INVESTMENT MODELS IN E-COMMERCE

INVESTMENT MODELS IN E-COMMERCE

Subject:  Economy

Context: India is considering revising its foreign investment rules for e-commerce, three sources and a government spokesman told Reuters, a move that could compel players, including Amazon.com Inc., to restructure ties with some major sellers.

Concept:

• It is a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet.
• In India, there are three types of e-commerce business model:

Inventory base model of e-commerce

Marketplace base model of e-commerce

The hybrid model of inventory based and marketplace model.

Marketplace and Inventory-Based Model

• Marketplace based model of e-commerce means providing an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between the buyer and seller.
• In a marketplace model, the e-commerce firm is not allowed to directly or indirectly influence the sale price of goods or services and is required to offer a level playing field to all vendors.
• Inventory based model of e-commerce means an e-commerce activity where the inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

FDI guidelines for e-Commerce

• In India 100% FDI is permitted in B2B e-commerce, however, No FDI is permitted in B2C(Inventory based ) e-commerce.
• 100% FDI under automatic route is permitted in the marketplace model of e-commerce, while FDI is not permitted in inventory based model of e-commerce.