Amazon prioritizes sellers on its marketplace, hurting small retailers
Small Indian retailers and trade associations have accused Amazon of foul play for years. They have maintained that Amazon prioritizes sellers on its Indian marketplace. In fact, in the recent complaint to the Competition Commission of India, the Confederation of All India Traders (CAIT) had alleged that Amazon involves in predatory pricing and prioritizes sellers on their marketplace.
And for years Amazon has claimed that it runs a transparent online marketplace which treats all sellers equally. That claim has just been laid bare, courtesy a Reuters report, which suggests that Amazon helps a small number of sellers to make gains by doling discounted fees and also helping them with special deals with big manufacturers. The report is based on Amazon’s internal documents from 2012 to 2019, that Reuters was able to access.
The Amazon Story
Amazon is one of the biggest e-commerce platforms in India. As per Forrester Research, Amazon reached almost $10 billion in sales in 2019. The internal documents reveal that 33 Amazon sellers accounted for about one third of the value of all goods sold Further, two merchants in particular accounted for around 35% of the platform’s sales revenue in early 2019. Amazon has indirect equity stakes in those two merchants. Collectively, this means that 35 sellers on the Indian e-commerce marketplace accounted for around two-thirds of its online sales. (Amazon has more than 4 lakh sellers)
The Indian market is unique and the foreign investment policy/ e-commerce rules do not allow an e-commerce marketplace to own an inventory and directly sell to the consumer. To circumvent this, Amazon entered into a joint-venture with Infosys founder Narayana Murthy and created a seller named Cloudtail. The JV had a sales share of 47% in 2016. But then the Government of India tweaked the foreign investment rules and capped online marketplace sales from a single seller at 25% of total sales. To retain the lion’s share of sales, Amazon moved sales of mobile phones from Cloudtail to a new Indian entity ‘Amazon Wholesale’. This entity would in turn sell mobile phones to selected sellers who would sell them on their marketplace.
A similar entity, Appario retail was erected in 2017. The internal documents suggest that both Cloudtail and Appario receive a subsidized fees benefit. They also receive Amazon’s global retail tools for inventory and invoice management.
Amazon stands by its claims
Amazon has once again reiterated that it does not give preferential treatment to any seller on its marketplace. It also maintained that it has “always complied with the law and it treats all sellers in a fair, transparent, and non-discriminatory manner, with each seller responsible for independently determining prices and managing their inventory.”
On its Twitter account the company tweeted:
“In last several years, there have been (a) number of changes in regulations; Amazon has on each occasion taken rapid action to ensure compliance. The story therefore seems to have outdated information and doesn’t show any non-compliance.”
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