Saturday 9 February 2019

‘Ecommerce rules won’t hit Cloudtail volumes on Amazon’

The recent change in ecommerce regulations will in no way impact the transaction volumes of Cloudtail India on the Amazon portal, as those had always been below a quarter of the online retailer’s annual sales transactions, people familiar with the matter said.

Cloudtail, in fact, will derive growth from the expansion of India’s retail market and pick-up in volumes on portals such as Amazon India, they said.

According to statistics, online transactions were 0.8% of India’s total retail market in 2014, and are expected to touch 4.4% this year and expand quickly in the coming years. Ecommerce revenue in India is projected to grow to $150 billion in 2022, a report by Nasscom and PwC had said in August last year.

The new regulations bar any single seller from contributing to more than a quarter of an ecommerce platform’s sales. The updated rules, which came into effect from February 1, also say inventory of a vendor will be deemed to be controlled by a marketplace entity if more than 25% of purchases of such vendors are from the marketplace entity or its group companies.

Cloudtail India is 100% owned by Prione, a provider of services to small and medium sellers across India. Prione was formed as a joint venture between Catamaran Ventures, the family office of Infosys founder NR Narayana Murthy, and two Amazon entities: Amazon Asia Pacific Resources and Amazon Eurasia Holdings. Murthy’s company has increased its stake in Prione to 76% from 51% after the new regulations came into effect.

Cloudtail had always been an India-owned and India-controlled entity and a wholly-owned subsidiary of Prione, the people said. Catamaran nevertheless raised its stake in Prione to remove any hint of violation of ecommerce regulations, they said, adding that the changes had been notified to the Reserve Bank of India as Amazon’s equity comes under the foreign direct investment regulations.

Catamaran increasing its stake in Prione has nothing to do with Cloudtail’s business volumes on the Amazon platform.

Cloudtail, as a seller on Amazon platform, never had any direct equity participation from Amazon, and was already compliant with the new regulations, the people said.

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