Amazon is looking at converting Cloudtail and Appario — two of the most prominent sellers on the platform — into wholesale entities undertaking business-to-business (B2B) transactions in order to be compliant with ecommerce FDI rules that came into effect on February 1.
Cloudtail and Appario, in which Amazon holds 49% each, will then sell to a battery of third-party, preferred vendors that will undertake final sales to consumers, said people with knowledge of the matter.
Category managers at the marketplace are in the process of identifying preferred sellers for each channel. They will source products from Cloudtail and Appario, according to executives of several brands and suppliers who work with them. Cloudtail and Appario went off Amazon.in on February 1 since group companies are prohibited from selling through the marketplace under the norms. However, both are selling through Amazon Business in India, Amazon’s B2B marketplace in India.
Walmart-owned Flipkart is compliant with the latest norms and hence there has been no major disruption, experts said. All products, including platform-exclusive ones, are still available, they added.
Wholesale arm Flipkart India Pvt purchases goods from manufacturers and sells to preferred vendors, which make the final sale to consumers. Flipkart has no stake in these preferred sellers.
Products of some leading electronic brands are listed as currently unavailable on Amazon, since they were only sold through Cloudtail and Appario. Amazon’s Echo speakers are available but not from Appario as they used to be.
Another executive said Amazon has still not given up on the idea of offloading stakes in Cloudtail and Appario to comply with the revised norms, thus allowing them to sell directly to consumers.
“The legal teams are finalising the correct structure so that the Indian operation is fully compliant as per the new policy,” he said. “But the stake sale idea has taken a backseat since the wholesale trading route will be a faster process, compliant with the FDI norms and Amazon will continue to enjoy the value in these two entities which are critical for growth.”
Cloudtail and Appario didn’t respond to queries. Amazon said it doesn’t comment on speculation or on behalf of sellers. The remaining 51% stake in Cloudtail and Appario are held by Catamaran Ventures and the Patni Group, respectively.
The government spurned requests by Amazon and Flipkart to extend the February 1deadline. The revised policy bars marketplaces and their group companies from having equity participation in any of their vendors and prohibits them from having control over inventory sold on the platforms.
Executives said Cloudtail and Appario have informed brands that their products will be live on the marketplace very soon. Both have also said that they are not cancelling purchase orders due in February and March.
Cloudtail hasn’t cancelled any orders, said Manmohan Ganesh, COO of BPL, which is available exclusively on Amazon. “We are hopeful to continue selling through Amazon complying with the terms of the new policy,” he said. TV makers TCL and Kodak said they have been assured their products will be live on Amazon soon.
Several brands have also started approaching top third-party sellers on Amazon, Primarc Pecan Retail, to continue selling on the platform. However, the seller is in wait-andwatch mode, said Primarc director Siddharth Pansari.
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