Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.
The main feature of inventory model is that the customer buys the product from the ecommerce firm. He manages an inventory (stock of products), interfaces with customers, runs logistics and involves in every aspects of the business.
Alibaba of China is following the inventory model.
In this model, Retailers or Company sources the products directly from Brands or Sellers and then Stock these. There are no multiple sellers selling one product. The Seller is the E-commerce company and invoice is issued to the customers on the company’s name.
This model is considered good if you have enough money to buy all the stuff at wholesale price and then sell it forward according to your own set price. Yes, here you can earn a more profit but still, you have to stock everything. BigBasket, YepMe, Jabong etc., are the examples of an Inventory-led model.
Shopping websites where online buyers choose from among products owned by the online shopping company or shopping website take care of the whole process end-to-end, starting with product purchase, warehousing and ending with product dispatch. A few examples of such are Jabong, Yepme
According to the FDI policy, “Inventory model of ecommerce means an ecommerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.”
Advantages
- Speedier delivery
- Better quality control
- Best customer experience and trust
Disadvantages
- Difficult to scale (but not impossible)
- High fixed costs
- Restricted cash flow
