Inventory model of e-commerce
Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT
Meaning
In the inventory model of e-commerce, the online platform owns the goods it sells. It buys stock, stores it and sells it directly to consumers. It works like an online shop that is also the seller. In India, FDI is not permitted in this model. Foreign-funded platforms could otherwise use cheap foreign money to undercut small traders and kirana shops through deep discounts.
Example
Suppose an online company buys 10,000 phones from a maker, keeps them in its own warehouse and sells them on its website at its own price. That is the inventory model. A platform with foreign investment cannot do this in India.
Don't confuse with
- Marketplace model of e-commerce: In a marketplace the platform only connects buyers and independent sellers and owns no stock. There 100% FDI is allowed through the automatic route (no prior government approval).
Related concepts
- Missing middle
- Dwarf firms
- Gazelle
- Industrial cluster
- Agglomeration economies
- E-commerce
- Marketplace model of e-commerce
- Ex-ante regulation of digital markets