Retail and consumer goods
First-party (1P) versus marketplace (3P)
Selling your own stock versus letting other sellers sell on your platform for a fee.
Facts checked against sources onWhat does First-party (1P) versus marketplace (3P) mean?
In a first-party (1P) model, the e-commerce company buys stock, holds it and sells it to shoppers, so it records the full sale as revenue and earns the retail margin, but it carries the inventory risk. In a third-party (3P) marketplace, independent sellers list their goods, and the platform earns commission, fees, advertising and often fulfilment charges, recording only those as revenue. Example: a 100 order in 1P gives 100 of revenue and perhaps 25 of gross profit; the same order in 3P gives 15 of commission revenue, nearly all of it gross profit. Amazon mixes both. In India, foreign direct investment rules allow foreign-owned e-commerce companies to run only the marketplace model.
Where does it come up in case interview prep?
- Channel economics across industries: direct, retail, marketplaces, distributors and sales teamsLesson in Customers and growth: the economics of marketing
- How e-commerce and marketplaces make moneyLesson in E-commerce, marketplaces, and quick commerce
- E-commerce players, trends, and how to crack the casesLesson in E-commerce, marketplaces, and quick commerce
- Beauty economics: from the shelf price to the brand's profitLesson in Beauty and personal care: cosmetics, skincare, haircare and fragrance
Related terms
- Gross merchandise value (GMV)The total value of goods or services sold through a platform.
- Take rateThe share of each transaction's value that a platform keeps as revenue.
- Working capitalCash tied up in running the business day to day.
- Gross profit and gross marginRevenue minus the cost of goods sold, as an amount or a percent.
- Like-for-like sales (LFL)Sales growth from stores open in both periods, leaving out new and closed stores.
- Sales per square metreStore sales divided by selling space: how productive the space is.
- Shrink (shrinkage)Inventory lost to theft, damage, errors or spoilage.
- MarkdownA lasting price cut to clear stock that is not selling.
Learn it in context
See First-party (1P) versus marketplace (3P) at work in a lesson from Customers and growth: the economics of marketing, with checks as you go.
Spotted something wrong or out of date? Report a mistake. We check every report and correct the page.