UPSC Prelims 2026 · Question 52 of 96

UPSC Prelims 2026 question on Dropshipping Model

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. Dropshipping Model
  2. Affiliate Revenue Model
  3. Transaction Fee Revenue Model
  4. Agency Revenue Model
Show answer

Answer: A. Dropshipping Model

Analysis

In dropshipping, the seller acts as a storefront or 'merchant of record'. They maintain control over the retail pricing and profit margins but outsource all warehousing, inventory management, and shipping logistics to a third-party manufacturer or wholesaler.

Key advantages include low startup costs, since sellers do not need to buy products in bulk or rent warehouses, minimizing upfront capital and inventory risk; and scalability, since the seller can easily test and offer a wide variety of products without managing the physical logistics of fulfillment.

Hence option (a) is the correct answer.

Statement by statement

Option (b) Affiliate Revenue Model is incorrect: Affiliates generate income by directing customers to third-party seller websites and earning commissions; they neither determine product prices nor handle order processing.

Option (c) Transaction Fee Revenue Model is incorrect: In this model, a platform earns revenue by charging fees for facilitating transactions (such as payment gateways or stock brokerage services), rather than selling products through suppliers.

Option (d) Agency Revenue Model is incorrect: Under this model, an agency provides services on behalf of clients and earns fees for those services, rather than engaging in product sales or order fulfillment.

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