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. 1. Dropshipping Model 
  2. 2. Affiliate Revenue Model 
  3. 3. Transaction Fee Revenue Model 
  4. 4. Agency Revenue Model

Answer (Detailed Solution Below)

Option 1: Dropshipping Model 

Detailed Solution

Answer: 1 

Explanation:  

Dropshipping is an e-commerce fulfilment model where sellers do not keep products in stock. Instead, they partner with third-party suppliers who store, package, and ship products directly to customers.

  • When a customer places an order through the online store, the seller forwards the order details to the  supplier. The supplier then completes the fulfilment process and delivers the product directly to the  customer. 
  • This business model reduces the need for heavy upfront investment in inventory, making it a popular  option for new entrepreneurs. It also allows businesses to offer a wide range of products without worrying  about storage limitations. 
  • By outsourcing inventory handling and shipping operations, businesses can reduce operational costs and  minimise the risks associated with unsold stock. In addition, dropshipping provides a flexible way to test  new products and business ideas with relatively low financial risk. 

Therefore, option (1) is the correct answer.  

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