Around 1,000-1,200 employees from Cloudtail will join Amazon India, and the process will be completed by the end of May
Cloudtail was established in 2014 and is the largest seller on Amazon India, delivering revenue of INR 16,639 Cr, with a profit of more than INR 182 Cr in FY21
Cloudtail is shutting down since the latest ecommerce norms do not allow an entity running an online marketplace and its group companies to own equity in any of the sellers on the platform or have control over their inventory
After completing the takeover of the parent firm, Prione Business Services, of its largest seller, Cloudtail, Amazon India will absorb all the employees of the etailer.
Around 1,000-1,200 employees of the joint venture between Amazon India and Infosys founder NR Narayana Murthy’s Catamaran Ventures will benefit from the uncertainty being cleared, a source told ET.
According to the source cited above, Prione CEO Pankaj Jathar informed the company employees about the transition plan on April 12.
This transition will be completed by the end of May.
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For now, the process of onboarding employees from Prione has started, and according to the source cited by ET, Amazon India has hired First Advantage, a third-party company, to conduct background checks on the incoming employees. Also, Prione has also maintained that its Langford Town office in Bengaluru will continue to function.
Cloudtail was established in 2014 and is the largest seller on Amazon India.
However, owing to the latest norms that do not allow an entity running an online marketplace and its group companies to own equity in any of the sellers on the platform or have control over their inventory, it is being shut down.
Amazon India already held a 24% share in the JV, but in December 2021, it received permission from the Competition Commission of India (CCI) to go through with acquiring the rest of Prione.
Cloudtail has been a key factor in Amazon’s success in India. That point is made all the more clear by having a look at the financials of the etailer. In FY21, Cloudtail’s revenue grew by more than 45% to reach INR 16,639 Cr, with a profit of more than INR 182 Cr.
The Confederation of All India Traders (CAIT) secretary-general Praveen Khandelwal also said that Cloudtail shutting down will not impact vendors.
“Cloudtail was a preferential seller on Amazon. While Cloudtail itself is a seller, it does not have a series of sellers. So, it hardly makes any difference whether the company is selling Amazon products or not. When Cloudtail will not be a seller anymore on Amazon after their agreement expires, then the ecommerce platform will find other preferential sellers,” Khandelwal said.
Right now, the etailer is in the process of shipping off its current inventory to other etailers. These include VRP Telematics, Rocket Kommerce and Cocobulu Retail.
It has also sent contract termination letters to its vendors. The notice has informed vendors that Cloudtail would stop listing and selling products on the Amazon marketplace in the near future and that it will stop handing out purchase orders from April 18.
The entire acquisition has not been without its share of controversy.
After the CCI’s green light, CAIT filed a petition with the CCI to block Amazon’s acquisition of Cloudtail, one of the largest sellers on the platform.
“Essentially, Amazon holds a 24% stake in Prione as of today. However, by acquiring the shares of Hober Mallow, Amazon and its affiliated entities would have a 100% stake in Prione,” says the petition filed by CAIT.
The petition alleged that some of the top sellers on the ecommerce platform are somehow connected to Amazon through common investors, directors, and shareholders and that Amazon gives these sellers an undue advantage with vested interests in mind.
Most of these allegations were earlier brought up in a Reuters report that the petition quotes. According to the report, only about 33 Amazon sellers made up more than one-third of the sales volume on the platform.
Cloudtail is not the only JV-based etailer that lists on Amazon, however. In 2017, Amazon India entered into a JV with Patni Group, forming Frontizo Business Services. Though Frontizo provides customer support services to Amazon India, it has a very well-known subsidiary in the name of Appario Retail.
Appario is one of the largest sellers on Amazon India, reporting revenue of INR 14,628 Cr in FY21, with a profit of INR 54 Cr.
Cloudtail’s departure, thus, casts a shadow of doubt over Appario’s existence as well.