The debate on dropshipping vs. affiliate marketing- which is more profitable- is endless. Some would argue their case for dropshipping, while others back affiliate marketing.
However, one thing is sure: dropshipping and affiliate marketing are among the most effective ways to make money online without investing, even as a student.
Dropshipping vs. affiliate marketing, which one is better? Dropshipping generally provides higher profit margins than affiliate marketing, depending on the type of affiliate program. However, affiliate marketing is easier to start and has low risk if you have an existing audience. Though both have the same earning potential, dropshipping offers you more control.
These business models allow you to make money without worrying about product storage, packaging, and shipping cost. Beginner entrepreneurs will find affiliate marketing and dropshipping attractive since they do not need advanced business knowledge to run it.
So, which business model is more profitable? A short answer is that it is challenging to point out which channels more money to your bank account because many factors determine profitability.
In this article, I compare dropshipping vs. affiliate marketing using several growth aspects like ease of start, profits, and earning potential. This information will help you decide which business model suits you.
If you are looking for other ways to make, I wrote a whole article about the top 15 ways you can start making money, even if you are not an expert.
Dropshipping Vs. Affiliate Marketing: The Basics
In this section, I will define these terms and how they differ.
What Is An Affiliate Marketing Business Model?
This is a business model where you recommend other people’s products and services through affiliate links to your audience. For example, you can approach companies or apply to join affiliate marketing programs if you have a good social media following or a blog with many loyal subscribers.
You will then receive affiliate links that you can include in your posts, and if someone purchases from that link, you earn an agreed commission.
The commission is often a percentage of the sales.
But how will the company know the sale came from your affiliate link? The link the company gives you has a special conversion tracker to help them distinguish different links they have given to various marketers.
However, affiliate marketing is not necessarily associated with buying a product. You can also be paid for generating leads, free trial users, app downloads, and website clicks.
These aspects help businesses such as Apple, Sephora, and Fiverr to grow, and the owners are willing to pay affiliate marketers to lead people to their sites.
What Is a Dropshipping Business Model?
Dropshipping is the cousin of affiliate marketing because it allows you to sell other suppliers or manufacturers’ products on your website. Many dropshippers do not stock inventory or ship products to clients since they delegate these tasks to suppliers.
So, how does dropshipping work?
You will likely follow this procedure:
- Create an e-commerce site (you can build your own or use third-party sites like Shopify, Amazon, eBay, or Etsy).
- Know the products you want to sell and their suppliers (build a relationship with suppliers)
- Take high-quality images of the products and post them on your shop
- Determine the profitable prices
- Promote your shop through different marketing platforms
- Wait for the first order.
- Forward the order to the supplier
Cool right!
Unlike affiliate marketing, you are responsible for many aspects of your business, such as setting prices, marketing, and handling customer issues.
Remember, your profit is the difference between your selling and wholesale prices. Once the supplier receives the order, they will facilitate your customer’s request on behalf of your store. You will then sire the wholesale price to the supplier and remain with your profits.
With planning and sound strategies, you can begin your entrepreneurial journey with dropshipping and build a successful e-commerce business.
Now, let’s consider some key differences between dropshipping and affiliate marketing.
Dropshipping vs. Affiliate Marketing: Comparisons
You can already identify some differences between affiliate marketing and dropshipping business model from the above definitions.
However, let me make your work easier with these comparisons
1- Easy To Start
Although both business models are easy to start, I believe affiliate marketing requires less work than dropshipping stores to open.
As an affiliate marketer, you don’t have to build an online store, focus on marketing, or provide customer support. If you are wondering if you do affiliate marketing without a blog site, the answer is yes.
Do you have thriving social media accounts? You can use them to do affiliate marketing. Nevertheless, a blog site can help you build a stable audience to purchase products from your link, allowing you to earn affiliate commissions.
Furthermore, it is easy to find suitable affiliate programs with merchant options like ClickBank, Affiliate Network, ShareASale, and Avangate.
You only need to write high-quality content and optimize them using trending keywords. Fortunately, you can find keywords without any tools and improve the visibility of your content for more traffic.
Conversely, dropshipping business model requires more effort, such as finding suitable suppliers, conducting market research, setting your retail price, and dealing with customers’ complaints.
You will need to solve delivery problems like wrong orders, errors, and returns. Choosing the right supplier can also be a headache, so visit sites such as Aliexpress, SaleHoo, and Doba for reliable partners.
