UPSC Prelims 2026 · GS Paper 1 · Question 87

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 :

Correct answer: Option A

Economy

Options

  • (a) Dropshipping Model
  • (b) Affiliate Revenue Model
  • (c) Transaction Fee Revenue Model
  • (d) Agency Revenue Model

Detailed solution

Answer

Option (A) — Dropshipping Model

Explanation
  • Dropshipping is an e-commerce fulfillment method where the seller does not maintain any inventory of the products it sells.
  • When a customer places an order, the seller forwards the order and shipment details to a third-party supplier (manufacturer or wholesaler), who ships the product directly to the customer.
  • The seller retains control over pricing and customer interaction, earning the margin between the supplier's price and the retail price, while avoiding warehousing and logistics costs.
  • Popular dropshipping platforms include Shopify, AliExpress, and Oberlo, making it a low-capital entry point for online retail entrepreneurs.
Statement Analysis
  • Option (a) Dropshipping Model: Correct. It precisely matches the described setup where the seller controls pricing but outsources stocking and shipping to a third-party supplier.
  • Option (b) Affiliate Revenue Model: Incorrect. Affiliates earn commissions by referring customers to other sellers' websites, they do not control pricing or process orders.
  • Option (c) Transaction Fee Revenue Model: Incorrect. Here a platform earns fees for enabling transactions (like PayPal or stock brokers), not by selling goods through suppliers.
  • Option (d) Agency Revenue Model: Incorrect. An agency acts on behalf of clients (like advertising agencies) and earns service fees, unrelated to product order fulfillment.
    UPSC Prelims 2026 GS Paper 1 Q87 Answer & Solution | ThinQ IAS