Cloudtail India: Cloudtail sends termination notice to vendors

Bengaluru: Cloudtail, one of the largest sellers on Amazon India, has sent out contract termination notices to a bunch of vendors who were working with the firm, saying that it was in the process of ceasing the listing and sale of products on the Amazon marketplace in “near future”.

“In light of the above, Cloudtail proposes to sell/liquidate its existing/residual inventory including the products procured from you. Please also treat this communication as a formal notice of termination of the agreement,” Cloudtail managing director and chief executive Ranjit Babu recently wrote to the vendors. He assured the suppliers to honour all purchase orders raised by it until April 18, 2022.

ET has seen the emails received by multiple sellers.

Emails seeking comment sent to Amazon India and Prione Business Services, which operates Cloudtail, did not elicit any response till the time of going to the press on Monday.

The letter from Cloudtail has caused anxiety among many of the small-scale sellers as they are yet to be told where their current inventory and businesses would be moved to. Cloudtail managers have assured these sellers that they would hear soon from the company, but they did not provide any additional details on the timelines, two such vendors to the company told ET.

“We received the notice last week and tried contacting our respective managers from Cloudtail but there is no clarity as to how the transition will take place,” one of the merchants said. “I am aware that some of the vendors moving a larger volume of goods through Cloudtail have already got new agreements on transfer of business to other seller entities.”

“As per our contracts, they (Cloudtail) had said they will give us a notice before terminating and that has now come. Their managers are saying that Cloudtail has 6,000-7,000 vendors and thus the transfer process for smaller vendors will happen gradually and take relatively longer,” another seller told ET.

ET reported on March 28 about
Cloudtail starting to ship its inventory in top categories like electronics, health and personal care to some of the existing big sellers on Amazon India.

The notice from the Cloudtail CEO marks the first instance of the Prione subsidiary formally informing vendors of shutting Cloudtail.

Prione is a 76-24 joint venture between Infosys founder NR Narayana Murthy’s Catamaran Ventures and Amazon. Amazon has proposed to buy Catamaran Ventures’ stake and the deal has been cleared by the Competition Commission of India.

ET reported on March 12 that
Amazon had internally decided to close Cloudtail’s seller business on Amazon following the clearance from the antitrust regulator.

VRP Telematics, Rocket Kommerce and Cocobulu Retail are among the leading seller firms where Cloudtail is shipping its existing inventory to, ET has reported. Amazon’s decision is because of the current regulations 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 to have control over their inventory.

Amazon, previously, held a 49% stake in Cloudtail, which was set up in 2014 as a joint venture between Amazon and Catamaran. Amazon was forced to trim the stake to 24% in 2019 to comply with foreign direct investment regulations for ecommerce. With CCI’s clearance to Amazon buying Catamaran’s 76% in parent Prione, Cloudtail cannot legally be a seller on the India marketplace of the US etailer.

With Cloudtail formally informing sellers of ceasing operations, it would be a significant end for the seller firm, which played a critical role in the initial success of Amazon in India by moving large portions of orders and delivering them to consumers in one-to-two days.

In the financial year 2021, its revenue increased by more than 45% to Rs 16,639 crore with a profit of more than Rs 182 crore. Cloudtail was credited for shipping over 50% of total sales on Amazon India at one point before the government tightened rules in 2016, stipulating that a single seller cannot account for more than 25% of total sales on an online marketplace.

Similar to Cloudtail, Amazon had set up Frontizo Business Services in a joint venture with the Patni group in 2017. Frontizo is involved in offering customer support services to Amazon India, and its subsidiary Appario Retail is a large seller on the Amazon India marketplace. Appario Retail recorded revenue of Rs 14,628 crore in FY21 with a profit of Rs 54 crore.

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