Although affiliate marketing and dropshipping have striking similarities, most entrepreneurs prefer dropshipping because of its freedom and profitability.
If the business of manufacturing, packaging, and shipping goods to customers seems daunting, you can still make money through dropshipping or affiliate marketing. This article puts dropshipping and affiliate marketing head-to-head to establish which business model makes more money.
Before we examine the difference between affiliate marketing and dropshipping, let’s consider their similarities.
Affiliate marketing vs. dropshipping: similarities
Although affiliate marketing vs. dropshipping has several differences, they are also similar in a few ways:
- They do not require lots of money to start
- Once you have a website or blog, you can start working immediately
- You need similar skill sets like marketing skills and the ability to create a landing page and drive traffic to run affiliate marketing or dropshipping.
- You do not need to stock inventory or ship goods for both business models.
- They present high earning potential
- They are low-risk business models
Now that you know some similarities between dropshipping and affiliate marketing, what are the differences? Consider some of the differences in the table below:
Dropshipping vs. affiliate marketing: the difference
|Business model||Your monthly commission on the product sold determines the money you make.||The money you make is the profit (your selling price – wholesale price)|
|How it works||You refer customers to another business website and earn a commission from the resulting sale.||You sell another company’s products on your site, but the company stocks and ships the goods to the customer.|
|Business management||The store owner gives you affiliate links, which you place on your website. Your site visitors can click on the link and are directed to the products’ site.||You sell products you do not own. The customer uses the payment platform to pay you, and you pay the owner of the goods.|
|Growth prospect||Although your affiliate website may grow, you will remain dependent on other businesses.||With good marketing, your dropshipping store will likely grow independently.|
|Ease of use||You do not handle customer support or store-related issues||Customer support is your responsibility|
|Control||The product owners control affiliate offers||You control all dropshipping offers|
|Repeat customers||Affiliate customers often do one-off purchases with the link||You can have repeat customers on your online store|
|Customer’s data||You don’t handle customers’ data.||You have control over customers’ data, like contact details.|
Let’s get into the details of this discussion by examining each business model and its pros and cons.
What is affiliate marketing?
Affiliate marketing is a business where you earn commission by promoting or recommending another business product and services. The product owners give you an affiliate link which you include on your website, product review, or blog post.
You hope your audience will see the product link, click it, and make a purchase. Why is this a good business idea? Statistics show that 93% of customers are influenced by online reviews when purchasing.
Of course, the product you promote should be related to the article you want your audience to read. For instance, if your blog is about the advantages of online studies, you can include an affiliate link for universities offering online courses or a link to a book.
If your visitors purchase by clicking the link from your website, you earn a percentage of the sales in the form of a commission.
Pros of affiliate marketing
- No start-up costs are required– Starting an affiliate marketing business is free. You will not incur costs for being an affiliate since the merchant covers all administrative fees on networks such as Amazon associates or Clickbank. You will only incur the cost of developing and hosting a website.
- An ideal way for earning passive income– Affiliate marketing does not require your constant attention. You can make money while walking your dog or asleep!
- You will not provide customer support– Your job is to promote the affiliate products of the network you work with. Unlike dropshipping, you do not deal with customers, which means you do not provide customer support.
- It is possible on different platforms– You can include affiliate marketing links on your blog, YouTube channel, or social media platforms and earn commissions.
Cons of affiliate marketing
Affiliate marketing also has drawbacks that could affect its profitability.
- Fixed commission– Since you do not dictate the products’ prices, you will earn a fixed commission. This could be detrimental if you spent more to direct visitors to the store.
- Delayed payment– Your commission is not the only issue the merchant is dealing with, which could result in delayed payment.
- Customers leave your site– Affiliate links redirect your audience to another website, which means they may have limited time interacting with your content.
- Change of commission rate– Some merchants can change commission rates without warning.
What is a dropshipping business model?
Dropshipping is a unique eCommerce model that allows entrepreneurs to sell suppliers’ products on their online shops without owning or stocking the product. You set product prices on your store, and the supplier is notified when a customer places an order.
The supplier will package and ship the merchandise to the customer. You will then pay the supplier and remain with your profit.
Advantages of dropshipping
Why is dropshipping worth it? consider some of the advantages:
It is a low-risk business model
Like in affiliate marketing, dropshippers do not stock inventory that could tie down capital in case of low sales. Dropshipping ensures your money is available when the customer pays for the product, unlike affiliate marketing, where you are paid monthly commissions.
You can dictate your profits since you set product prices. For instance, you can sell a product whose cost is $3 for $19.99, allowing you to earn a considerably high-profit margin after deducting marketing costs.
You build your own brand.
You can build your dropshipping site through advertising, content marketing, and stellar customer service. Customers will know your business as reliable. They may even think you own the products, thus enabling you to build an asset.
Furthermore, you can sell your online store if you want to move to another business. Affiliate marketing may not be an asset you can sell to someone else.
Dropshipping stores can grow and offer you a chance to sell your products. With affiliate marketing, you will always promote other people’s products regardless of how big your site grows.
Multiple ways to attract customers
Since dropshipping direct traffic to your site, you can retarget your customers through various advertising means. Affiliate marketing does not give you the chance to retarget past customers.
Dropshipping allows you to optimize product copy, landing pages, and website designs. This control enables you to attract more visitors and convert them into customers.
Cons of dropshipping
- Customer support management
One of the main downsides of dropshipping is maintaining robust customer support. If you don’t have the expertise or time needed for this function, you can outsource the customer support system at a fee.
- Low prices
You will be forced to lower your prices if you operate in an overcrowded niche. This can significantly lower your profit margin.
- No control over shipping
Although you fully control what products to sell your customers, you cannot control shipping. Several customers have complained about delayed shipment since the supplier ships the product when they want.
How much can you make from dropshipping?
Every entrepreneur contemplating dropshipping business has one question in mind: is dropshipping worth it? Is this business model profitable?
Dropshipper can earn between 20% and 30% profit from every store transaction. Therefore, your income is dependent on the number of customers buying from your store and the quantity they buy.
Most established dropshippers earn up to $10,000 annually. You can earn between $1,000 and $5,000 monthly after paying the supplier, dropshipping fees, marketing, and website hosting fees.
You can make more money if you pick less crowded niches with high-margin products or you do reverse dropshipping.
Nevertheless, you can only sell a few high-margin products; therefore, it is essential to strike a balance between demand and pricing before settling for a supplier or product.
Dropshipping vs. affiliate marketing- which is more profitable?
We have considered the advantages and disadvantages of both business models. But which one wins the debate?
While affiliate marketing is an ideal business opportunity to earn passive income for individuals who do not want to deal with customers directly, dropshipping is a better option.
You will make more money with dropshipping than affiliate marketing since you can advertise and draw traffic to your website from various platforms. Dropshipping outweighs affiliate marketing because:
- Dropshippers set their own prices, leading to high margins that affiliate commissions.
- Dropshippers have a better chance of creating a viral ad that can take their business to the next level.
- You will likely have repeat customers with dropshipping than affiliate marketing.
- Dropshippers send traffic to their online stores, while affiliate marketer sends traffic away from their sites.
- Dropshipping has no risk of delayed payment.
You can build your brand, thus amassing a bigger audience.