An e-commerce revenue model where the seller has control over pricing but doesn't keep products in stock and instead transfers cu…

Question

An e-commerce revenue model where the seller has control over pricing but doesn't keep products in stock and instead transfers customer orders and shipment details to a third-party supplier, who then ships the goods directly to the customer, is called:

1. A. Dropshipping Model (Correct answer)
2. B. Affiliate Revenue Model
3. C. Transaction Fee Revenue Model
4. D. Agency Revenue Model

Correct Answer

Option A — A

Detailed Solution & Explanation

The correct answer is Option A.

Key Points

• In dropshipping, the seller lists and prices products and takes the customer's order, but holds no inventory.
• The order and shipping details are passed to a third-party supplier, who ships the goods directly to the customer.
• The seller's margin is the difference between the retail price they set and the supplier's price.
• dropshipping lowers the seller's capital and inventory risk but reduces control over fulfilment quality and delivery times.

Additional Information

• Affiliate Revenue Model (B): earning commission by referring buyers to another seller's product — the affiliate does not set the price or handle the order.
• Transaction Fee Revenue Model (C): a platform charges a fee per transaction (e.g. a marketplace commission).
• Agency Revenue Model (D): the firm acts as an intermediary/agent bringing buyers and sellers together for a fee.

Exam Tip

• the discriminator is 'controls pricing + no stock + supplier ships directly' — that combination is unique to dropshipping.