2- Dropshipping Vs. Affiliate Marketing: Profitability
Profitability is probably one of the reasons why you clicked this article. So here it is: you can make more money with a dropshipping business model than with affiliate marketing.
With dropshipping, you can determine the prices of your product and pocket the whole profit. Some people add 30% or more profit margins to their products.
For instance, you can buy a product at the wholesale price of $25 and decide to sell it at $50, provided the products are high-quality.
On the other hand, affiliate marketers get commissions from selling a product, ranging from 5% to 30% of the sales. Even if you find a high-paying niche, you will have to contend with stiff competition.
3- Dropshipping Vs. Affiliate Marketing: Earning Potential
Of course, you have a more stable earning potential with dropshipping than affiliate marketing. Dropshipping builds loyal customers who will keep coming to your online store, while affiliate marketers can only refer a customer.
Once the customer has made the purchase, the chances are that they will not go through an affiliate next time but instead visit the company’s website directly.
As an affiliate marketer, you have no control over the company’s pricing strategies, meaning if the prices drop, your affiliate commissions also drop.
You aim to promote and popularize the company’s brand exposure in affiliate marketing. And once their product and brand are popular, they may stop using affiliate marketing since customers will organically visit their sites.
The next segment discusses the pros and cons of both e-commerce business models.
Pros Of Dropshipping Business Model
If you decide to pursue dropshipping, here are some advantages.
1- It Is a Low-Risk Business Model
One of the arguments for dropshipping in the debate of dropshipping vs. affiliate marketing is that it is less risky in many ways.
Unlike affiliate marketing which requires you to attain a certain threshold to cash out, you can access your money every week with dropshipping.
2- High-Profit Margin
Since you set your own prices in the dropshipping business model, you will likely earn more than affiliate marketing.
The affiliate marketing commission percentage rarely matches dropshipping profit margin- all factors held constant.
3- Dropshipping Helps You Build An Asset
You can build your brand with dropshipping because the products are on your professional website. You can create content for your site, generate traffic, and more money.
When you have built your site, you can decide to sell it to the highest bidder and move on to other passions. And since you have loyal and repeat customers, the site will likely fetch a fortune.
On the other hand, not all affiliate marketers have built websites they can use as an asset. For instance, if you make money through YouTube videos or social media accounts, you may not sell them to anyone.
Cons Of Dropshipping
- You handle customer support: Since you manage your own site, you have to deal with angry customers and their complaints.
- Marketing costs: As a dropshipper, you do your own marketing and advertising to get your products noticed by potential customers.
Pros Of Affiliate Marketing
Now let’s discuss the pros of affiliate marketing
1- No Costs Required
Starting affiliate marketing has no initial costs. You will not pay any fee since the merchant handles any administrative costs paid to an affiliate network like Amazon Associates or ClickBank.
However, you still incur costs associated with your website and server.
2- No Customer Support To Handle
As an affiliate marketer, you do not handle your merchant’s store. This means that you will not deal with customer complaints in case of errors in the order or delivery has been delayed.
The merchant will handle any customer support because they handled the order, and the store is on their site. Affiliate marketing is an excellent source of passive income.
Like Amazon FBA, affiliate marketing is an ideal source of passive income. And once you have created converting content and figured out a few ads, you can continue to earn money from the background without lifting a finger.
Cons Of Affiliate Marketing
Like anything in life, affiliate marketing has also a few drawbacks. Here are the cons of affiliate marketing
- You only earn a percentage of the sale: One of the major drawbacks of affiliate marketing in the argument of dropshipping vs. affiliate marketing is that you are paid in commission. This means you could make a loss if your ad expenditure is higher than your earnings.
- Finding the right people is difficult: you will spend some money to get them. The question is, will they buy to cover your expenses?
- Payment Can Get Delayed: Customers don’t pay when they purchase from your affiliate link. The money goes to the merchant’s account, and they can sometimes delay your payment for months.
- No control over pricing: The goods do not belong to you; therefore, you cannot determine their pricing to increase your earnings. This task rest on the merchant’s shoulders, so you are at their mercy.
- Customers can bypass the affiliate link: If you do not use a link shortener, some customers may recognize the affiliate link and assume that the product will cost them more to buy through you. They may abandon your link and go to the site directly.
The Takeaway
Dropshipping vs. affiliate marketing has been debated for years. However, based on the earning potential, dropshipping is more profitable than affiliate marketing.
Dropshipping allows you to build an asset, determine prices, and increase your revenue whenever possible. Yes, it takes some effort to build a dropshipping store, but the returns are worth it.
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