Dropshipping vs Affiliate Marketing: Which One to Start in 2023?

Dropshipping and affiliate marketing are two popular money-making methods in 2023, but they differ in a number of ways.

But first things first, don’t give in to the myth that these are easy money-printing methods. Both methods require hard work and consistent effort to generate sustainable income.

And even after you start generating a decent income, you’ll constantly need to put effort into ensuring that the profits don’t die down.

So, let’s explore their differences, pros, and cons and find out which one is easier and better in this dropshipping vs. affiliate marketing guide.

Dropshipping vs. Affiliate Marketing [Comparison Table]

Criteria	Dropshipping	Affiliate marketing
How it Works	No need to store inventory or ship products; just make  profits on arbitrage	Refer customers and earn commissions
Business Model	The amount of profit you make is your selling price minus the wholesale price	The amount of profit you make is the commission on the product you sell; usually paid monthly
Business Management	Sell products that are not yet in inventory and pay the manufacturer after customers pay you	Clicks on the affiliate links on your site links direct potential customers to the merchant’s website.
Ease of Use	You are responsible for customer support	You are not responsible for handling anything related to the store
Commission	Name your own price and have full control over offers	You are paid a fixed commission by the merchant
Growth Prospect	A quality online store will naturally grow over time with a strong foundation	Affiliate websites will grow, but the affiliate marketer will always remain dependent
Recurrence	Repeat business and recurring orders from customers	An affiliate purchase is just a one-off transaction.
Control	You have full control over the dropshipping offers available to you	You don’t have control over the affiliate offers available to you
Customer Data	You own the customer data	You don’t deal with customers
Future Prospect	Your dropshipping store can easily become a full-fledged business	As an affiliate marketer, you are dependent on the retailer/manufacturer whose products you promote

 

What is Affiliate Marketing? Is It a Profitable Model?

Affiliate marketing is a simple business model in which you promote someone else’s product and earn commissions on successful sales.

You start by signing up for an affiliate program, getting a link, and marketing the product using that link. And you’ll get paid whenever anyone purchases the product using your unique affiliate link.

It’s really that simple.

You can do affiliate marketing on any platform without holding inventory or dealing with client-side issues.

It only revolves around this basic principle: The more you promote, the more you earn.

Now, is it profitable? Affiliate marketing can be really profitable if you are willing to put in the required effort.

Don’t you see when YT channels request you to purchase a product using a link in their description? That’s them doing the affiliate marketing. Initially, you’ll struggle a bit in convincing people to buy using your link.

But once you are past the initial phase and have substantial traffic or a number of followers, then making profits becomes way easier.

Who Are the Key Players in Affiliate Marketing?

There are 3 key players involved in affiliate marketing:

• Merchant

The company or a vendor that initiates the affiliate program and wants to have their products promoted.

• Affiliate

An individual or company that promotes the merchant’s products to increase sales and earns a fee or commission for successful transactions.

• Customer

The entity that purchases the product using the affiliate link. Once a transaction takes place, the company receives the money and disburses the commissions to the affiliates after a certain period.

Advantages of Affiliate Marketing

Affiliate marketing is a $17 billion industry in 2023, with many benefits that make it appealing, including:

Low Barrier to Entry

You don’t need many resources to start affiliate marketing; you can even start with your phone or laptop. Also, most affiliate programs are free to join, with some even offering sign-up bonuses to welcome new affiliates.

There may be some costs depending on which affiliate marketing platform you choose. For instance, starting out with social media platforms like YouTube, Instagram, Facebook, etc., is completely free.

That said, if you plan on starting your own website, you’ll need to pay for the domain, hosting, and tools to accelerate your growth.

Great Way to Earn Passive Income

Affiliate marketing consumes high effort initially, but it reduces with time.

Once you build a decent audience online, you won’t have to inject full-time hours to make profits. The snowball effect is the best part of affiliate marketing.

Sure, you’ll need to roll out new content regularly, which will still take some effort. But your old content can generate customers for months and even years.

In that sense, it’s a great stream to generate passive income.

In fact, most people are earning a decent passive income just by affiliate marketing. One of the most prominent ones is Pat Flynn.

No Post-Sales Hassle

Another great reason to become an affiliate marketer is that your responsibility ends once a user purchases a product through your link.

You only have to promote the affiliate offers of the network you have joined. All the after-sales responsibility lies on the merchant.

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Disadvantages of Affiliate Marketing

Like every business model, affiliate marketing also has some downsides that you must consider before starting your affiliate marketing journey. Here they are:

Commission Based

Affiliate marketing usually works on a commission-based model.

This can be a disadvantage, especially if you make affiliate efforts in the ecommerce industry. When a visitor goes to a business and buys several things, you’d likely only get commissions for the product(s) that you shared.

Also, the commission rates are fixed, so you can’t do much about it.

Delayed Payments

Although the affiliate commissions are paid monthly, they can get delayed due to a backlog or some other financial issue with the merchant store.

People Can Remove Affiliate Links

Due to the prevalence of malicious activities online, people are cautious when clicking on affiliate links.

Sometimes, they may remove the links altogether or visit the merchant directly instead of clicking the affiliate link. Unfortunately, this can result in reduced commissions for affiliates.

Even if you have successfully introduced someone to a product, you won’t receive a commission if they don’t click on your link.

And that’s pretty much it about affiliate marketing. Now let’s jump to dropshipping and draw a comparison.

What is Dropshipping?

