If you’re looking for ways to make money online, you may have looked into dropshipping and affiliate marketing. Both are popular ways to make money without needing your own product to sell. Both are also excellent opportunities for ecommerce entrepreneurs to make more money quickly.
But if you’re just getting started with an online business, it’s hard to know which path to go down. Is one better than the other? Which is easier to manage?
Let’s look at affiliate marketing vs. dropshipping — the pros and cons of each and which one may be a better match for you.
Affiliate marketing vs. dropshipping: What’s the difference?
The two online business models have two big similarities.
First, both can be defined as a low-risk business model. You won’t lose a bunch of money by trying either one. Second, they do not require you to manufacture or ship a product or to carry any sort of inventory. This means they both have low startup costs for you as you’re getting into the business.
But this is where the similarities end.
Below, you will find everything you need to know before you decide to launch an affiliate marketing website.
With the affiliate marketing business model you get paid a commission for promoting a company’s product. You promote a product through a blog post or social media. If someone clicks on your affiliate link and buys the product, you get paid a commission for the sale.
Many companies now have affiliate programs, so you can promote their products that you are familiar with and use daily. This model works well if you have an online blog you can devote to reviews and recommendations. It also works well for social media influencers that have a large following.
Pros and cons of affiliate marketing
The affiliate marketing model is a great way to get started in online entrepreneurship. Affiliate links are free to set up, and you control your business. You decide when you post and how to best market the product.
But you need to have a few marketing skills to help you get started, and you’ll want to create an online following quickly so you can make sales. Let’s take a look at what are the advantages and disadvantages for a beginner affiliate marketer.
Advantages of affiliate marketing businesses
Here are some affiliate marketing pros:
- No store inventory: In this business, all transactions are pass-through. This means your affiliate partners are in charge of the inventory. Your responsibility is to market the products. You don’t need to worry about storing a product or having to handle customer service.
- Low to no startup costs: The only thing you need to get started with affiliate marketing is a blog or a social media page. You may choose to incur some costs for ads at some point, but it isn’t necessary. You may also want to have your own website to post your blogs to. This will get people returning to your site and clicking your links.
- No shipping and fulfillment issues: With an affiliate program, you never have to worry about shipping or fulfillment. That is the responsibility of your merchant. They also have to provide customer support for you so that if there are any issues with shipping, it’s on them, not you.
- High commission rates: If you do your research, you’ll find companies that pay solid commission rates, some of them up to 40% on a sale. Tech products often pay more, as do some supplement manufacturers. Take time to look for the ones with better commission structures.
Disadvantages of affiliate sales
Affiliate marketing cons you should know about include:
- Limited control over the product: As an affiliate business, you have no control over the product or its price. You can’t determine the look or quality of the product you are promoting. But many times, you can get a sample of the product so you’re aware of the product when you get questions.
- Low conversion rates: It takes time to build a solid following. People don’t always trust affiliate marketers, and until they do, they won’t click on your links. The more visibility you have, the more quickly you’ll gain the trust of your audience.
- Dependence on the merchant’s affiliate program: Your income and your commission depend on the affiliate programs you are a part of. Also, if your merchant supplies low-quality photos for marketing, you may have trouble selling the product. Likewise, your payday is determined by when they pay out. Some pay weekly, some monthly. Check with your merchants to see what their structure is.
- Limited customer information: You don’t get much information on who is clicking on your links and possibly buying the products through them. This makes it hard to market to a particular audience because you don’t know who that group is.
These cons may sound like a reason not to get started with an affiliate website, but if you do your research, there is plenty of opportunity. Many affiliate marketers are able to create affiliate networks that allow them to earn passive income.
Look for companies that give higher commission rates. Also, consider products with lower competition to give your affiliate website a chance to be found.
Before starting a dropshipping website, you can scroll through the information below.
Definition of dropshipping
In the dropshipping model, you sell products to your customers, and a third party ships them. The third-party company owns the inventory and stocks the product. You are acting as a go-between between the buyer and the warehouse.
This model requires you to set up an online store and advertise your business to your customer base. Then, your customer buys a product from you at a set retail price, and your third-party vendor fulfills the order.
Pros and cons of dropshipping
Dropshipping is fantastic because it allows anyone to enjoy having an ecommerce store.
It’s a great business model for those who want to see if they can sell before investing in an inventory. It’s also an excellent side hustle for someone working full-time. But as with any business, there are also advantages and disadvantages to running a dropshipping store.
Advantages of dropshipping businesses
Some advantages of dropshipping are:
- Low startup costs: The only major expenses you have are your ecommerce store website and your marketing. Websites can run as low as $29 a month, and some come with a free or low-cost trial period. Your marketing costs will vary, but you can start small and work your way up as your store grows.
- Product variety: There is a wide range of products for you to choose from to include in your dropshipping store. Pick something you’re passionate about, or choose a product you know will sell! If you’re looking to make money quickly, consider a high-ticket item — one that costs more but will still sell. Furniture is a great example of this. These products tend to have higher profit margins.
