Is there a Silver Lining to Cloud(tail)?
The new e-commerce rules has the entire nation biting their nails. What's going on?
Amazon is in no mood to let its crown of glory slip from its head. In the past year, it has entered the space of autonomous vehicle and cab-hailing with the $1.2 billion acquisition of Zoox (yes, not Zoom). And its recent deal with MGM is going to be nothing but a game-changer (beware, Netflix!).
Well, well. It was also in the news for some wrong reasons.
Its monopolistic practices made it a very strong target for the Antitrust Lawsuit in the United States. Zeroing in on India, it made its way to the newsrooms through Cloudtail India.
Cloudtail India is a joint venture between Amazon Inc. and Infosys’ Chairman Narayan Murthy's Catamaran Ventures. It came to life in 2014, just around the time when Amazon started operating in the country. What was the need?
You see, as per government laws, foreign companies could not themselves be sellers on the platform. But by forming Cloudtail India with Narayan Murthy, it could do that!
In 2015, it became the biggest merchant on Amazon India’s platform generating 40% of the sales in a matter of few months. Well okay, no biggie. But here comes the plot twist by the Government of India (GoI).
In 2016, India revised its e-commerce policy which stated, "e-commerce entities providing a marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain a level playing field." It also capped online marketplace sales from a single seller at 25% of total sales.
Good move, GoI.
But Amazon being Amazon, did a classic Ctrl+C and Ctrl+V and created a new joint venture. Appario, in 2017, backed by the undisputed leader of the IT outsourcing sector, Ashok Patni. What a comeback!
By 2019, Appario and Cloudtail together enjoyed 35% of the online sales. Poor GoI. They did not see that coming, right?
But they were not going to lose face. So they prohibited vendors in which Amazon had >25% equity interest in from selling on the same platform. Sleek.
And so, Mr. Murthy increased his stake in Cloudtail from 51% to 76%.
But, Mr. Murthy is an inspiration for many. His ideals and principles are revered by one and all. So why is Catamaran Ventures linked to this exploitation of loopholes? Why is Mr. Murthy a part of a venture which is the reason for grief for small businessmen?
Here’s the fun fact: Catamaran is backed by an entity called Prione Business Service. Looks like a regular arrangement? Well, hang in there.
Now, Prione has its MD and CFOs as former Amazon employees. So, even though Catamaran has a majority of stake in Cloudtail, it is directly or indirectly 100% Amazon.
Yes, you guessed it right. Mr. Murthy is just the poster boy of the joint venture. Behind the scenes, it's all Amazon.
But why are we talking about this now?
Well, The Indian Sellers Association wrote a letter to Mr. Narayan Murthy requesting him to part ways with Amazon as it was hurting them where it hurts the most: financially.
Why is he doing this? It's still a mystery. (The heart simply refuses to believe that he is still lending his name to the entire circus! No?)
Not only this, Confederation of All India Traders (CAIT) requested Mr. Piyush Goyal for a detailed investigation earlier this year after a scandalous reveal. Here’s the tea for that.
An internal document leaked earlier this year showed that Cloudtail and Appario have a "Special Merchant" status. This included subsidies and access to Amazon global retail tools. This hand-in-glove arrangement might prove to be worrisome in the long run as some big banks are collaborating with Amazon by providing repeated discounts, thus hurting the brick-and-mortar stores.
This brings us to the most important question. What now?
Is Amazon’s “marketplace” narrative being a myth? Because the seller who’s making most of the sales is indirectly Amazon itself!
Accusations of influencing the market rates and predatory pricing reminds us of Amazon all the time.
So, the GoI has again come with its new draft rules. No more unconventional flash sales (yes, everyone is guessing what that is!), no algos to prioritize a particular seller (dunno how GoI will manage that!) and a whole host of other rules that are not very clear right now.
Everyone is biting their nails. All eyes are on the government. What does the future hold?
Well, all we can do is read on….
A big shoutout to Pritika Arora for writing this post.
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