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Cloudtail Accused of ‘Preferential Treatment’ to Select Sellers


Cloudtail India is one of the largest sellers of Amazon India and the most trusted and popular online shopping site. In the recent news, it has been heard that Cloudtail India has an insignificant annual financial number. It has cost Cloudtail a lot of trouble as many online sellers have accused the online marketplace and demands of a fair and true judgment against the preferential treatment with Cloudtail. Since 2014, Cloudtail holds a good reputation with Amazon India and has been their one of the main sellers. Amazon India do provide offers on various products such as cash back offers, great Indian sale, Amazon daily offer.

Facts that support the acquisition

There has been an enviable growth in the annual financial number of Cloudtail. In 2016-17, an increase of 24% to $848.9 Million was marked however the amount of commission that it pays to Amazon India has gone down by 25% to $47Mn. Also, a hike of 68% to $380 Million was seen in the Amazon’s Seller Services’ delivery charge. As per the report by All India Online Vendors Association (AIOVA), a seller is charged a number of service taxes which includes logistics, fixed fee, pick and pack fee, penalty and many other such charges that increase the cost of selling the item on gross sale.

Cloudtail India

A spokesperson also mentioned that the minimal cost of selling on Amazon India for most of the merchants is above the margin of 20% in most of the categories. However, it is quite shocking that Cloudtail cost of selling is only 5% of its net sale which is way below the set net sale.

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Justification of Amazon India

However, Amazon India from its end has made it clear that they have no preference for Cloudtail India and they also added that they do not favour any of their sellers since the online marketplace cannot be built by focusing on only one of its sellers. Further, they cleared that they have an equal relationship with all their sellers and doing preferential treatment will not work in their favour at all. Their only job is to support the sellers by providing services and help the leverage India’s economic growth.
Amazon stands firm on its stand of not doing preferential treatment with any of its sellers. In its support, it made man remarkable statements from which it can be said that Amazon is innocent and has nothing to do with this matter. Since, the facts and figures are not in the support of Amazon India, therefore, nothing can be inferred till the truth comes out.

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Crisis in the Online Marketplace

In last few years, many such allegations against the online sites have come up. Many merchants have reported the cases to AIOVA for unfair and unjust treatment against the sellers by the online sites.  Flipkart has also been accused of such treatment where AIOVA wrote to CCI about the “unfair and discriminatory” practice of giving goods to sellers at a discounted price through Flipkart India Pvt Ltd. Due to such kind of activities, the belief of sellers in the online marketplace is deteriorating.
There have been many such related stories of the online world that makes the online marketplace a big chaos not only for the sellers but for the companies too. Like the news of Flipkart making approximately 300 sellers Millionaires in a short span of time. Only in a Four-day sale, Flipkart came up with huge numbers which are a little difficult to digest easily.

To avoid such illegal and false practices, a guideline was issued in 2016 that had put a limit on the percentage of total share a single seller should have. According to this guideline, all the e-commerce platforms had to follow the rule of not giving more than 25% of the total sale to a single seller on an FDI-backed marketplace. Under the platinum seller programme of Amazon India, it offered the sellers lower marketplace fees and logistics costs.

Later on in 2016-17, Cloudtail India had to pay an after-tax of nearly $224K, as per the news reported by Tofler. Last year, the total revenue collection on Amazon India from its marketplace increased to $297.6 Million to $148.3 Million the year before. Overall, revenue at the main unit of Amazon India grew up to 43%, however, losses were also marked at the same time. The losses increased 31% to $720.8 Million.

Many such issues have been in the online marketplace that need to be resolved. The growing anger of the merchant community cannot be taken for granted for a longer time as it will be troublesome for the online marketplace and the digital economy of India will be affected badly. With the trending growth of the e-commerce sites, a subtle way to resolve the problems faced must be found out. The e-commerce companies certainly should take some measures to ensure equal and fair treatment to all the sellers. As the sellers play a vital role, therefore their interests must be taken into consideration to avoid such problems in the future.

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