- 14-Sep-2025
- Elder & Estate Planning law
E-commerce has revolutionized the way we shop online, with two prominent models dominating the market: the marketplace model and the inventory-based model. These two models differ significantly in terms of ownership, operational structure, and consumer experience. Understanding these differences is crucial for both businesses and consumers navigating the digital retail landscape.
In this model, the platform acts as an intermediary between buyers and third-party sellers. The platform doesn't own the products but facilitates the exchange of goods. Examples include Amazon, eBay, and Flipkart. The platform earns through commission on sales.
In this model, the e-commerce platform itself owns the products and sells them directly to consumers. The company manages its own stock, supply chain, and distribution. Examples include Walmart's online store and Reliance's digital retail business.
The marketplace does not own the inventory. Third-party sellers list their products, and the platform facilitates the transaction, handling payments and sometimes logistics.
The platform owns and stocks the products, managing the entire inventory from warehousing to sales.
Multiple sellers list their products on a single platform. The marketplace doesn't control pricing, product descriptions, or availability.
The platform itself lists and sells products it owns. It controls pricing, stock levels, and product details.
Since the platform acts as an intermediary, it has less operational control over the products. However, it has more flexibility to scale quickly as it doesn’t need to manage stock or logistics for all products.
The platform has complete control over its inventory, which includes stocking, quality control, pricing, and logistics. This can lead to better management of product quality but also requires more operational investment.
The customer experience can vary because products come from different sellers with different pricing, shipping policies, and service standards. However, the platform usually provides customer support and manages returns and refunds.
The platform controls the entire customer experience, from product quality to shipping and returns. This often leads to a more consistent experience.
Foreign Direct Investment (FDI) regulations allow 100% FDI under the automatic route for marketplace platforms, but the platform cannot own inventory or directly sell goods. It can only facilitate third-party sales.
FDI regulations restrict 100% foreign investment in inventory-based models unless certain conditions are met, as the platform directly sells its own goods, which can lead to greater foreign control in the retail market.
The platform earns through commissions, listing fees, advertising, and subscription services, but it doesn’t generate revenue from selling products directly.
The platform generates revenue by selling its own products, with profits made from the markup on these goods.
Logistics are handled by third-party sellers, though the marketplace may offer fulfillment services (like Amazon Fulfillment). Delivery times and quality of service may vary.
The platform is directly responsible for warehousing, packaging, and delivering products, ensuring a more uniform logistics experience.
Lower investment in infrastructure, wider product variety, and a larger pool of sellers. Ideal for consumers who want variety and competitive pricing.
Variability in seller quality, potential fraud risks, and inconsistent customer service.
Greater control over product quality, better customer experience, and uniform pricing. Suited for companies that want to control their brand and product offerings.
Higher inventory costs, risk of unsold stock, and complex supply chain management.
Marketplace platforms must adhere to consumer protection laws and provide transparency in product listings, return policies, and dispute resolution processes.
Consumers can file complaints with the Consumer Forum or National Consumer Helpline if they experience issues like misleading advertisements, defective products, or non-delivery.
The platform must ensure that products meet the advertised quality and deliver on time. Consumers can seek refunds or replacements if products are defective or not as described.
They also have legal rights under consumer protection laws like the Consumer Protection Act, 2019.
Choose Reputed Platforms: Whether marketplace or inventory-based, opt for trusted e-commerce platforms that have solid customer feedback and ratings.
Check Product Listings: Review seller ratings, return policies, and shipping costs when shopping on marketplace platforms.
Secure Payment Methods: Use secure payment gateways to safeguard your financial details during transactions.
Track Orders: Always track your orders and save transaction receipts for reference in case of disputes.
Read Return and Refund Policies: Before making a purchase, check if the platform has a clear and fair return/refund policy, especially in the case of marketplace models.
Contact the platform’s customer service, provide proof of purchase, and request a replacement or refund. The platform will mediate between the seller and the consumer.
Reach out to the platform directly. As the platform owns the inventory, it will handle the return and ensure the customer receives a replacement or refund.
If the platform does not resolve the issue, escalate the matter to the Consumer Forum or file a complaint with the National Consumer Helpline.
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