Affiliate Marketing vs Dropshipping: Which one?
When I was looking in to starting my online business, I researched lots of ways to make money from home. But I was torn between two options, affiliate marketing and drop shipping. As you found this post, you are probably at the same point I was. I chose affiliate marketing, but it doesn’t necessarily mean it is the best choice for you. So in this post I am going to outline affiliate marketing vs Dropshipping. I am going to start with the very basics of each business type.
What is Affiliate Marketing?
Affiliate marketing is promoting products or services for other companies in return for a commission. By creating content in the form of reviews, you build up an online reputation for being an authority in a niche. Your site is monetised through affiliate links. When people buy through these links, you get rewarded with a commission.
What is Dropshipping?
Dropshipping is a where a store doesn’t physically hold the stock. When it sells a product, it buys it from a third party who sends directly to the customer. As a result, the merchant never sees or handles the product.
Similarities Between Affiliate Marketing and Dropshipping
- You don’t need to buy stock or ship anything yourself
- Relatively low-risk business models
- High earning potentials
- Easy to start
- They both require similar skills. For example, creating ads and driving traffic to a landing page
- Cheap to start up
Pros and Cons of Affiliate Marketing
As I said above, affiliate marketing is a commission based business. An affiliate marketer promotes a product or service that someone else sells. They get a commission for every sale that they are responsible for. When you see a review online, there is s very good chance that the “click here to buy” button will earn the content creator some money if you buy it. Therefore, it is a potentially high profit, low cost business model.
Pros of Affiliate Marketing
- Excellent way of making money – By starting an affiliate marketing business, you can work from anywhere as long as you have a computer with an internet connection. But, you can also earn money while you are asleep or doing something else. Your content is there all the time, therefore, once you have an established website it can be earning money for you all the time.
- Don’t need to worry about customers too much – To build your reputation, you will need to interact with visitor to your site. This is done through comments, mailing lists and social media. However, you don’t have to worry about customer service. Your affiliate marketing will take the user to the merchant. Therefore, customer service isn’t your problem.
Cons of Affiliate Marketing
- It is a slow burner – It takes a long time to earn money affiliate marketing. You don’t get a certain amount of money for the hours you put in. It happens when it happens, it will take several months or a year to start seeing profits.
- You only get a percentage – This makes advertising difficult, because if you spend a lot of money on an advert, you may not make enough money to cover the cost of your advert. Therefore, you need to make sure your content is SEO friendly to attract users without having to spend money on adverts.
- You don’t always get your money straight away – Sometimes you have to wait until your commissions hit a threshold before you are paid.
Pros of Dropshipping
- Low risk – Like affiliate marketing, drop shippers don’t hold any stock.
- Potential high earnings – It is possible to have high earnings with certain products. If you get it right, your profit margin can be huge.
Cons of Dropshipping
- Customer support – As you own an online store, you are responsible for customer support. There can be a lot of issues you have to deal with.
- Stock shortages – This is the main problem, sudden stock shortages is something you can’t control.
- Increase in cost of goods – People that actually hold stock pay less for the product than a drop shipper would. This is because they have a relationship with the supplier. They also get inside information, marketing incentives and bonuses.
Higher Fulfillment Costs – The drop shipping process requires that you pay the real cost of stocking, picking, packing, and shipping, as well as a large mark-up. This means that drop shipping costs rise as your sales grow. However, if you stock merchandise yourself, you have more control over these costs.
Affiliate Marketing vs Dropshipping, which one wins?
It’s a tough one to call. I think it depends on how you want to work. Affiliate marketing takes longer to make money, but you don’t have to worry about external issues as much. Dropshipping has the potential to earn money quicker, but it does have more risk associated with it, that you have no control of.
If you are still trying to decide, I may have a good option for you. Start with affiliate marketing and once you have built up a following and regular traffic, you could start dropshipping on your website. You could test the water by slowly introducing Dropshipping to your audience. Just make sure you choose relevant products to your niche.
Check out Shopify for information on Dropshipping.
Check out Wealthy Affiliate for information on affiliate marketing.
**UPDATE – I have gone in to more detail on affiliate marketing and drop shipping since I created this post**