In October 2021, Reuters published a bombshell investigation, alleging that Amazon was making knockoffs of products by Indian sellers on its website and selling them under its own labels. An earlier report had further alleged that Amazon India’s “special merchants” Cloudtail — a joint venture with Infosys founder N.R. Narayana Murthy’s Catamaran Ventures — and Appario— a joint venture with Patni Computer Systems co-founder Ashok Patni — accounted for 35% of sales on the website by early 2019.
It was a massive embarrassment to the company, and, in August last year, Amazon said that it was shutting down Cloudtail. Ideally, this would have meant more business going to small and medium businesses that use Amazon, but interviews with at least eight sellers and representatives of small business associations suggest that nothing has changed for them. In fact, many Indian sellers believe that selling via Amazon can never be a profitable option for them, which makes the e-commerce platform a threat.
Navneet Pathak, joint general secretary of the All India Mobile Retailers Association, an industry body representing 150,000 mobile retailers, believes Amazon’s steep discounting makes it impossible for small and medium businesses to make money through the platform. “Amazon burns cash to get hold of the market. Small retailers can’t afford to do that. Small retailers are in survival mode,” Pathak told Rest of World. “The government needs to come up with a comprehensive e-commerce policy or else small retailers will be completely wiped out.”
Praveen Khandelwal, general secretary of the Confederation of All India Traders, alleges that Amazon uses customer data to understand the demand for products on its website and replicates them under its own private labels.
“Amazon sells thousands of products under its private labels,” Khandelwal, whose industry body represents 80 million small and medium businesses, and 40,000 trade associations, told Rest of World. According to its website, Amazon runs more than 12 private labels in India, including Amazon Basics, Solimo, Vedaka, Presto, Myx, Symbol, and Jam & Honey, among others. These labels sell everything from women’s and kids’ clothing to cheap electronics and household items like dry fruits, pulses, and pickles.
The Reuters findings were based on internal documents from 2016. Since then, Amazon founder Jeff Bezos (2020) and a member of its general counsel team (2019) testified at a U.S. congressional hearing that this was not happening, although some of the brands mentioned in those internal documents (e.g., Solimo) still exist.
An Amazon India spokesperson told Rest of World that the company policies strictly prohibit the use of seller-specific data for the benefit of any seller. “This policy applies uniformly … to all our employees — our internal teams receive regular training on its application and we thoroughly investigate all allegation[s] of individual misconduct that could be in violation of these policies.”
Some Indian retailers and traders told Rest of World that they believe Amazon has simply divided Cloudtail’s business among newly set up firms, and continues to promote its private labels. In August, The Economic Times reported that a number of new firms that have taken up Cloudtail’s business are run by former Cloudtail executives.
“Cloudtail isn’t a company, it’s a business model. The company gives [an] unfair advantage on the marketplace to certain sellers,” a former seller on Amazon, who did not wish to be named due to fear of losing business, told Rest of World. “So while Amazon claims it has over a million sellers on its website, in reality, apart from the big sellers, only 5,000 to 10,000 are able to generate enough sales to keep things going on the platform.”
For years now, Indian traders and industry bodies have accused Amazon of unfair trade practices like predatory pricing, deep discounts, and preferential treatment to certain sellers. As a sign of goodwill, during his visit to India in 2020, Bezos committed a $1 billion investment toward helping small and medium businesses digitize. Amazon claims it has digitized over 4 million Indian businesses, and has vowed to digitize 6 million more by 2025.
According to several sellers, these efforts have not done much to help small businesses, many of whom are disappointed in the Seattle-headquartered company. Some small sellers told Rest of World that they are now looking to launch their own websites, while others have simply lost faith in the e-commerce model.
Om Prakash, a furniture manufacturer and shop owner from New Delhi, was listed by Amazon in its local shops initiative and started selling on the platform in 2020. In the first few years, his sales quadrupled as he received orders from almost all parts of the country, Prakash told Rest of World. But lately, he says, sales haven’t been the same. He only gets a few orders every month from Amazon. He said that between paying a 16% fee to Amazon and managing shipping charges, there is hardly any profit left.
“Earlier we were selling swing chairs for 8,000 rupees [$99] apiece and we had 10-15 orders coming per week. Now the same item is available for 5000-6000 rupees from other sellers. I don’t understand how those guys are able to sell it so cheap,” Prakash said. Brick-and-mortar shop owners like Prakash don’t know that Amazon sells products by itself, and do not have the tech capabilities to understand which sellers are taking away their business.
Pravin Shaikh, who sells cosmetics and beauty products under the name Gorgeous Princess Beauty Center, also had early success when she started selling on Amazon in 2020 — the company even helped her set up a digital storefront for her business without any charges. But the success was short-lived, and her daily online orders have now slumped to 2-3 orders, which bring in not more than 300-400 rupees ($3-$5). “I’m still on Amazon, we’ll see how it goes but for now it’s not that great,” she told Rest of World.
Apoorve Mathur from Uttar Pradesh, who owns a women’s wear brand, also tried his luck on Amazon when he started his business in 2018. He told Rest of World that he received only a handful of orders from the e-commerce platform, most of which had been from friends and family members. Mathur said Amazon offered him a “Fulfillment By Amazon” option, a system by which Amazon handles shipping and delivery on behalf of sellers. But, at the time, Mathur, couldn’t afford to ship all his inventory to Amazon. “I don’t think you can build a brand on Amazon, which is the only way a small business can really grow in the fashion industry,” he said.
Illyas Khan had an almost similar experience when he started a small dry fruit packaging company in Kashmir in early 2021. He had listed himself as a seller on Amazon just as he started his business. It was his first time selling anything online. “I didn’t know how to sell online. Amazon, being one of the biggest e-commerce platforms in the country, seemed to be a good place to start,” he told Rest of World.
Just a month after launching his business, the Indian government announced a Covid-19 lockdown. Like most small business owners, the 32-year-old from Kashmir was worried about the potential impact on his revenue, but he was hopeful that his Amazon sales would tide him over. “We had almost 800 boxes of walnuts and other dry fruits packed and we hoped if we work on our Amazon account, we could at least sell them,” he said.
But for months, Khan didn’t receive a single order on the e-commerce platform.
At first, he thought it was his own fault, so he contacted Amazon’s seller services for help and watched hundreds of videos on how to successfully list products on the portal. Khan changed the keywords on his products, and even reduced his prices. Nothing worked. And then, he realized the problem: “When you search for dry fruits on Amazon, it shows you products that it [Amazon] owns or products that have been sponsored. Our product was buried deep in the search results for anyone to find organically.” In 2019, an Amazon representative told a congressional subcommittee that its algorithm did not take into account whether a merchant was a private label sold by Amazon or had purchased ads.
Khan says he has moved away from Amazon, but he understands the future is e-commerce. So, he is in the process of setting up his own website and uses social media to get customers. “We have had a lot more success using social media to market our products,” he added.