Fundamentals of Business Intelligence (FBI) Practice Exam

What is the method called when a business sells products without maintaining inventory?

1. Direct sales

2. Retail marketing

3. Drop shipping

4. Wholesale distribution

The correct answer is: Drop shipping

The method of selling products without maintaining inventory is known as drop shipping. In this model, a retailer takes orders from customers but does not keep the products in stock. Instead, when a retailer sells a product, they purchase the item from a third party (usually a wholesaler or manufacturer) who then ships the product directly to the customer. This allows the retailer to offer a wide variety of products without the need for significant capital investment in inventory, reducing overhead costs and risks associated with unsold stock. Drop shipping is particularly appealing for entrepreneurs and small businesses looking to enter the market, as it eliminates the need for warehousing and inventory management. This aspect of drop shipping enables more flexible business operations and scalability, allowing businesses to focus on marketing and customer service rather than logistics. In contrast, direct sales typically involve selling products directly to consumers through personal relationships or events, without the intermediary of a physical store but may still require inventory. Retail marketing involves a broad range of strategies for selling goods to consumers, often with inventory. Wholesale distribution usually relates to selling large quantities of products to retailers or other businesses rather than directly to the end consumer.