- Affiliate Marketing and Dropshipping: How Are They Similar?
- What is Affiliate Marketing?
- What is Dropshipping?
- Affiliate Marketing vs Dropshipping: Which is better?
- How do I get started with dropshipping?
If you’re an aspiring entrepreneur looking to start making money online, then you’re probably wondering what business model is right for you. It’s wise to ask questions like “which has the lowest start-up cost?” and “which has the highest profit potential?” Luckily, there are a few options to choose from when it comes to online business models. Two of the most popular options for online entrepreneurs are affiliate marketing and dropshipping. Both have their pros and cons, which is why it may be challenging to decide which one is right for you. In this article, we will compare affiliate marketing vs. dropshipping in detail so that you can make an informed decision before jumping into your new business.
Affiliate Marketing and Dropshipping: How Are They Similar?
Although affiliate marketing and dropshipping are really quite different when it comes to the actual business you’ll be running and earning an income with, there are many similarities. Before we go into more detail about the pros and cons of affiliate marketing vs. dropshipping so you can decide which works best for you, let’s take a look at how these two profitable business models are similar.
No inventory required
Both affiliate marketing and dropshipping don’t require you to carry any inventory. This means that you can market and sell products, and make a good income doing so, without actually having a physical location to store and ship inventory. This is a considerable advantage if things like location freedom and low overhead costs are important to you.
Low startup costs
Since there is no need to invest in inventory, manufacturing, or product creation, you won’t have to put thousands of dollars into products before you even start making any money. The products you’re selling already exist and are made available by another company for you to drive sales to. In the end, it’s really just your job to market and sell the products.
For the most part, both affiliate marketing and dropshipping are pretty low-risk business models. This is especially true when compared to having your own online store with your own inventory. If something were to not work out, you’re not stuck with unsellable inventory. You can simply move on to the next product with little to no risk.
High profit potential
Another similarity between affiliate marketing and dropshipping is that there is no limit to how much money you can make. Once you find successful methods for making sales, you will be able to scale your success and increase your profits. Compared to traditional brick-and-mortar businesses, where your profits are much more limited with higher overhead costs, or even online stores where you’re carrying your own inventory, you’ll face minimal limitations. With affiliate marketing or dropshipping, you have the ability to earn almost unlimited profit.
Start working & earning quickly
With both affiliate marketing and dropshipping, you can basically start working on your business the same day you make your decision to start a business. Since you’re simply selling items that already exist on behalf of another company, you can easily be up and running (and profiting) in no time. Once you have your skill sets down and can drive targeted traffic to your landing page or dropshipping store, you have the potential to start profiting within weeks or even days.
What is Affiliate Marketing?
Affiliate marketing is a type of online marketing where you, as the affiliate, promote a company’s products and services and earn a commission on each sale that you generate. Some companies will pay a flat dollar amount per sale while others will pay a percentage of the sale.
As an affiliate marketer, you don’t need to worry about creating or manufacturing products. You also don’t need to deal with shipping or inventory. The key here is that you’re selling a product as an affiliate for a company that is providing the product by marketing the product and leading customers to them. Once the customer you sent them orders from that company, you earn your commission.
As an example of this, you will often see social media influencers on Instagram, TikTok, YouTube, or blogs leading people to a company’s product with the use of an affiliate link or code. This is done by providing you, the affiliate, with a unique affiliate link that will track clicks and purchases and provide that information to the company to pay your commission.
Affiliate Marketing Pros
Little to no start-up costs
When you sign up as an affiliate for a company or product, you can generally do this for free. Some of the largest affiliate networks like Amazon Affiliates, Clickbank and Shareasale simply require you to register to start promoting products through your affiliate link. There is no cost associated with being an affiliate which keeps your start-up costs low. The costs you will incur are any ads or tools you pay for, such as a website, to promote the affiliate products you’re marketing. This means if you’re just starting out, you can keep these costs low and only scale up as you have more money to invest. Some people are even able to start by building an audience for free on social media platforms, though this takes time. In the end, you can decide how much money to put into marketing affiliate products when you’re just starting out.
One of the most significant advantages of affiliate marketing is that it’s a great way to build passive income. Since the products you’re selling are not your own, as long as the company you’re an affiliate for continues to offer them and you have marketing that is driving targeted traffic to your affiliate links, you can continue to earn with little to no effort on your part. You’re able to continue earning affiliate income even while you’re sleeping, out of town, or spending time with family. The more affiliate products you promote, the more passive income streams you can build up which can lead to financial freedom down the road.
No direct customer contact
Another advantage of affiliate marketing is that, as the affiliate, you generally don’t have direct contact with customers once they have made their purchase because they’re not paying you directly. This means you’re not responsible for customer service or any type of after-sale support, which can be a huge advantage. Because you’re essentially handing customers over to the company you’re an affiliate for, they will take care of all of that, and you won’t have to deal with customer emails and questions or hire someone else to do so.
Affiliate Marketing Cons
Set percentage or flat fee pay
Unfortunately, when earning an income with affiliate marketing, you’re not in control of how much you earn per sale. The company whose product you’re selling sets the commission amount and you have to rely on them to give you your affiliate earnings. While most companies are fair, and you can choose who to work with, some may low-ball affiliate payouts or even change commission percentages down the line. There have even been situations where companies have stopped their affiliate programs, meaning any affiliates who put their time and money into marketing items will no longer be able to earn from those efforts.
