Amazon To Delist Seller Cloudtail In A Year, Renews Frontizo JV With Patni Group

SUMMARY

The joint venture with Patni Group-owned Zodiac Wealth Management has reportedly been renewed for a period of three years

Amazon said it will continue to explore new business opportunities with Patni Group in the coming future

Earlier this year, the CCI conducted raids at the offices of Amazon’s sellers Cloudtail and Appario for alleged violation of competition laws

Months after delisting Cloudtail, ecommerce major Amazon on Monday (October 31) said it plans to shut down its another seller, Appario Retail, within the next 12 months.

Appario Retail is one of the biggest sellers on Amazon India and operates under the aegis of Frontizo Business Services, the ecommerce giant’s joint venture (JV) with Patni Group-owned Zodiac Wealth Management.

Amazon also announced extension of its partnership with Patni Group through renewal of Frontizo. According to a report, the joint venture has been renewed for a period of three years.

“Amazon and India’s Patni Group-owned Zodiac Wealth Management LLP have agreed to renew their joint venture, Frontizo Business Services Private Limited. Partners have decided that Appario Retail Private Limited, a wholly owned subsidiary of Frontizo, will cease to be a seller on amazon.in, and amazon.in/business within the next 12 months,” an Amazon spokesperson said.

“The partners will continue to explore new business opportunities, including helping businesses across India to scale up their online presence,” the spokesperson added.

The move to shut down Appario is likely part of Amazon’s bid to prevent any blowback from increased government scrutiny on the ecommerce space. In the past, Amazon has been alleged of giving preferential treatments to some of the sellers and flouting ecommerce norms.

Cloudtail And Appario Under Scrutiny

The move to delist Appario Retail comes months after Amazon shut down another major seller Cloudtail. Earlier this year, the Competition Commission of India (CCI) conducted raids at the offices of Cloudtail and Appario for alleged violation of competition laws.

At the centre of the controversy appear to be allegations accusing Amazon of favouring certain sellers. A media report claimed that Amazon-backed Cloudtail and Appario accounted for 35% of Amazon’s India sales in ‘early 2019.’ It had also noted that a group of mere 33 sellers on the Amazon India marketplace made up nearly two-thirds of the total online sales.

Later, reports also said that the CCI was in possession of certain documents that suggested financial dealings between the ecommerce platform and its preferred sellers. Amazon has also previously been probed by the CCI for its monopolistic policies.

Besides, there were also allegations of Amazon circumventing ecommerce rules in India. Previously, rules barred Amazon and other ecommerce firms from holding and selling inventory directly to consumers. To bypass this, ecommerce players tied up with local companies to operate a maze of joint ventures to sell products.

A case in point were the two largest sellers on Amazon India. While Cloudtail was operated by Amazon in partnership with Infosys cofounder Narayana Murthy-led Catamaran Ventures, Appario Retail was operated in a JV with Patni Group.

However, as stricter ecommerce rules were brought in, Amazon took a major restructuring exercise at these companies, slashing its stake in these vendors and consolidating its other JVs.

It is not immediately clear whether the government’s crackdown on such players has actually yielded any results. Earlier, reports said that many new sellers have sprung up and taken over Cloudtail’s business on Amazon. Interestingly, all of these new vendors are run by former executives of Cloudtail and Appario.

Appario Retail generated revenue of INR 14,628 Cr and a profit of INR 54 Cr in FY21. This is in huge contrast with Amazon which has been burning cash in the country.

Amazon Seller Services, which runs the India-based marketplace, saw its loss narrow to INR 3,649 Cr in FY22 from INR 4,748 Cr in FY21. The marketplace’s standalone revenue soared 32% to INR 21,633 Cr in FY22 from INR 16,378 Cr in the previous fiscal year.

Amidst all this, India continues to be one of the key markets for the ecommerce major. As more and more Indians jump onto the ecommerce bandwagon, the ecommerce space in the country is expected to provide a $400 Bn market opportunity by 2030.