Correct Option
The correct option is A. Dropshipping Model
[as per provisional answerkey]Explanation
The question describes a specific retail fulfillment method within the e-commerce ecosystem where the merchant functions as an intermediary without maintaining physical inventory.
- Dropshipping Model: In this model, the seller (retailer) hosts a storefront and sets the retail price for products. However, the seller does not own or store the inventory. When a customer places an order, the seller purchases the item from a third-party supplier (usually a wholesaler or manufacturer), who then ships the product directly to the customer. The seller's profit is the difference between the retail price charged to the customer and the wholesale price paid to the supplier.
- Affiliate Revenue Model: Unlike dropshipping, the affiliate does not have control over pricing. The affiliate simply redirects potential customers to a merchant's website via a link and earns a commission on successful conversions. The transaction occurs entirely on the merchant's platform.
- Transaction Fee Revenue Model: This model involves a marketplace or platform (like eBay or Etsy) charging a fee or percentage for enabling and executing a transaction between a buyer and a seller. The platform itself is not the seller of the goods.
- Agency Revenue Model: In this model, a firm (the agent) provides a service or platform to connect buyers and sellers and takes a commission. While similar to transaction fees, it is characterized by the agent acting on behalf of a principal, rather than acting as the primary retailer of a physical product as seen in dropshipping.
Key Takeaway: Dropshipping is a fulfillment strategy where the retailer manages pricing and customer acquisition but delegates inventory management and logistics to a third-party supplier.