Affiliate marketing and drop shipping are often hailed as the best way to build an internet-based business. These two methods let you harness the power of digital marketing to build a profitable online business. For the uninitiated, telling the two business models apart might be a bit of a pickle and impossible to determine which of the two businesses is more lucrative.
That sparks a lot of affiliate marketing vs dropshipping debates, some of which are hardly conclusive. While both business models are primarily internet-based, they’re fundamentally different and use different strategies and approaches to generate revenue. To tell them apart, you need to understand how each model works, their strong points as well as the downsides that come with each of them.
What is Dropshipping?
Dropshipping is an e-commerce business model that centers around the arbitrage process. It involves sourcing for products from various suppliers and manufacturers, then selling them at a profit through an online store. Simply put, dropshipping lets you fill the needs of your customer without carrying any inventory.
The first process in this business model entails identifying a range of products that you will sell on your webstore and identifying a target market. From there, you can go ahead and set up the online store complete with an ordering and checkout system. Once the store is set up, you must roll out a marketing campaign to engage and attract customers.
The difference between dropshipping and other forms of online businesses becomes apparent after a customer places an order. Since you don’t carry any inventory, you leave it up to your suppliers to process and fill the order. Once they’ve packaged the item, the supplier then ships the ordered goods to the customer’s address.
Customers pay for the items upfront when ordering through your dropshipping site, and then you pay the supplier. You earn money through arbitrage since you get to keep the difference after paying the supplier without having handled the product.
This business model is particularly attractive to first-timers because there’s no need to carry inventory. It allows you the freedom to test various products before making a full commitment. It also calls for small capital injection when starting out.
Dropshipping Top Features
Low Entry Bar
A domain name and web hosting are all that is required when starting out in dropshipping. That makes it one of the best low-cost online businesses to start since inventory is controlled solely by customer demand. Better yet, customers pay for the product upfront; then you use the funds to pay the suppliers.
The business model allows you total control over the range of products that you sell down to the packaging and pricing. Since you get to carry no inventory, you can sell as many products as you wish on your site. All you need are reliable suppliers who will fill in the orders as soon as they are placed on your website.
Limitless Earning Potential
Since there’s no risk of accumulating dead or obsolete stock, there’s no limit to the number of products you can have in your dropshipping store. It gives you the freedom to select any product you wish as long as there’s a market for it or you can turn a tidy profit selling it. You have a free hand setting the prices on each item in your portfolio, which assures you of a tidy profit from each piece.
In addition to selling your products, this business model lets you in on affiliate programs from major drop shipping companies, including AliExpress and WorldWideBrands. That gives you a chance to grow your income further.
Great Control Over Marketing
With dropshipping, you’re in charge of the marketing strategy and driving traffic to your website. You have total control over search optimization, sales copy, web site design, landing pages, and more. You can customize every aspect of the marketing process, including rolling out an email marketing campaign. You can use any trick in the online marketing handbook to reach your target market and direct traffic to your web store.
No Holds Barred
There’s no one looking over your shoulders and scrutinizing your activities when running a dropshipping business. Suppliers are only too glad to have you helping them sell their products. It means that you’re not at the mercies of any company and can add or drop any product you wish to your online store.
Huge Growth Potential
With dropshipping, you can create and grow your branded line of products. Most manufacturers are amenable to supplying you with custom branded products when your orders meet their threshold. That holds the potential of building and growing your branded line of products into a successful company. In essence, dropshipping is the fastest way to build a brand without incurring massive manufacturing costs.
You’re In-Charge of All Business Operations
Save for the manufacturing part, you’re in charge of every other aspect of the business. You’re in charge of building a website, creating the marketing copy, optimizing for visibility, and creating a marketing strategy. You also have to handle the customer support of your business, including customer complaints and returns. Luckily, you can outsource most of these tasks if you have neither the time nor the expertise to handle them yourself.
Little Control Over Your Supply Chain
Dropshipping leaves you at the mercy of your suppliers as you have no control over the quality of the product, return policies, and fulfillment speeds. That makes it quite tricky to handle customer complaints and product returns. You can only hope that the supplier addresses any problems that crop up while doing your best to reassure your customers when something goes wrong.
What is Affiliate Marketing?
Affiliate marketing is a form of e-commerce business that entails promoting items offered by an online store or a manufacturer. It involves using referral links to drive traffic to another online store. You earn a commission whenever a customer follows one of these links to a commerce site and buys the item you’re promoting. The e-commerce store or the manufacturer sets the commission structure as well as the payout timelines.
The business models entail creating a web site and using it to promote your choice of products. The core purpose of affiliate marketing sites is to help customers make informed buying decisions. These are content-heavy sites populated with quality product reviews, buyer’s guides, and other informative articles.
Your success as an affiliate marketer depends you on your ability to match shoppers with the kind of products they are looking for. Successful sites focus on solving the reader’s main points when looking to buy an item. Solving these problems convincingly and transparently increases the likelihood of a customer using your referral links to buy a product.
