With Cloudtail ceasing to operate and Appario’s future at stake, experts are weighing the impact consumers will feel and predicting Amazon’s next steps.
After the surprising announcement on Monday that Amazon and Catamaran would end their joint venture partnership at Prione Business Services, the owner of Cloudtail, from May next year, two important questions arose: 1) Who will fill the void, Amazon’s largest Seller and 2) Appario, the platform’s second largest seller, will suffer a similar fate.
Why is it important? According to a Reuters Report, Cloudtail and Appario account for nearly 35 percent of sales on Amazon. These two companies are the dominant sellers in popular categories like smartphones, electronics, everyday necessities, and fashion. Without answers to these two questions, consumer welfare will inevitably suffer as product availability and variety on the platform decrease.
Who will fill the void that Cloudtail has left?
Several smaller sellers: “Amazon has already created several smaller sellers and the volume of Cloudtail will now simply shift to them,” Nikhil Varma, Managing Partner of Miglani Varma and Co told MediaNama. Several industry executives confirmed the same thing with the Business hours Amazon will appoint several independent sellers to take over Cloudtail’s business. Amazon is not expected to have any direct or indirect interest in these sellers, and Amazon will only provide assistance to these sellers, the executives stated. This is done to ensure that no single seller is in a dominant position, the executives added.
Brand Authorized Sellers: Amazon has also reached out to some big brands. Three major electronic brands are currently in the early stages to see if they can appoint authorized sellers, the ET report said.
“The end of the joint venture would be a stumbling block indeed, but given the strength it has brought to market over the years since its inception, it would be temporary and it wouldn’t take long for the wrinkles to be ironed out and the Things are back on track, ”Siddharth Jain, co-founder of PSL Advocates & Solicitors told MediaNama.
Will Appario suffer the same fate?
Brief history of Appario: Like Cloudtail, Appario Retail is an Amazon seller in which the e-commerce platform is indirectly involved. When the Indian government changed FDI rules in 2016, which said that an e-commerce marketplace couldn’t get more than 25 percent of its total sales from a single vendor, which at the time was Amazon supposed to do Through Cloudtail, Amazon formed a 51:48 joint venture with Patni Group to set up Frontizo Business Services, which in turn founded Appario Retail. After the government tightened FDI standards in 2018, Amazon reduced its stake in Appario to 24 percent.
How big is Appario? While Cloudtail is the most famous seller on the platform, Appario is just behind. Noisy Reuters Report, while Cloudtail was referred to as “Special Merchant” or “SM” in internal documents, Appario was referred to as “SM2”. Amazon “estimated that the two specialty retailers together would make up about half of the sales on its platform,” the report said.
Cloudtail allegations also apply to Appario: All allegations that stationary retailers and smaller online retailers have made against Cloudtail also apply to Appario. Organizations like the Confederation of All India Traders (CAIT), Delhi Vyapar Mahasangh (DVM), Swadeshi Jagaran Manch (SJM), and the All India Online Vendors Association (AIOVA) have long claimed that sellers like Cloudtail and Appario are preferred when it comes to Amazon are treated by better search rankings and reduced fees.
Appario faces similar external circumstances: “Amazon’s move may, in view of the proposed 2020 changes to consumer protection regulations (e-commerce), prevent the platform’s“ related parties ”or“ affiliates ”from selling on the platform and / or the information received from the platform, among other things to use them to their advantage. It also doesn’t seem to be a coincidence that the announcement was preceded by the Hon’ble Supreme Court’s allusion to the CCI investigation against Amazon. Given the circumstances and the non-renewal of the Cloudtail JV, it is likely that Appario will also face a similar fate as that of Cloudtail, ”Anu Sura, Counsel, PSL Advocates and Solicitors, told MediaNama.
So will Appario also cease operations? It seems that only time (or Amazon) can say for sure. Accordingly Reuters, Amazon is in talks with Appario’s parent company to determine if the joint venture should be renewed next year, and according to unnamed industry executives quoted by Business hours, the decision to withdraw from this joint venture is likely. But just a few days ago, Amandeep Lohan, previously category leader at Amazon India, appointed of the general manager and CEO of Appario Retail for a period of five years, creating uncertainty about allegations that the JV will end.
Why couldn’t Appario suffer a similar fate? If Amazon ends its Cloudtail partnership for reasons other than regulatory pressure and competitive allegations, such as differences with Catamaran, Appario is unlikely to suffer a similar fate. However, experts with whom MediaNama spoke suggested that the former is more likely the reason.
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