Affiliate Marketing vs Dropshipping, what should you choose?
Two of the most common ways to start an online business nowadays are represented in fact by affiliate marketing and dropshipping.
Even if the businesses present some similarities, we need to make a distinction, so that you can understand in which of the two categories you might want to fall into.
Keep reading and make sure to take notes!
Affiliate Marketing Vs Dropshipping: What’s The Difference?
Both dropshipping and affiliate marketing require hard work to start.
We can say that there are many similarities in the way you manage the two businesses.
Which are the similarities?
- Low-risk business models
- High earning potentials
- No inventory required
- You can get started at a relatively low price
- Similar skills required (create ads, drive traffic, build landing pages, etc.)
Yet, the two business models are completely different in some areas and you might prefer one or the other, depending on your goals and time you are willing to invest in order to start your online business.
Let’s look at the pros and cons of both, affiliate marketing vs dropshipping.
What Is Affiliate Marketing?
With affiliate marketing you refer a customer to another business and take a commission if the customer makes a purchase.
You don’t actually sell any product and you don’t directly collect any money either.
A company usually pays you the commissions on a monthly basis, after you made a sale.
Therefore, affiliate marketing is a commission based business model.
As an affiliate marketer, you receive a certain percentage of each sale that you are responsible for.
We have 4 different key-players:
- Affiliate network: it collects a wide range of products you can promote
- Merchant: the company that makes its products available to be promoted
- Publisher: the person who promotes products or services and earn a commission.
- Buyer: the final customer who buys the merchant’s product through an affiliate link.
Related: Affiliate Marketing For Beginners.
Affiliate Marketing Pros
Let’s have a look at the affiliate marketing advantages:
- Passive Income stream: even if it requires a lot of work upfront, it allows earning passively later on, cause you don’t need to care about the product itself and you can potentially earn at any given time (e.g. a good blog post ranked on Google could bring you recurring income for several years).
- No customer service: once you refer a customer to a merchant, your job is done. You can focus only on the marketing side of the business.
- No need to own products: as per above, you don’t need to own any products, you just need to send traffic to an offer and get a commission once a customer purchase the product or service you are promoting.
- High income potential: the sky is the limit. You can apply for different affiliate programs and you don’t need to stick to a specific niche or category of products (e.g. you could promote products of two different competitors at the same time).
- Little to no money to start: the costs are generally quite low. You don’t pay to access to affiliate promotions, the only costs can be represented from the hosting service of your website or if you decide to spend for paid advertising.
Affiliate Marketing Cons
Let’s have a look at the affiliate marketing disadvantages:
- High competition: While it is still a viable way to make money, the competition is large. Depending on the nature of your business, your specific niche could be completely saturated, with high authority websites. Worth to do some research upfront.
- Late payments: even if the majority of affiliate programs make payments on time, there could be merchants unreliable with their payment deposits.
- No control over product and pricing: you have no control over the product you are promoting. This can limit what you can do as an affiliate marketer, as you have less room to play in your marketing activities. The merchant could decide to change the price or remove the product and out of sudden your revenue could decrease significantly.
What Is Dropshipping?
Dropshipping is an eCommerce business model in which you don’t keep products in stock.
Whenever a customer orders a product through your website, you pass the order to a supplier who then ships it to the customer.
You earn the difference between the selling price and the cost of the product.
Thus, this business model allows anyone to sell products from their own website.
Anyway, even if the seller never actually sees or handles the products, as the purchases are shipped directly to the buyer from the supplier, dropshipping varies a little from affiliate marketing.
In order to start, you can create your own store with Shopify or you can become a seller on Amazon.
When you are an affiliate marketer, you promote products by sending traffic to the merchant’s offer.
With dropshipping, in fact, you are sending traffic to your own website.
Therefore, your landing pages must be optimized for conversion, otherwise only a small percentage of visitors will buy from you.
On top of that, you are responsible for customer service and you are directly receiving the payment from the customer.
Related: How To Start A Dropshipping Business.