Additionally, you have to optimize the site for online visibility and improve its ranking to increase the number of visitors.
Highlights of Affiliate Marketing
Low Entry Barriers
E-commerce store use affiliate programs to grow their sales and increase their business reach. As such, there are no costs to joining an affiliate program. You only need pay for a domain name and hosting to get started as an affiliate. While there are other costs associated with affiliate marketing, a live site is all you need to get started and make some money promoting merchant links.
An Excellent Passive Income Source
Affiliate marketing follows a set it and leave it business model, making it an excellent source of passive income. Successful affiliates create and put systems in place to help their sites run seamlessly. Once you’ve laid the groundwork, you only need periodic updates to maintain the site’s visibility on the internet and grow traffic.
Affiliate marketers promote any products sold by the companies behind their chosen affiliate programs. You only need to direct online traffic from your website to the e-commerce store you are affiliated with. Your involvement ends when a customer follows an affiliate link to the online store. The online store handles payment and fulfills the orders, limiting your participation to just directing the customer to the store. Once the sale is concluded, your commission is calculated and credited to your account.
Limitless Earning Potential
With affiliate marketing, you only need to direct online traffic to your favorite online store or stores to earn a commission. Large e-commerce sites such as Amazon boast a wide range of products giving an almost limitless selection of items to promote through your website. Additionally, you can have more than one affiliate site and can join more than one affiliate program. Some companies and manufacturers also run affiliate programs with handsome payouts giving you a wide selection of affiliate programs.
Affiliate Programs Have You Under Their Thumbs
Online stores and companies hold all the affiliate marketing cards. They dictate the commission rates, terms, and conditions for all affiliate marketers and change them regularly to suit needs. They can lower or raise the commission levels as they see fit. They can also revoke your affiliate membership if they so wish or if you violate the terms of engagement.
It’s Highly Competitive
There are more than half a million affiliate marketing sites on the internet, making the sphere quite competitive. Some of these sites have a rich history and command a considerable portion of the market, making them quite hard to beat. However, there’s always room for one more affiliate marketing site if you take the time to do it properly.
DropShipping and Affiliate Marketing Similarities
Although both business models are vastly different, they have quite an overlap and a lot of features in common.
- They are both low-cost business ventures
- Both are relatively low risk and beginner-friendly
- They have limitless earning potential
- They don’t need you to carry inventory
- They require excellent online marketing skills
- They’re easy to launch and run.
Differences Between Dropshipping and Affiliate Marketing
For all their similarities dropshipping and affiliate marketing are quite different.
- Drop shopping entails creating an independent online store while affiliate marketing sites are dependent on companies behind the affiliate program.
- With drop shipping, you need to liaise with manufacturers, often based outside the country, to supply you with products. In affiliate marketing, you only need to refer customers to an online store or a company’s website.
- With drop shipping, you can create your own line of branded product lines. With affiliate marketing, you have to sell products carried by the company or the online store.
- You have full control when running a dropshipping business while your business is wholly dependent on the company behind the affiliate program.
Drop Shipping and Affiliate Marketing: Which is More Profitable?
Dropshipping is more profitable. It lets you create an independent store where you have full control over the product line you’re promoting. With careful product selection, you can have your store carrying a unique range of products with high market demand.
The scarcity can give you an edge when pricing your products, increasing the likelihood of turning a tidy profit. Most drop shippers source their products cheaply from countries like China then put a huge markup on them. It’s not uncommon to source a product for $1 or less then sell it for $20.
The massive earning potential makes dropshipping more lucrative compared to affiliate marketing. In the latter, the commissions are fixed by the companies running them and often work out to a small percentage of the price. Sometimes these companies lower the commission payable on some items, which reduces the amount of money paid to their affiliates.
Can You Combine Dropshipping and Affiliate Marketing?
Yes. Savvy internet markets have figured a way to have the best of both worlds. Many affiliate marketing vs dropshipping debates fail to explore their compatibility. Since they both revolve around building online audiences, it is possible to run both business models from the same website.
For instance, you can start out with an affiliate marketing site and then integrate dropshipping as your business grows. Building an online audience is crucial to creating a successful affiliate site. It entails creating a professional-grade website, populating the site with superior content, improving the site’s online visibility and SEO, and building site authority.
Building a site’s traffic backed by useful and informative content lends credibility to your website and build’s trust with your audience. That increases the likelihood of the target audience buying the products you review or recommend on the website using your affiliate links.
Once you’ve built a large online audience that trusts your recommendations, you can introduce dropshipped goods to your store. Adding a store to your website can increase the amount of revenue generated by your affiliate marketing. Initially, most of the work is upfront, and it entails adding products to the store and writing product descriptions. Later, you’ll have to roll out a marketing strategy, manage orders, and handle customer service. Luckily, you can outsource most of this work to skilled experts.
Coupling the models boosts your revenue and speeds up the growth of your business. It also affords a chance to test the waters if you’re skeptical about venturing into dropshipping. Starting out as an affiliate marketer lets you build a highly targeted audience, which makes it easy to choose relevant and popular products.