The merchant model is a business model that consists in selling goods or services over the internet. This type of e-business is the most popular amongst wholesalers and retailers, and its sales are usually made through auctions or based on list prices.
It is often the case that online merchants offer products at a discounted price, this is attributable to the way they operate because of the following reasons:
- Merchandise is purchased from manufacturers in large amounts
- Operations are usually done from inexpensive warehouses located in peripheral areas
- Drop shipping is frequently used as supply chain management technique, which means that the retailer does not keep goods in stock; instead it instructs the manufacturer or wholesaler to ship the purchased merchandise directly to the customer.