In December 2021, when Amazon India offered to buy out Cloudtail, effectively dissolving its largest seller, it marked a significant shift in the e-commerce giant’s modus operandi in the country.
Cloudtail had spent the better part of the last seven years as an effective hack of India’s foreign direct investment (FDI) regulations, which prohibit overseas companies from having their own inventory in multi-brand retail.
Set up as a subsidiary of Prione Business Services, a joint venture between Amazon India and billionaire NR Narayana Murthy’s investment firm Catamaran Ventures, it started by helping merchants selling popular items like consumer electronics, apparel, books, and furniture to get online. Eventually, it became the largest vendor on Amazon India, with over 300,000 sellers under it, including manufacturers, distributors, and third-party sellers. Just two years ago, Cloudtail was responsible for a third of the goods sold on Amazon India, according to Bloomberg Bloomberg Bloomberg Billionaires Bezos, Murthy to End Controversial India Venture Read more .
Today, Cloudtail has come crashing down to earth. In early 2020, India’s competition regulator started cracking down cracking down Reuters Amazon documents reveal company’s secret strategy to dodge India’s regulators Read more on Amazon and its rival Flipkart. This was after smaller retailers alleged anti-competitive practices like deep discounting, exclusive launches of smartphones, and favouring a few big sellers, like Cloudtail.
In June 2021, the Indian government further tightened the noose by issuing a new draft e-commerce policy that proposed banning “flash sales” and putting curbs on private labels. However, industry associations, including those with Amazon and Flipkart as members, have challenged challenged The Economic Times Industry groupings seek major changes in draft ecommerce rules Read more some of the proposals.
That didn’t stop the joint venture with Catamaran from being disbanded in August 2021. Both partners believe the primary business objectives of the JV have been fulfilled, they said in a statement.
Amazon was then effectively left with two choices with regard to Cloudtail—a complete buyout or a complete exit. Amazon chose the former because exiting Cloudtail and listing it as a private seller or taking it public would just put more scrutiny on its operations, says industry expert Satish Meena, who was previously senior forecast analyst at Forrester Research.
However, if Amazon’s buyout proposal is approved by the Competition Commission of India, Cloudtail won’t be allowed to continue as a vendor on the platform.