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Marketplace vs Inventory Model

This topic is applicable to Marketplaces in India.

There are two models of E-Commerce defined in Indian FDI policy.

Marketplace model

Marketplace model of e-commerce means providing an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. 

In this model:

  • Marketplace acts as a medium for the seller to sell his goods to buyers.
  • Invoices are issued directly from Seller to buyers.
  • Seller is responsible for the collection of taxes on the products and services that it is selling.
  • Marketplace charges a fee/commission to sellers on items listed/sold on the marketplace and charges service tax on those fees.
  • Examples: Ebay, Shopclues

Inventory Model

Inventory model of e-commerce means an e-commerce activity where the inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

In this model:

  • Marketplace purchases the goods from the sellers and sells them to customers directly. 
  • Marketplace issues purchase order to the sellers and seller issues invoices against the purchase orders.
  • Marketplace issues invoice directly to customers for the products sold. 
  • Examples: Jabong

Hybrid Model

The Hybrid model is a mix of Marketplace and Inventory led models. The model works similar to Marketplace model except that in this model the marketplace offers sellers fulfilment services which include inventory storage, packaging and delivery but sellers are free to choose between self-fulfilment and marketplace-fulfilment.

Multi-seller implementation on StoreHippo

Multi-seller marketplace implementation on StoreHippo uses Marketplace model of E-Commerce.