- No store inventory: With the dropship business model, you don’t hold on to any inventory. Your vendors will store and ship all the products for you. You don’t have to worry about where you are located or finding a vendor to ship your products.
- Flexible location: You can dropship from anywhere. There is no need to be in a large city or tourist location. You can set up your online ecommerce store and work from anywhere you have an internet connection.
Disadvantages of the dropshipping market
Some common dropshipping cons are:
- Lower profit margins: Other ecommerce stores may be selling the same products as you. You will have to price yours competitively to sell your product. Take the time to find a product that has low wholesale prices, and you can get better profit margins from your dropshipping.
- Dependence on suppliers: Your store will depend on your suppliers’ quality. They will dictate your pricing, quality of service, and fulfillment capabilities. Take the time to research your suppliers and make sure they have a solid reputation before doing business with them.
- Shipping and fulfillment issues: Some dropshipping vendors ship from China and have lengthy shipping times. Check with your vendors to see where their warehouses are and how long their time from sale to shipping is. Some vendors may also run out of products and be unable to fulfill your customer orders.
- High competition: Dropshipping has become one of the latest money-making trends, and new ecommerce stores are popping up every day. You will have competition for your store. Build a quality online store to make it stand out from other stores that are selling the same or similar products. You’ll also want to be aware of the competition’s price for the same product.
Although some of these cons may be detrimental to your business, there are ways to minimize your risk. Do your research before picking a product. Use a few different dropshipping suppliers to cut back on shipping issues. And keep an eye on what your competition is doing so you have an edge over them.
A dropshipping business can be an excellent way to earn money online if you do your due diligence on the front end.
Profit potential of dropshipping vs. affiliate marketing
Both dropshipping and affiliate marketing have the potential for you to make a good profit. They both require work on the front end to get them up and running, but after setup, there are endless possibilities.
You can make affiliate marketing profitable, even more so than you think. By taking time to find products with high commission rates, such as digital products, you can start to see money coming in quickly.
The best part about this is that affiliate marketing is scalable and repeatable. You can create and promote as many links as you choose without incurring much expense. But out of the two, dropshippers tend to make more money overall due to higher profit margins.
With the dropshipping business model, you can choose your products and the pricing. The wholesale price of the product is low, so you make good profit margins. You’ll also get repeat customers. When dropshipping, people buy the product directly from your online store.
But with affiliate marketing, a customer is leaving your website to buy the product. With high-ticket dropshipping, you will have less competition. You’ll need to spend some money on digital marketing campaigns, but you can expect to see a return on that investment within the first few months.
Dropshipping is a more profitable business model, but affiliate marketers have a better opportunity to earn a passive income. If this is what you’re looking for, affiliate marketing may be a better option for you.
Considerations when choosing a business model
Before choosing between dropshipping and affiliate marketing, there are a few things you should consider about each business model.
Which is better for beginners?
Many people prefer affiliate marketing because of its low risk. You don’t need to invest a lot of money to get started. If you’re resourceful and willing to put yourself out there on the internet, this is a great option.
Aside from writing blogs and social media posts, it’s a fairly hands-off business model that is great for beginners.
Be sure to brush up on some basic search engine optimization (SEO) rules before starting to make sure your content is easily found online. This will keep your content in front of new people constantly, so you’ll have people clicking your links regularly.
Which is better for experienced marketers?
The dropshipping model is often used by people who are familiar with the basic rules of marketing and know how to target certain groups of people.
It requires more time on the front end to set up the ecommerce store. You’ll need to do your research on vendors and products before creating your store. You’ll also need to have some cash flow for online ads and take time to develop a marketing strategy to get you started.
Once you get traction and people are ordering from your store, you’ll need to have a line of customer service and a way to properly manage customer support. If there is an issue with an order, your customer will be contacting you, not the vendor.
Which has a higher potential for long-term success?
Both options have great potential for success if you treat it as a business and put in the work needed.
Final thoughts on affiliate and dropshipping businesses
Not sure which business model to follow? There is no one right answer. Both dropshipping and affiliate marketing are great business models and have the potential to make significant online income.
Weigh the pros and cons of both affiliate marketing and dropshipping and get your business goals on paper. This can help you determine which direction to go. Whichever method you choose, be patient with the process. Put in a solid effort, and you’ll start to see the work pay off.
You’ll learn valuable skills during the process that you’ll be able to use in future endeavors. And given some time, you’ll be able to have the freedom of working for yourself. You’ll find the financial freedom you’ve been looking for. What could be better than being your own boss?
Frequently Asked Questions
Can you really make money with affiliate marketing or dropshipping?
Yes. If you treat it as a business model and “go-to work” each day, you can quickly start to see an income from your business. The more time you invest in your business, the more potential for an increased income.
Which is easier — affiliate marketing or dropshipping?
Affiliate marketing is easier to get started with. You don’t need to spend any money — you simply need a will and a drive to succeed. Having a bit of marketing experience may be helpful, but isn’t necessary.
How do you make money with no product to sell?
In both dropshipping and affiliate marketing, you are selling or promoting another company’s product. You are the “middle man,” doing the marketing and bringing attention to the product for another company.