In 2018, two of the most profitable ways to earn money online were dropshipping and affiliate marketing. Those who are entering the digital marketing world will get confused about which of the two is more profitable to start.
So, in this post, we will focus on the pros, cons, and comparison of these two earning models to decide which one is better for you.
Honestly speaking, both dropshipping and affiliate marketing requires hard work to start. Most people enter online marketing thinking that they can easily get rich by making the website and streams of income will start popping out in no time. That is a grave mistake. Whether it is dropshipping business, affiliate marketing, or any other online business, it requires consistent effort to grow the business.
Dropshipping vs Affiliate Marketing [Comparison Table]
|How it Works||In Dropshipping, you don’t have to store inventory or ship products. Just get orders and make a profit on arbitrage||In Affiliate marketing, you refer a customer to another business and take a certain percentage as commission|
|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. The commission is usually paid on a monthly basis|
|Business Management||You sell products that are not yet in your inventory from your store. The customers pay to you and then you pay to the manufacturer||Whenever a potential customer clicks on an affiliate link on your site they will be automatically directed to the merchant’s website. The affiliate tracking cookie remains on the browser of the visitor’s browser for a limited time|
|Ease of Use||You are responsible for customer support||You are not responsible for handling anything related to store|
|Commission||As you earn by arbitrage, you can name your own price||You are paid a fixed commission by the merchant|
|Growth Prospect||A quality online store will naturally grow over time with a strong foundation||A quality affiliate website will grow over time but the affiliate marketer will always remain dependent|
|Recurrence||You get 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 Dropshipping?
Dropshipping is an ecommerce business model in which you don’t keep products in stock. Whenever a customer orders a product, you pass the order to a supplier who then ships it to the customer. You earn through arbitrage.
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Advantages of Dropshipping
Where dropshipping is a great business opportunity, it also helps users find products that they didn’t know exist because of the novel approach of dropshippers.
Below are three main benefits of starting a dropshipping business in 2020.
No Barrier to Entry
Dropshipping is an ecommerce business model that you can start with almost no investment. It is a lucrative business model that grants the owner complete rights over the type of products he wants to sell and the ways in which he wants to sell them. In fact, most of the time the only things a dropshipper will need are domain and hosting.
More Opportunities to Earn
The only reason more people are moving to dropshipping is that with affiliate marketing they only get a fixed commission on the number of products they sell. In comparison, with intelligent advertising platforms, they can precisely target each buyer who wants to buy their products and pay only when they receive an order. Even after taking out the costs of advertisements, hosting, and customer service, they still get a commission that’s higher than what they would have earned with affiliate marketing. Moreover, users can also install plugins such as AliDropship, Dropified, and various others that are associated with dropship affiliate programs including AliExpress and WorldWideBrands.
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Easy to Scale
As dropshipping is just like an ecommerce store – customers can’t distinguish between the two. It is much easier to scale it in comparison with an affiliate website which is more or less dependent on the merchant store with which it is associated. The dropshipping store is a brand in itself. It grows with time, especially with the word of mouth.
Disadvantages of Dropshipping
Like every business dropshipping has its fair share of drawbacks. We have listed the main ones below.
Manage Customer Support
As dropshipping is an ecommerce store, so whenever a customer orders a product, provide the customer support and keep them in a loop by briefing them about the order ID and timing of delivery. You can also automate this process by hiring a virtual assistant on freelancing websites.
Less Control over Shipping
While you have complete control over the type of products you can promote or keep in your store you can’t control shipping. That’s why many times people have complained that the products they ordered arrived late at their place. This happens because supplier ships the products as per his convenience and only tells you the shipping order ID – which you send to the customer to let him track his order.
However, during shipping and orders, sometimes there is a delay of many days. So, for a few days you have are literally clueless about the state of your order. For some of us, this can be a discouraging factor of dropshipping. But it can be avoided by choosing products that have ePacket delivery option available. The ePacket option allows faster delivery times and is recommended for dropshipping products from Aliexpress.
Low Prices in Overcrowded Niches
Dropshipping is all about luck and intelligent niche selection. If you accidentally select a niche that is already overcrowded you will have a hard time surviving. Because someone else will already be selling your products for a lot lower price and you will have to sell for an even lower price to bring buyers to your website.
What is Affiliate Marketing? Is Affiliate Marketing Profitable?
Affiliate marketing is a business model in which you promote the offers of someone else and earn a commission when someone purchases those offers. In comparison with dropshipping, affiliate marketing doesn’t require you to handle orders or manage customer support. Just promote and earn. The more you promote products, the more commission you can earn.
Advantages of Affiliate Marketing
Affiliate marketing is one of the oldest online business models and has many advantages for users. These include:
Free to Enter
Every prominent ecommerce store has an affiliate program that is free to join. Interested people can sign up and join the affiliate program to promote links of the merchants. It is free. The only cost an affiliate marketer has to pay is of domain and hosting.
Great Way to Earn Passive Income
To know if affiliate marketing is profitable or not you must know that it is a great way to earn passive income. You will have to figure out how to market your affiliate products, but otherwise, it doesn’t require full-time activity from your side. In fact, most people are earning a huge passive income just by affiliate marketing. One of the most prominent ones is Pat Flynn.
No Customer Support
In an affiliate marketing business, you only have to promote the affiliate offers of the network you have joined. In comparison with dropshipping where you have to cater to customer support, affiliate marketing doesn’t have any of those issues. Customers only get redirected from your website to the ecommerce [merchant] store through the links and you get a commission.
Disadvantages of Affiliate Marketing
Affiliate marketing has a disadvantage that can become a hurdle in your affiliate business if you aren’t aware of them. So, here they are:
The biggest disadvantage of affiliate marketing is that you are paid in commissions. This means, even if you spend more money on bringing visitors to the store through your affiliate link, you will still be paid a fixed commission – which can be lower than the amount you actually spent.
The price of the commission is fixed and you can’t do anything about it.
Payments Can Be Delayed
Although the affiliate commissions are paid on a monthly basis, they can get delayed due to a backlog or some other financial issue with the merchant store.
People Can Remove Affiliate Links
Most people don’t trust affiliate links even if they are legit. If they come across a review website that has an affiliate link of the product, these people will simply remove the affiliate link or manually enter the URL of that website in the search bar to visit it. This can seriously reduce the commissions of the affiliate.
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Which Is More Profitable: Dropshipping or Affiliate Marketing?
While affiliate marketing is great for starters who don’t want to mingle with customer support, I believe dropshipping is a much more lucrative option. Running an online dropshipping store can make you more money than an affiliate marketing website. You can easily market your products through Facebook Ads and Google Ads. Further, if your store is providing great quality of products, you will soon start to get a consistent stream of orders.
Moreover, a dropshipping store can also be turned into a passive business by hiring freelance staff for marketing and management activities of the ecommerce dropshipping store.
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Increasing Earnings with Dropshipping vs Affiliate Marketing
In comparison with Dropshipping, affiliate marketing is a lot easier to start and manage. In a dropshipping website, you will have to actively monitor the store and order products through suppliers. All this requires time. But in an affiliate website, you don’t have to actually do any of this because you get a commission by letting people buy through your link. That’s it.
So, if you want to start both at the same time, simply start a review website and add affiliate links in the reviews. Add a ‘Store’ section to your website and fill that store section with dropshipping products. Promote these products on social media and search engines. This will help you run both the businesses at the same time and maximize earnings.
Have we missed anything in this Dropshipping vs Affiliate marketing comparison? Let us know in the comments below.
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