Official Question UPSC 2026
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:
Solution & Analysis
Answer: A
Let us define the core mechanisms of modern e-commerce fulfillment models:
•Dropshipping Model (Correct): This is a specific retail fulfillment method where the storefront operates without warehousing physical inventory. The retailer retains full control over the consumer-facing price. When a sale occurs, the retailer purchases the item at wholesale cost from a third-party supplier, who then fulfills and ships the order directly to the end consumer. The retailer profits on the arbitrage margin.
•Affiliate Revenue Model (Incorrect): In this model, the promoter earns a fixed commission by referring traffic to a merchant's site. The affiliate does not control the retail pricing, nor do they process the customer's transaction.
•Transaction Fee Revenue Model (Incorrect): This applies to digital platforms (like payment gateways or freelance marketplaces) that earn revenue strictly by taking a percentage cut for facilitating a transaction between two external parties.
•Agency Revenue Model (Incorrect): This refers to service-based businesses that charge clients fees for providing specialized professional services (e.g., marketing or consulting), not for selling physical goods.
Conclusion: The prompt perfectly describes the supply chain mechanics of Dropshipping.