This research has been initiated in the wake of an article published on www.livemint.com titled ‘B2C definition could roil online marketplaces, dated 04-09-2015.

Before moving ahead, it would be pertinent to put forth the contents of the article in brief. The Indian Industry Department, in order to streamline the ever-growing field of e-commerce, is planning to define the term ‘marketplace’ and also elaborate as to what constitutes retail and wholesale trading on such platforms.

Along with e-commerce and high profile startups, this move of the Government is likely to decide the course of traditional brick-and-mortar retailers who have long complained that these e-commerce marketplaces have made inroads into retail as well and, as such, the business of traditional retailers is being affected.

In addition, the e-marketplaces also get the support from billions of dollars which have found their way into the same in the form of venture capital. This move of the Government has put this foreign funding also at stake.

Marketplaces in question are in the form of websites that connect buyers to sellers offering services such as warehousing, logistics and payments (B2B e-commerce). It is to be noted that foreign investment is allowed in such firms but not in the firms engaged in retail.

An online marketplace is a type of e-commerce site where information about a product of service is provided by multiple third parties whereas transactions are processed by the marketplace operator. Online marketplaces are primary type of multichannel commerce.

The transactions are processed by the marketplace operator and, subsequent thereto, the delivery is effected by the participating retailers or wholesalers.

The ‘marketplace model’ precisely means that the e-commerce company does not own any inventory. They only connect buyers and sellers to transact with each other.[1]

Owing to a large number of retailers and wholesalers in the marketplace offering the same product to the customers, choice and quality of suppliers is wider, availability of the product is more and, it goes without saying that, the prices are more competitive as opposed to a vendor-specific online store.

Since 2014, marketplaces are abundant as customers are more inclined towards organized marketplaces. Difference lies, however, in the fact that some marketplaces provide a wide array of products and cater to the public in general whilst others are consumer-specific and deal with a specific segment of customers. [2]

Qua the functioning of these marketplaces, it should be understood that the discounts by the sellers on the websites are duly compensated back to them by the marketplace and, as such, it tends to be a profitable transaction for both the sellers and customers, in that, the customers are getting to purchase the product on a discounted price and the seller is able to cater to a larger consumer base.

The Industry Department would, inter alia, define as to what would be considered retail e-commerce (B2C) and wholesale trading (B2B) within the marketplace model.

Although, Indian Government is trying to carve out a distinction between the B2C and B2B e-commerce, there is no other country in the world which is doing the same.

Currently, there is no official definition of the marketplace model.


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