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.