After wholesale arm, Amazon's Cloudtail turned profitable in FY17, sellers allege nepotism

Back to back good news for Amazon. After tasting profit for the very first time on Indian shore through its subsidiary Amazon Wholesale, the largest seller on Amazon India platform, Cloudtail has posted a net profit (before tax) of Rs 1.59 crore in FY17.

Cloutail had reduced losses to zero and recorded marginal profit against a net loss (before tax) of Rs 30.25 crore in the preceding fiscal, reveals regulatory filings.

It's a joint venture between Amazon Inc. and Infosys co-founder N.R. Narayana Murthy’s Catamaran Ventures. Amazon’s selling arm has witnessed its revenue jumped by 24 per cent, clocking a revenue of Rs 5,706.2 crore in FY17 compared to Rs 4,591.2 crore in the previous year.

Importantly, AmazonBusiness.in (wholesale arm) had reported a net profit of Rs 2.8 crore in the financial year 2016-2017. The company clocked a revenue of Rs 7,069.8 crore during the same fiscal.

Meanwhile, as the Cloudtail India profit surges, a section of merchants accusing the online marketplace of favorable treatment to a few select sellers. Alleging, gross nepotism, sellers are also planning an appeal in Competition Commission of India on the pretext of violating FDI and preferential treatment.

They explained that normal is charged commission, logistics, storage fee, fixed fee, pick and pack fee, return charges, penalty, and other such charges, which increase the cost of selling on gross sale. The cost of selling on Amazon India for most other merchants is above 20 per cent of net sales on most categories.

However, Amazon has reduced the charges for Cloudtail, which is only 5 per cent of its net sales. While Cloudtail’s sales in 2016-17 increased 24 per cent to Rs 5,706 crore, the commission it pays Amazon India for selling on the marketplace dropped 25 per cent to Rs 315 crore.

"Amazon is clearly subsidising Cloudtail and Appario. We will take this up in a fresh petition with (the Competition Commission of India),” said a spokesperson for the All India Online Vendors Association (AIOVA) talking to ET.

In November last year, Amazon Seller Services, which earns through commissions, advertisements and shipping fees, had announced to register a growth of 41 per cent in FY17 with a revenue of Rs 3,128 crore.

In the past few months, Amazon has invested a total of Rs 4,850 crore into its marketplace arm Amazon Seller Services.

Besides, the Amazon marketplace reported 105 per cent growth in revenues in India in the fiscal year 2017.

The development was first reported by Mint.