The new company, Bengaluru-based Dawntech Electronics, is the first such independent well-funded preferred seller that is getting the business of Cloudtail, which earlier this year announced that it would wind up operations by next May. As per Dawntech’s regulatory filings with the Registrar of Companies, Amazon is not a stakeholder.
Amazon is in the process of appointing sellers in other categories to take over from Cloudtail and there too it would not own any stake, the executives said. It will likely finalise a seller to replace Cloudtail in the fashion category next month, said the CEO of a top apparel brand.
Amazon Action Mirrors that of Rival Flipkart
An Amazon India spokesperson said Amazon.in is a pure play marketplace with close to a million sellers from all over India. “Our approach is to enable businesses of all sizes digitally to offer the largest selection to the customers, at great value and with the convenience of fast and reliable delivery,” the person said.
Emails sent to Salarpuria Sattva, its promoters and Dawntech remained unanswered till Wednesday press time.
Amazon’s action mirrors that of rival Flipkart, which is also limiting the share of each seller’s sales on its platform and staying away from having any stake in them.
Both companies have been accused by opponents including small traders of operating front companies to sidestep India’s regulations that bar foreign-owned marketplaces from selling anything of their own. Critics have also been targeting Infosys founder NR Narayana Murthy for his association with Cloudtail – the seller’s holding company, Prione Business Services, is a joint venture between Amazon and Murthy’s Catamaran Ventures.
In fact, the allegations and the possibility of regulatory actions might have been among the reasons why Cloudtail is being wound up, the executives said.
However, Amazon continues to hold a stake in the parent company of another leading seller on the platform, Appario Retail, as per latest RoC filings.
Amazon wants companies that have high capital to become sellers on its platform in place of Cloudtail. For large categories like smartphones, there may be two-three sellers taking over the business and Dawntech might also be one of them, the executives said.
Dawntech has already started sales of Samsung and OnePlus televisions on the Amazon platform.
The executives said Cloudtail has stopped buying from consumer electronics brands from this month and is currently liquidating the existing inventory. It significantly reduced buying of FMCG products and apparel from September.
Cloudtail didn’t respond to an email seeking comment.
Avneet Singh Marwah, chief executive of SPPL which sells Kodak and Westinghouse electronic brands on Amazon, said his company will start business with Dawntech from December and the business terms remain the same as those with Cloudtail.
As per a recent document from ratings firm ICRA, Dawntech is supposed to primarily sell mobile phones under the electronic goods category.
“However, Dawntech’s current balance sheet cannot support operations at the scale on which Cloudtail has been operating and a significant infusion of capital is required,” said business intelligence firm AltInfo’s founder, Mohit Yadav, who analysed the RoC filings.
The ICRA document noted that Dawntech intends to raise Rs 150 crore as working capital and being a part of the Salarpuria Sattva Group, it enjoys significant financial flexibility by way of support extended from the group and its promoters. It said Dawntech is a special purpose vehicle of the Salarpuria Sattva Group.