If you have thought of starting an online business, you’ve likely have asked yourself which is better between Affiliate marketing and drop shipping. They are 2 of the most popular online business models available.
The two share some similarities but also vary in many ways. This article compares dropshipping with affiliate marketing across different fronts. By the end of your reading, you should have figured out which one of them is best for you.
Dropshipping is an e-commerce strategy where a seller fulfills orders from a third party and has them shipped directly to the customer.
In a dropshipping business model, the seller sets the price and takes orders from the customers. He/she then passes these orders to a supplier who ships the product directly to the customer.
The seller acts as a middleman and is responsible for marketing the products. He/she does not carry any inventory. Over 30% of online entrepreneurs use this model.
Affiliate marketing is an e-commerce business model where a marketer earns money for promoting another person’s product. The marketer obtains a link through which he/she advertises the products. Whenever a customer purchases through that link, the marketer earns a commission.
In this model, the marketer does not carry any inventory either. He/she also doesn’t set the price for the product. Over 81% of marketers use affiliate marketing.
- Both are hands-off business models. Affiliate marketers and drop shippers do not handle any inventory. The products they sell are offered directly by the suppliers.
- In both models, the “seller” bears the burden of marketing. Affiliates and Drop shippers are responsible for driving customers to the sites. Marketing skills are thus essential in both cases. Without adequate online traffic, neither can survive.
- Both have low start-up costs. Entrepreneurs dealing with either of these models incur very little initial expenditure when setting up because they do not handle any inventory.
No starting costs
You don’t need money to become an affiliate marketer. You only need to sign up for an affiliate program. Most eCommerce platforms have affiliate programs you can join for free. The only costs you could incur are marketing costs for your links and expenses for a domain and hosting if you have a website.
Passive source of income.
Affiliate marketing is one of the best ways to make money without a full-time commitment. Initially, you must set up the ads and produce content. Then just let them run and earn you money while you do something else.
Potential for multiple partnerships
There is no limit as to how many companies you can promote – you can get into as many programs as you want. Doing so will grow your revenue stream. It may take a while, but as more people visit your site, the chances of clicking your links to purchase increases.
No customer care is needed.
In affiliate marketing, you promote the product and have people use your link to purchase. The company directly handles sales and customer support. This position reduces your operations burden tremendously.
Your income won’t change
Your commission is limited to the sales made through your advertisements. So, if people do not buy products through your links, you will not make any money. Furthermore, because you cannot change the prices, it is unlikely that your margins will grow. The only way to drive an increase in income is to attract more clicks and sales for the product or join other affiliate networks.
No repeat purchases.
Affiliate marketing often deals with e-commerce sites and digital products. In these categories, customers typically buy the product once. As a result, you always gear your marketing activity towards attracting new buyers. This practice is more expensive than convincing already existing customers. Sales are also not guaranteed.
No inventory is required.
Dropshipping presents the best way to buy and sell products without holding any inventory. Without physical goods, you do away with expenses like procurement, warehousing, etc.
Price changes are possible
With dropshipping, you have control over the prices. Depending on the profits you want, and your competitors’ prices, you can adjust your price at any time to be more competitive. This position could generate higher margins for you.
Dropshipping provides you autonomy over your business. You personally handle every aspect of your business. That way, you can keep all the profits.
No barrier to entry
Getting into dropshipping is a straightforward process. With the right products, suppliers, and management platform, you can set up a business today and start selling.
Customer support is necessary
The seller is responsible for all customer support. You must be in touch with the customer, provide tracking numbers, and always keep them in the loop. In some cases, when things go wrong with the shipment, you may have to apologize and reassure the customer even when it is the supplier’s fault.
Lower product control
Since you do not handle inventory yourself, you have less control over your buyer’s orders. When issues like low-quality products, shipment delays, and damages occur, you can’t directly fix the problem. Instead, you must contact the supplier and try to have them sort it out.
Most dropshipping niches already have hundreds, even thousands of sellers involved. It thus becomes harder to break into the market, get recognized, and attract many buyers. The high competition also instigates price wars that can quickly eat into your profits.
A Comparison between dropshipping and Affiliate marketing
Dropshipping customers are more likely to return and buy again, unlike in affiliate marketing, where it is often a one-time purchase. Repeat purchasing guarantees a regular income for you. It is also possible to build a strong brand and create loyal customers, enhancing growth in the long run.
However, with affiliate marketing, you seek to attract new buyers every time. Not only is this more costly, but it also creates an unstable flow of income.
With dropshipping, the business and its promotion are in your control. You have the freedom to develop any content for your customers and collect their data.
Affiliate marketing is a different case. You promote products set by the service provider and cannot maintain any relationship with the buyers. Companies can also change their product offerings and policies at any time, which could affect your efforts.
Having control over these core activities means that you can manipulate your online assets to generate higher profits and create long term success.
Ease of operations (products control)
Affiliate marketing is much easier to start and maintain compared to Dropshipping. You sign up for a program and start creating content and promoting.
Dropshipping, on the other hand, involves identifying the right suppliers, handling orders and shipments, providing customer support, etc. You might also encounter the daunting task of finding a suitable dropshipping platform like Wholesale2B or Oberlo.
Winner; Affiliate marketing
You can change your prices with Dropshipping, but not with Affiliate marketing. Since the “shop” is yours, you are free to adjust pricing based on market trends. Doing so could increase your profit margins.
However, with Affiliate marketing, you only promote what the company offers and cannot make any changes to increase profit. There is also little room for negotiation.
A steady flow of income
Unlike dropshipping, affiliate marketers rely on others to earn money. Customers must follow the link and purchase the product for you to make money. Also, the company must pay you in time, which they do not always do. If none of these happens, your account remains dry.
However, in dropshipping, your earnings mostly depend on you. You must aggressively advertise, run sales promotions, adjust pricing, etc., to increase your income flow.
Long term brand benefits
Dropshipping offers full business control, which facilitates brand building and long-term success. As you make more sales and attract more customers, it increases your brand awareness. In so doing, you establish your business even further in the market, thus creating room for future expansion.
However, as an affiliate, you promote another brand, which then takes all the credit and leaves you a small percentage. It is challenging to build a brand of your own from promoting another person’s products.
Note: neither dropshipping nor Affiliate marketing offers a sure path to success. Experts, therefore, encourage online entrepreneurs to do both simultaneously. That way, they can maximize returns from both models.
Dropshipping and Affiliate marketing are both viable ways to make money online. However, they vary in modes of operation, control, and income levels, etc. Your choice depends on whether you want to earn passively or build a long-term business.
Affiliate marketing is quick and effortless. It is a great way to make money online. Nonetheless, it is not a long-term business solution since it is unpredictable and dependent on others.
Dropshipping is a more profitable and rewarding option. It is the ideal choice for building a scalable business online—the ease of doing business online by dropshipping offsets any complexities within the set-up process. You also have the satisfaction of owning your store.
Besides, with reliable dropshipping solutions like Wholesale2b, your dropshipping experience will be smooth and hassle-free.