Hybrid Marketplaces
Evolution of hybrid online marketplaces – A perspective
The ecommerce sector in India has been growing at unprecedented rates in recent years. With revenues touching US$1.2 billion in 2012 and adoption surging among Indian consumers, it has become an ideal breeding ground for start-ups. The successes of companies like Flipkart, Myntra and Jabong lend credence to the massive potential of the sector. These companies have traditionally operated as inventory-led “first-party” 1P ecommerce sites. However, Flipkart’s announcement in April, 2013 regarding its adoption of a “Managed marketplace” model as a complement to its existing 1P model highlights an emerging trend among ecommerce companies.
‘Managed marketplace’ model
An online marketplace is a type of ecommerce site where inventory is provided by multiple third party sellers, with the transaction processing handled by the marketplace provider. Such a model has been notably implemented by Ebay in India for about 8 years now, albeit with limited success. But while Ebay’s model involves the individual sellers being responsible for item page design, shipping and customer service; Flipkart intends to leverage its existing infrastructure to handle all these responsibilities, leaving only sales to third-party sellers (3P), thus creating a managed marketplace. Jabong is another company to have introduced the hybrid 1P-3P model.
Motivation
1. Surge in Inventory
India has millions of SME’s who have not yet been able to effectively tap into the online medium because of limited online presence and lack of organized online retail processes. Since the marketplace provider only needs to allocate virtual inventory for the 3P products and not have to worry about physical warehousing, it can expect to see an abundant increase in supply, especially in categories which have a long holding time for products.
2. Established logistics networks
Many Indian ecommerce companies who have traditionally focused on 1P sales
The ecommerce sector in India has been growing at unprecedented rates in recent years. With revenues touching US$1.2 billion in 2012 and adoption surging among Indian consumers, it has become an ideal breeding ground for start-ups. The successes of companies like Flipkart, Myntra and Jabong lend credence to the massive potential of the sector. These companies have traditionally operated as inventory-led “first-party” 1P ecommerce sites. However, Flipkart’s announcement in April, 2013 regarding its adoption of a “Managed marketplace” model as a complement to its existing 1P model highlights an emerging trend among ecommerce companies.
‘Managed marketplace’ model
An online marketplace is a type of ecommerce site where inventory is provided by multiple third party sellers, with the transaction processing handled by the marketplace provider. Such a model has been notably implemented by Ebay in India for about 8 years now, albeit with limited success. But while Ebay’s model involves the individual sellers being responsible for item page design, shipping and customer service; Flipkart intends to leverage its existing infrastructure to handle all these responsibilities, leaving only sales to third-party sellers (3P), thus creating a managed marketplace. Jabong is another company to have introduced the hybrid 1P-3P model.
Motivation
1. Surge in Inventory
India has millions of SME’s who have not yet been able to effectively tap into the online medium because of limited online presence and lack of organized online retail processes. Since the marketplace provider only needs to allocate virtual inventory for the 3P products and not have to worry about physical warehousing, it can expect to see an abundant increase in supply, especially in categories which have a long holding time for products.
2. Established logistics networks
Many Indian ecommerce companies who have traditionally focused on 1P sales