Dropshipping is an increasingly popular business model that’s projected to reach a staggering valuation of $1670 billion by 2031.

It’s an ecommerce business model that lets you sell products without the hassle of stocking inventory. Instead, you take orders from customers and forward them to your vendors, who then ship them to the customer.

The beauty of dropshipping lies in earning profits through arbitrage, as you sell products at a higher price than what you pay your vendors.

Key Players in Dropshipping

There are 3 key players involved in dropshipping as well:

• Customer

Places the order that the dropshipper receives. They choose their customization options from the choices provided by the dropshipper.

• Dropshipper

The one who receives the order via their website or any other channel and forwards it to the supplier.

• Supplier

Takes in the order from the dropshipper, manufactures the good, and delivers it to the customer.

Advantages of Dropshipping

Dropshipping is a lucrative business model with several benefits, making it an attractive option for entrepreneurs. Here are a few benefits of starting a dropshipping business in 2023.

No Barrier to Entry

Dropshipping is an ecommerce business model that requires minimal investment, making it accessible to anyone with an internet connection.

You have complete control over what products you want to sell and how you market and sell them; all you need is a domain and hosting.

More Opportunities to Earn

People are moving to dropshipping from affiliate marketing because the latter gives them a fixed commission on the number of products they sell.

Comparatively, the dropshipping model lets them precisely target potential customers looking to buy their products and pay once they receive their order.

With dropshipping, you aren’t limited by fixed commissions. So, you earn as much as you sell.

Easy to Scale

Dropshipping is just like an ecommerce store, and sometimes customers can’t even distinguish between the two.

Hence, it is much easier to scale compared to an affiliate website, which depends more or less on the associated merchant store.

A dropshipping store is a brand in itself. It grows with time, especially with word of mouth. At face value, the customers are purchasing from your brand.

Disadvantages of Dropshipping

Like every business, dropshipping has its fair share of drawbacks. We have listed the main ones below.

Manage Customer Support

As mentioned, dropshipping is an ecommerce business model. So you are responsible for whatever is sold and have to manage the after-sales and even handle customer support.

If any mishap happens, your brand name is at stake.

This is additional responsibility when compared with affiliate marketing.

Less Control Over Shipping

Shipping is among the main issues with dropshipping as it relies on the vendor. Since you don’t check and dispatch the product yourself, errors and late deliveries can be a problem.

This happens because the supplier ships the products at their convenience and only tells you the shipping order ID – which you send to the customer to let them track their order.

But you can minimize this problem by searching for vendors with an excellent reputation.

Low Prices in Overcrowded Niches

Choosing the right niche is crucial to be successful in dropshipping. However, due to the increasing number of dropshippers, many niches are now saturated, resulting in lower profit margins and forcing some dropshippers to operate on lower percentages.

Which Is More Profitable: Dropshipping or Affiliate Marketing?

Both dropshipping and affiliate marketing are lucrative, and their success depends upon the efforts you put into selling the products.

The profit models for affiliate marketing and dropshipping differ significantly. In affiliate marketing, the commission you earn is determined by the vendor or merchant, while in dropshipping, you have the flexibility to set your own prices.

This means that in affiliate marketing, your earnings increase as you sell more products, while in dropshipping, your profit margins are determined by your pricing strategies.

However, it’s important to note that returns and customer support can impact your profits in dropshipping, whereas you won’t incur any such costs with affiliate marketing.

Dropshipping or Affiliate Marketing: Which One Is Easier?

The truth is, neither of these models is easy, and both come with unique challenges and require dedication, hard work, and persistence.

If you’re considering affiliate marketing, you’ll need to focus on building a loyal audience that trusts your recommendations and is willing to purchase the products you promote. This takes time and effort, as you’ll need to create high-quality content and engage with your audience consistently.

On the other hand, with dropshipping, you’ll need to juggle multiple tasks, such as setting up customer support, managing inventory, and ensuring competitive pricing.

Regardless of your chosen model, you’ll need extra effort in the early stages to achieve growth. Even after your business gains momentum, it’s crucial to maintain the same level of commitment and quality to retain your audience and keep your profits flowing.

It’s important to remember that slacking off or neglecting your business can lead to decreased profits and, eventually, a loss of customers. Therefore, whether you choose dropshipping or affiliate marketing, be prepared to work hard and stay dedicated to your goals.

Increasing Earnings with Dropshipping vs. Affiliate Marketing

You’ll need to understand dropshipping and affiliate marketing’s business and profit models to increase earnings in each category,

With affiliate marketing, your earnings depend on the number of sales you make. Since the commissions are fixed, the more you sell, the more profits you make. So, you must focus on growing the audience to grow your earnings in an affiliate model.

On the contrary, with dropshipping, several profitability metrics are under your control, such as pricing, product acquisition cost, customer service, after-sales service, niche, etc. You can review each area and make necessary adjustments to make more profits.

Bottom line – with the right approach and strategy, you can earn more in any model you choose.

Final Thoughts – Dropshipping vs. Affiliate Marketing

Both affiliate marketing and dropshipping have their own advantages and disadvantages. Ultimately, deciding which business model to pursue depends on your goals, preferences, and expertise.

If you pursue affiliate marketing, your primary focus should be on growing your audience. Plus, you’ll always be dependent on the vendors and be limited by what they offer.

On the other hand, dropshipping offers more flexibility, allowing you to change vendors and set your own prices. But it also comes with more responsibilities, like after-sales services, return backs, etc.

In the end, both models are great ways to make money.