Let’s have a look at the dropshipping advantages:
- No barrier to entry: you can start with almost no investment. You only need to pay for a domain and hosting. Everyone can open a store with Shopify in minutes.
- No inventory needed: you don’t need to buy inventory upfront nor ship goods. Supplier will do it for you, unless you decide to sell through Amazon FBA.
- You can build an asset: at the moment you open a store, you are building a brand. You have full control on the look and feel of your website and your offers. In the future you can resell it a make a profit.
- Earn more money: with affiliate marketing you only get a fixed commission on the number of products you sell. With dropshipping you can sell more times to the same customer. After the first sale, you can take advantage of email marketing to propose new offers or products.
- Easy to scale: thanks to the fact that you control the prices on your store, it’s much easier to scale a dropshipping store, in comparison with an affiliate website, which is more or less dependent on the merchant store with which it is associated.
Let’s have a look at the dropshipping disadvantages:
- Customer service: The main downside to dropshipping is that as the store owner, you’re responsible for customer service. Anyway, you can automate this process by hiring a virtual assistant on freelancing websites.
- Long shipping times: During shipping and orders, sometimes there is a delay of many days. Depending on your target market, it’s very important to find the best dropshipping suppliers, who will reduce your shipping times and increase the customer satisfaction.
- Money transfer issues or delays: you manage the cash flow of your business. In other words, make sure to have enough money in order to pay your ads and to order the products. Your payment processor could have a delay in sending you the money to your bank account.
Affiliate Marketing Vs Dropshipping: Which Is More Profitable?
Each online business requires consistent efforts to grow.
Affiliate marketing vs dropshipping, the income potential is very high in both cases.
Affiliate marketing is great for starters who don’t want to care about customer support.
In comparison with dropshipping, affiliate marketing is a lot easier to start and manage.
In a dropshipping website, you will have to actively monitor the store and order products through suppliers. All this requires time and money.
When you have an affiliate website, you have only to promote one or more products.
As a result, you’ll get a commission by letting people buy through your link.
On the other side, dropshipping could be a much more lucrative option, giving you more opportunities to make more money (you can sell multiple times to the same customer).
However, by combining your affiliate marketing efforts with a dropshipping store, you could really boost your results.
For instance, you could open a store, inside your niche affiliate website, and start selling products in dropshipping.
As a result, your passive income from dropshipping and affiliate marketing business will soar.
In the long run, however, a dropshipping business will make you more money.
Anyway, it requires more skills and efforts as you are building a real brand.
Should You Go For Affiliate marketing Or Dropshipping?
We’ve seen the differences between affiliate marketing and dropshipping and which one could be more profitable.
Each business model has pros and cons that you should consider, regardless of what will be your choice.
If you are a total beginner, above all, I would suggest you to start with affiliate marketing.
It will be much cheaper to start and you will learn a lot of skills that you can reuse with dropshipping.
Things are different if you want to build a real brand.
You’ll need much more money to invest, therefore you’ll need to be very good at marketing your products.
After you gain enough experience and skills from affiliate marketing, reapply them to start and grow a dropshipping business.
How to start with affiliate marketing
My #1 recommended resource to learn and start an affiliate marketing business is Wealthy Affiliate.
Wealthy Affiliate allowed me and thousands of other online entrepreneurs to start our own business from home.
As a result, today is a community of more than 1.2 million people around the world.
What you get inside Wealthy Affiliate
WA will give you all the support required to build a sustainable online business.
By opening your free account today, you get access to:
- 10 lessons covering online fundamentals (choose a niche, build a website, SEO, content creation)
- Free keyword tool (up to 30 searches)
- 2 free hosted websites
- Live chat for a week
- Community support
I’m part of the community, ask me any questions inside WA and I’ll make sure to answers all your doubts.
Are you serious about making money online? In addition, you’ll get a special offer during your first week at WA.
You’ll have the possibility to become a premium member a get access to a lot more of useful resources.
Hope you find valuable information in this post, please share it with someone who wants to start an online business.
See you inside 😉