India and Amazon Tie Contrived Knots

March 8, 2021

Small businesses in India have been accusing Amazon of shady business practices for some time. Now, a report from Reuters has exposed the company’s strategy to circumvent Indian regulators. Fossbytes discusses the report in, “The Great Amazon India Document Leak: All You Need to Know.” We’re told one internal presentation obtained by Reuters blatantly urged workers to “test the boundaries of what is allowed by law.” Not a good look, Amazon. Journalist Manik Berry writes:

“According to the report by Reuters, Amazon has been bending rules just enough to not get into legal trouble in India. For instance, the Indian FDI (foreign direct investment) rules prevent Amazon or other e-commerce retailers to control inventory in India. This means Amazon can be the platform where buyers meet sellers but it cannot control how the sellers sell things. However, the report says Amazon found a way to control the inventory. …
“Amazon’s internal documents reveal the creation of a ‘Special Merchant (SM)’ in 2014. This special merchant, namely Cloudtail, is one of the biggest sellers on Amazon, accounting for over 40% of the platform’s sales. Cloudtail was created as a collaboration between Amazon and the Infosys founder, N.R. Narayana Murthy. Amazon wanted it to control more than 40% of sales on Amazon India. This would’ve made it a $1 billion business, whose profit would, indirectly, go to Amazon. What’s alarming is that Cloudtail is created and controlled by Amazon, which means it directly flouted the Indian FDI rules.”

The report also reveals that about a third of Amazon India’s sales come from only 33 sellers. It seems the company has been providing those select few with support and promotion, giving them an unfair advantage. The leaked docs suggest this practice is resulting in losses for the other 66%. For more details, we direct readers to the extensive Reuters article.

Amazon is still the Bezos bulldozer. Perhaps the new driver is a streak of cleverness lacking when Mr. Bezos pulled the levers?

Cynthia Murrell, March 8, 2021

Written by Stephen E. Arnold · Filed Under Amazon, Business strategy, News

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Stephen E. Arnold monitors search, content processing, text mining and related topics from his high-tech nerve center in rural Kentucky. He tries to winnow the goose feathers from the giblets. He works with colleagues worldwide to make this Web log useful to those who want to go "beyond search". Contact him at sa [at] arnoldit.com. His Web site with additional information about search is arnoldit.com.