Amazon is negotiating terms with the family offices of prominent business families in order to create more merchant entities that will act as sellers on its India-based marketplace, according to three people aware of the development. Among those who have been approached are Burman Family Holdings, the strategic investment arm of the Burman family, which owns consumer company Dabur and Infosys co-founder Kris Gopalakrishnan’s family office, the sources told ET.
“Talks are continuing with the Burman family and a deal could get hammered out in the next couple of months,” said one person cited above.” Discussions with the other groups have reached an impasse,” the person added.
Gaurav Burman, director of Dabur India declined comment while a representative for Amazon said, “we do not comment on speculations”.
In an email response to ET’s queries, Kris Goplakrishnan wrote, “I have no current discussions with Amazon.”
The proposed joint venture is expected to be similar in function to Cloudtail India, the largest seller on Amazon, which is a 100% owned subsidiary of Prione Business Services, a joint venture of Infosys co-founder Narayana Murthy’s Catamaran Ventures and Amazon Asia. This entity was created in 2014 and enjoys preferential rates and fees on the Amazon India marketplace, being the only Platinum seller remaining on the platform.
While the exact structure of the deal is unknown, the announcement of the venture is a fortnight to a month away, said the sources quoted above.”Until the discussions on GST settle down, Amazon India will not announce the venture,” said a partner at one of the entities which works closely with Cloudtail.
Analysts are of the view that the formation of a captive selling entity will help Amazon control inventory and customer experience. “Cloudtail has been doing well. These ventures help Amazon comply with the DIPP norms and exercise greater control over inventory, manage customer experience and comply with the regulations of GST for tax collection at source,” said Satish Meena, senior forecast analyst at Forrester Research.
In March 2016, the Department of Industrial Policy and Promotion (DIPP) capped the sales originating from a single vendor on a marketplace at less than 25%. With GST coming into effect it would be easier to trace the sales to the entity and hence creation of another entity will aid the marketplaces in complying with the norms, said Meena. Cloudtail India reported a 300% increase in revenues to Rs 4,591 crore in FY16 while losses fell marginally to Rs 30.2 crore from Rs 31 crore the previous year, according to documents filed with the Registrar of Companies.
“For family offices, this is a better investment opportunity as compared to investing in a marketplace directly due to better returns,” said Meena of Forrester.