Amazon seller Cloudtail set to log out of food biz: Report

Cloudtail India Pvt. Ltd, which until recently was one of the largest sellers on e-commerce site Amazon India, will reportedly no longer source and sell locally-procured food items.

Citing two people it did not name, The Economic Times reported that Cloudtail is likely to have made this decision in light of Amazon’s move to ramp up sourcing of locally-produced food items through its food and grocery retail arm, Amazon Retail Pvt. Ltd.

However, the report added that Cloudtail, in which Amazon has a stake, is on-boarding independent vendors to sell imported food products as the norms only allow the Seattle-based e-commerce major to directly offer locally-produced and packaged items.

Email queries sent to Cloudtail chief executive Sumit Sahay did not elicit a response while Amazon declined to comment on the grounds that it cannot speak on behalf of Cloudtail. Sahay was previously the director of category leadership at Amazon before he took charge of Cloudtail in 2017. A specific query related to the nature of association between the two entities remained unanswered.

The development comes after a recent revision in the norms for foreign direct investment (FDI) in e-commerce that were issued last December. The government notification barred companies from selling products via vendors in which they have an equity interest.

Subsequently, a government clarification in January stated that food retailers with FDI can continue to sell through e-commerce. This meant that food retail was kept out of the purview of curbs related FDI in e-commerce, which have been in force since February 1.

Earlier this week, Amazon Retail raised Rs 240 crore ($34.7 million) from Amazon Corporate Holdings Pvt. Ltd, Singapore, and Amazon.com Inc., Mauritius amid efforts to double down on the segment. 

In February, Amazon temporarily de-listed Cloudtail after the government refused to extend the February 1 deadline for e-commerce companies to adhere to the new rules. It even removed all listings of its private brands across several categories.

However, Cloudtail subsequently resumed selling its products on Amazon after media reports suggested that it underwent a restructuring of ownership to comply with the new FDI policy. Cloudtail is no longer a group company of the marketplace, and hence free to sell in compliance with the new FDI rules.

Under the new structure, Infosys co-founder NR Narayana Murthy’s family office increased its stake in Prione Business Services, the parent of Cloudtail, from 51% to 76%. Correspondingly, Amazon Asia brought down its holding to 24% from 49%.

Cloudtail is also believed to be exploring listing its products on other online marketplaces including Snapdeal and IndiaMart and may launch an independent website as well. However, the company will not sell products on the marketplace of Amazon’s main rival Flipkart.