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Market Place Vs Inventory Led Model - The Arkrobot Perspective

It is a widely known fact for etailers (Ecommerce retailers), Inventory storing, management, manpower and removing unsold goods is a major challenge. Perhaps it is the critical reason why slowly some etailers have either shut shop or shifted to a market place model. However this move helps to slow down the capital burn rate but does not guarantee profitability and sustenance. If we look at successful Ecommerce retails globally, we are given to understand that both models are successful but the Inventory model does have better margins and control over the supply chain than a market place model.

Following a Market place model also means compromising on the delight of online shopping experience for the customers. It also means lower margins for the etailers and a whole lot of money to be burnt in shipping individual products from various merchant locations (Hence you will see them acquiring logistics companies). The only advantage in a Market place model is that of adding thousands of products and merchants overnight and maintaining that growth rate. This however is a double edged sword where merchants may not be qualified properly that may later spoil brand image of the etailer. End of the day, capital burn rate is slower, the innings goes longer and everyone is happy. Oh wait did we forget somebody? The customer? Oh yes, the customer! Well, you know he has no option but to buy from a marketplace and wait for the product to be delivered whenever it gets delivered. And ya, the customer has to bare with receiving 5 products at five different times of the day or sometimes spread over days. But that’s ok, because marketplace is the only option customer has now.

This is precisely what the Brick and Mortar retail business wants to see happen. Most customers like to buy online because of the convenience factor, better pricing, assurance of quality and the overall experience. I am sure a large percentage of people quit going to the malls and instead buy online for the same reason. But market place model also comes with new problems. Maintaining updated stock information is just too much to ask when it comes to small merchants and manufacturers. Can products be delivered within a day of ordering items? Do the customers come back after a bad experience? What does that do to the brand image of a particular eretailer when such things happen? All these situations point at a larger order fulfillment problem.

That said, the problems of the Inventory led model are real and far more challenging. In that sense it is justified to move towards the market place model for most eretailers. Consider a scenario where Google and Facebook are looking to enter Ecommerce as drop ship market place model. Yes this is happening as we speak! (Read More) If these two online giants make their move, with the help of third party logistics providers, we know the outcome. It is also predicted that many large merchants and reputed manufacturers will also go online with their own stores directly selling to customers in the near future. With third party logistic providers available at anyone's service, this seems a more possible option down the road.

In this context, consider a situation if any one of the large eretailers have a breakthrough in order fulfillment and warehouse automation, especially in the Inventory led model. What happens to the Ecommerce space then? The situation of this kind has already happened in the US in 2006 where a Massachusetts based Robotics Company Kiva Systems came up with a breakthrough technology that made the inventory led model very workable. On realizing its enormous benefits, Amazon was quick to acquire the company at a record $750Mn in 2011 and started building huge fulfillment centers across USA. It is reported to have has hired over 20,000 Kiva robots till date and seems to be a scalable model for the future. (Read More)

Amazon, the world’s leader in Online Retail business has a hybrid model combining Marketplace model and Inventory Led model adapting suitably where it must and also continues to expand its robotic giant fulfillment centers. Few companies can match this online retail giant when it comes to filling massive number of orders especially during the seasonal and festive sales. This is now powered by the Kiva Robots that helps the ecommerce giant fill orders quickly and effectively while still maintaining the highest standards of user experience.

To summarize, it boils down to two core issues in both these models.

Market place model: How can delivery cost be brought down and avoid multiple source shipping without compromising on the user experience. How can pick rates be increased as business expands?

In inventory led model: How can inventory storage costs be cut down, manpower be reduced and space be utilized to its optimum? How can pick rates be increased as business expands?

Whatever the approach to solving this problem, it requires it be scalable as that alone will decide the future growth prospects of the eretailers as they continue to grow and expand. We at iFuture Robotics see that both these models have a common problem of quick order fulfillment. An automated order fulfillment hence must deliver high pick rates in a cost efficient manner.

We developed the technology of Arkrobot to help solve precisely this problem. Arkrobot technology is yet another breakthrough in the field of warehouse Automation. It is a disruptive robotics technology that will help accelerate growth and solve most of the problems of modern fulfillment centre. We believe eretailers in Inventory Led model and marketplace model can build reliable and advanced Automated Fulfillment centers that can solve some of the bottle necks and make them profitable.

Arkrobot delivers products to workers at blinding speeds, reduced labour intensive manpower, savings on energy consumption, security infrastructure and so on. Products related to a single order are accumulated and shipped which leads to customer delight also leading to shipping cost saved for the eretailers. These savings can reflect on the aggressive product pricing on the eretailers websites and increased profit margins.

With Arkrobot’s introduction, it is time to accelerate growth be it an Inventory Led model or a Market Place Model!