones constituted the largest category of ecommerce sales
and formed a big part of Cloudtail’s overall sales in previous years.
But it continues to sell Amazon private labels in India.
An Amazon spokesperson said the company has put a process in place to
assess the performance of the sellers on the platform and update
sellers if they are close to or about to exceed the 25% threshold.
“Cloudtail is one of the 140,000 sellers that sell on the Amazon.in
marketplace. Our marketplace has grown tremendously in the last three
years, and sellers have seen growth in business. Our continued belief is that a robust marketplace cannot be built on a
single seller focused strategy. We have a robust platform which is open
to all,” said the spokesperson. “We have and we will continue to
operate within the parameters of the laws and policies of India as we
do in each country we operate in.”
Amazon India’s largest rival Flipkart was also heavily dependent on a
key vendor, WS Retail, for over three-fourths of its sales until two
years ago. But it has gradually reduced its dependence on WS Retail and
claims it has moved towards a pure marketplace model which can allow
over one lakh sellers to compete on the portal within nearly 80
India is one of the fastest growing markets for the US etailer and its
founder Bezos has pledged to invest $2 billion in local operations.
Last month, it invested Rs 2,100 crore in its main India unit, taking
total capital invested in Amazon Seller Services to over Rs 7,000 crore
in the last 12 months.
The country’s ecommerce market is expected to grow to $103 billion by
2019-20 from $26 billion now, according to Goldman Sachs.
Amazon expects India to overtake Japan, Germany and the UK to become
its largest overseas market, besides becoming the quickest to reach $10
billion in gross merchandise value in the company’s history.
It’s showing in Amazon’s performance already. Amazon Seller Services
has more than doubled its revenues in the year ended March. It earns
its revenues through commissions, advertisements and shipping fees that
they charge to sellers.
“Being a third-party market has caused a lot of invention on our side.
The team in India has been very creative on whenever they find a
roadblock or something that has not existed in another country, they
create it themselves, whether from delivery stations to working with
small merchants,” Brian Olsavsky, CFO at Amazon-.com, told investors in
October this year.
in The Economic Times)