Honestly, I'm not quite sure how each seller goes about the different sizes or colors they sell.
But I would say for sellers offering a variety of sizes or colors most may resort to sourcing the items from a dropshipper otherwise you may need a big capital securing all those stocks plus a take bigger risk of the items not selling. Unless of course you are big time online seller/wholesaler :)
Have you heard of variation listing? This enable you to create a single multi-quantity fixed price listing that includes all the variations you offer - color, sizes, material... For example, you sell a pair of fashionable wedges - these might come in multiple colors and sizes, so instead of creating a number of separate listings for your product you can create a variation listing. Enabling your buyers to select which variation they want to purchase from a single listing. Plus you get more exposure for your products too!
To learn more about variation listing and how to create one, please visit this link: Link hidden: Login to view
Hope this helps. All the best :)