Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.
Marketplaces are platforms that enable a large, fragmented base of buyers and sellers to discover price and transact with one another in an environment that is efficient, transparent and trusted.
The main feature of the market place model is that the e-commerce firm like flipkart, snapdeal, amazon etc. will be providing a platform for customers to interact with a selected number of sellers. When an individual is purchasing a product from flipkart, he will be actually buying it from a registered seller in flipkart. The product is not directly sold by flipkart. Here, flipkart is just a website platform where a consumer meets a seller. Inventory, stock management, logistics etc are not supposed to be actively done by the ecommerce firm.
The main feature of marketplace model is that it provides a platform for customers to interact with a selected number of sellers. When a customer purchases a product from Flipkart, it means he doesn’t buy it from Flipkart. Actually, he is buying it from a registered seller in Flipkart. The product is not directly sold by Flipkart. Here, Flipkart is just a website platform where a consumer meets a seller.
The Stocking of Product and Pricing is done by the respective sellers and not by the E-commerce website. In this case, there are chances that customers will find different price options and shipping options for the same products, depending upon the seller from whom they choose to buy the product. Inventory, Stock management, Logistics etc are not involved in this model.
It is a true e-commerce marketplace adheres to the standards and directions of a zero inventory model. Some classic examples are Naaptol, eBay and Shopclues. The e-commerce marketplace becomes a digital platform for consumers and merchants without warehousing the products. Marketplaces do offer shipment, delivery and payment help to merchants by tying up with some selected logistics companies and financial institutions.
According to the FDI policy guideline, “Marketplace model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.”
Advantages
- Highly scalable
- Investor-friendly
- Wide product portfolio
- Large number of sellers
Disadvantages
- Difficult to conduct quality checks
- Shipping costs are higher
- Difficult to build customer trust and loyalty
