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:
ADropshipping Model ✓
BAffiliate Revenue Model
CTransaction Fee Revenue Model
DAgency Revenue Model
How the Dropshipping Model Works
🛍️ Customer
places order
on seller’s site → 💳 Customer
pays seller
(seller sets price) → 📋 Seller forwards
order + details
to supplier → 📦 Supplier ships
product directly
to customer → 💰 Seller earns
margin (price
minus cost)
places order
on seller’s site → 💳 Customer
pays seller
(seller sets price) → 📋 Seller forwards
order + details
to supplier → 📦 Supplier ships
product directly
to customer → 💰 Seller earns
margin (price
minus cost)
Why Each Option is Right or Wrong
A
✓ Dropshipping Model — THE ANSWER
Every element in the question description matches dropshipping precisely:• Seller controls pricing ✓ — Sets the sale price, earns margin
• No inventory held ✓ — Zero stock risk
• Transfers order + shipment details to supplier ✓
• Supplier ships directly to customer ✓
Examples: Shopify-based stores, many Amazon third-party sellers, AliExpress-based businesses.
B
✗ Affiliate Revenue Model
An affiliate promotes another company’s product on their website/blog/social media and earns a commission per referral or sale. The affiliate:• Does NOT set prices — the merchant does
• Does NOT handle orders
• Does NOT interact with the supplier
Examples: Amazon Associates, Flipkart Affiliate. A blogger earns when readers click a link and buy.
C
✗ Transaction Fee Revenue Model
A platform charges a fee per transaction facilitated on its network. The platform:• Does NOT sell products
• Does NOT control pricing of the goods
• Does NOT manage shipping
Examples: Payment gateways (Razorpay, Stripe), stock exchanges, eBay seller fees, Airbnb service fees.
D
✗ Agency Revenue Model
An agent sells on behalf of a principal (the actual seller) and earns a commission. Key difference:• The agent does NOT control pricing — the principal does
• The principal (not the agent) owns the product
• Agent earns a fixed % of sale price
Examples: Travel agents, real estate agents, insurance agents, Apple App Store (Apple acts as agent for developers).
Four E-Commerce Revenue Models — Comparison
| Model | Who sets price? | Inventory held? | How revenue earned? | Example |
| Dropshipping ✓ | Seller (controls price) | No — supplier holds stock | Margin = sale price minus supplier cost | Shopify stores, AliExpress resellers |
| Affiliate | Merchant (not affiliate) | No — not involved | Commission per referral/click/sale | Amazon Associates, Flipkart Affiliate |
| Transaction Fee | Buyer/Seller (not platform) | No | Fixed/% fee per transaction processed | Razorpay, eBay fees, Airbnb fee |
| Agency | Principal/Seller (not agent) | No — principal holds stock | Commission % of sale on behalf of principal | Travel agents, insurance agents, App Store |
Memory Trick
🧠 The Three Clues That Point to Dropshipping
Clue 1 — Seller controls pricing: In affiliate model, the affiliate does NOT control price. In agency model, the agent does NOT control price. Only in dropshipping does the seller set their own price (and earn the margin between their price and the supplier’s cost).
Clue 2 — No inventory / stock: The seller never physically handles the product. Zero inventory risk. If a product doesn’t sell, the seller has no unsold stock. This is the core advantage of dropshipping for small online sellers.
Clue 3 — Supplier ships directly to customer: The customer places order on the seller’s website → seller forwards it to supplier → supplier ships to customer. The customer may not even know the supplier exists. This three-party flow is the hallmark of dropshipping.
Dropshipping vs Agency — the key difference: In agency model, the principal (merchant) controls the price and the agent earns commission. In dropshipping, the seller (drop-shipper) controls the price and keeps the margin. The seller IS the seller, not an agent for the supplier.