Another downside to affiliate marketing is that you generally don’t get paid for the sales you generate right away. Companies often have a set timeframe in which they will pay out affiliate earnings, such as once per month, after a holding period to account for returns or chargebacks. For example, if there is a 30-day holding period and a company only pays out at the beginning of each month, you will wait not only the 30 days for your commission to be ready to be paid out, but then have to wait until the actual payout date after that waiting period. This can create a bit of a wait to receive your affiliate income, especially when you’re just getting started, and may make it difficult to manage your finances if you’re relying on that income to pay bills or other expenses.
Some people avoid affiliate links
For some reason, some people prefer not to use affiliate links and will go out of their way to either edit links or search a product on their own without clicking on the provided affiliate link. When this happens, you don’t get a commission even if you were the one who introduced a customer to a product. If you have a successful affiliate marketing business, this usually won’t account for a huge loss of income as most people don’t mind affiliate links or don’t even realize what they are, but it’s definitely something to note because it can be a bit discouraging.
Set products and pricing
Since you’re selling products on behalf of another company, you don’t have any control over what products are available or the pricing of those products. This means that products that are priced lower than you’d like are going to pay out much less commission, while products that are priced too high for customers are likely not going to make as many sales. In order to be successful with affiliate marketing, you need to find products that are priced well to make sure you’re earning a good profit from each sale.
What is Dropshipping?
Dropshipping is a great business model for new ecommerce entrepreneurs. It’s simple to set up and manage, and it doesn’t require a large up-front investment. Dropshipping is a business model in which ecommerce entrepreneurs sell physical products without having to carry any inventory. When a dropshipping store owner receives an order from a customer, they simply contact the supplier (usually via automation), who will then ship the products directly to the customer’s doorstep on behalf of the store owner.
Most customers don’t even realize they’re shopping from a dropshipping store because they look just like any online store. The difference is on the back end where orders are then placed with your supplier to send the customer products, rather than you (or your employees) shipping items directly. With your own dropshipping store, you will own your website and can build a reputable brand with your own customers, unlike with affiliate marketing, where you’re sending customers to the company selling the product.
Full control over pricing and profit
Unlike with affiliate marketing, when you’re running your own dropshipping store, you can control your pricing and, in the end, your profit. Your supplier will provide you with their pricing for a product and then it’s up to you to decide what you charge your customers for that product. If you can purchase a product from a supplier for $5, you can determine whether you’re going to sell it for $10, $20, $30, or even more. This allows you to test different pricing and makes it much easier to factor in your costs to ensure that you’re making a good profit from each sale.
One of the biggest advantages of dropshipping is that you get paid instantly for each sale because the orders are made directly on your own dropship website. There’s no waiting period like there is with affiliate marketing because the payments come straight to you via your accepted payment methods and then you go ahead and pay your supplier after the order is placed. Not only does this mean that you can quickly receive your earnings and pay yourself, but it also means you can turn around and reinvest your earnings to grow your business even faster.
Dropshipping is one of the most low-risk businesses to start. You don’t need to invest any money into inventory, you can start with a minimal budget, and if something goes wrong with a product or supplier you can simply stop working with that supplier. Since you can quickly access your funds, you can start earning faster and begin using those funds as needed to continue to grow your business rather than having to wait weeks or months for an affiliate program to pay you.
Build your own brand
When you have your own dropship websites, you’re able to build your own brand. You will have your own website, email list, social media accounts, you name it. This is something that you can’t do as seamlessly as an affiliate marketer because with affiliate marketing you’re providing customers for someone else’s brand. Not only does this mean that you have quite a bit more control, but it also means that if you decide to get out of the dropshipping business in the future, you have an asset that you can sell.
Ability to create customer loyalty
In addition to building your own brand, dropshipping also allows you to keep your own customers and create customer loyalty. When customers purchase from your store, you are in control of their shopping experience and how you interact with them through your website, emails, etc. When you build customer loyalty, you’re encouraging repeat purchases and word-of-mouth referrals for your products. This is much less likely with affiliate marketing where you’re essentially driving targeted traffic to someone else’s business.
Ability to retarget customers
Because traffic is coming to your own website, it’s easy to retarget customers who have visited your site but didn’t purchase anything. You can do this through Facebook ads, Google ads, or other ad platforms and bring them back to your store to finish their purchase.
Customer support is your responsibility
One of the biggest cons of dropshipping compared to affiliate marketing is that because you’re building your own store and/or brand, you have to provide customer support to your customers. With affiliate marketing, you’re sending customers to another company, but with your own dropshipping business, your customers are your own to manage. When you look at the big picture, having your own customers rather than handing them off to another company is a huge advantage, but taking on the responsibility of customer support is a small price you’ll have to pay. This means either handing customer support on your own or hiring someone to do it for you.
Affiliate Marketing vs Dropshipping: Which is better?
After reading through this article, you can clearly see that both affiliate marketing and dropshipping are profitable options for entrepreneurs who want to start a low-risk, high-profit business. However, we have to point out that the clear winner for most new entrepreneurs is dropshipping.
Dropshipping offers a number of advantages over affiliate marketing, including the ability to quickly receive earnings, build your own brand, create customer loyalty, and have more control over pricing and profit. The only real downside to dropshipping is that you have to provide your own customer support, but when you compare that to all of the advantages, it’s really not that big of a deal. So, if you’re ready to start your own online business but don’t want to risk a lot of money upfront, dropshipping is the way to go!
How do I get started with dropshipping?
When starting your own dropshipping website, there are plenty of ways to start from scratch, or you can skip ahead a few steps and start looking into turnkey dropship websites for sale. Both options are great, but we recommend looking into turnkey dropship websites if you have the funds to do so as it will save you a lot of time and hassle in the long run. Either way, dropshipping is a low-risk, low-cost way to start your own online business and potentially earn a high income even as a brand new entrepreneur.