Dropshipping vs Affiliate Marketing

Dropshipping vs Affiliate Marketing

Dropshipping and affiliate marketing are two very different business models.

Dropshipping is a retail model where you don’t need to carry any inventory like with traditional eCommerce. Affiliate marketing is when you promote other people’s products and get paid commissions for them. Your blog can be your storefront, no need to buy anything!

So, which one should you choose? It depends on what your goals are as an online entrepreneur.

If you want to start an online business that won’t require much startup capital, dropshipping might be the right choice for you as there are no upfront costs or risk of carrying inventory.

On the other hand, affiliate marketing is probably the right choice to start an online business that will generate a significant income. You don’t have to deal with any product management.

This article will discuss the differences and similarities between dropshipping and affiliate marketing, so you can choose which model is best for your goals.

We Will Talk About:

  • What Is Dropshipping?
  • Benefits of Dropshipping
  • The Cons of Dropshipping
  • What Is Affiliate Marketing?
  • Benefits of Affiliate Marketing
  • The Cons of Affiliate Marketing
  • Dropshipping vs Affiliate Marketing

What Is Dropshipping?

Dropshipping is an eCommerce business model where you sell products without holding any inventory.

When somebody purchases a product from your store, you contact the supplier to send the item directly to your customer.

The main advantage of dropshipping is that it allows you to build a business without any up-front costs or risks involved with carrying inventory.

Dropshipping also makes it easy for individuals and businesses alike to start selling products:

  • You don’t need to worry about sourcing inventory.
  • You don’t have to manage any product fulfillment yourself.
  • You can sell your products on multiple platforms.
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How Dropshipping Works?

With drop shipping, you can sell products without carrying any inventory. You list the products in your store and set a markup for each product.

When somebody orders an item, you take the order information and send it to your supplier, who will ship directly to your customer. Dropshipping is usually done with external suppliers through an eCommerce platform or marketplace like Shopify.

Benefits of Dropshipping

With drop shipping, you get the following benefits:

1.No need to Carry Inventory.

There is no need to carry inventory, which saves you money and space. This allows you to start your business with very little initial capital. In addition, it’s efficient for testing new products on the market as there is no risk of taking a loss on unsold items.

2. Outsource Product Sourcing.

Dropshipping allows you to easily source products from manufacturers and suppliers in your country or another country if you’re looking for more competitive prices.

You can find a supplier who will drop-ship directly to your customer without the need of warehousing the items yourself. In addition, there are several marketplaces where individual suppliers are selling their products.

You can also use a dropshipping platform that provides wholesale suppliers and will take care of the product sourcing.

3. Flexibility.

Dropshipping allows you to be very flexible. For example, you can create your dropshipping store and sell products from multiple platforms like Amazon, eBay, Shopify, etc., at the same time, or choose to use a dropshipping platform that will give you access to hundreds of suppliers.

4. Multiple Products.

Since there is no need to carry inventory, you can turn on and off products whenever you like. This allows you to test new products without having to worry about leftover stock taking up valuable space in your home or office.

5. Fast Setup.

It’s fairly easy to set up a dropshipping business because there is no need for product development and fulfillment. In addition, many eCommerce platforms have a built-in drop-shipping feature.

6.No Minimum Purchase Amounts.

Since you don’t need to carry Inventory and there is no fulfillment involved, you can avoid setting up shop in high traffic areas like malls or opening a physical store that requires customers to make a minimum purchase amount.

The Cons of Dropshipping

Dropshipping is not without its cons. There are some disadvantages to this business model that you need to be aware of before getting started:

1. Time-Consuming.

Dropshipping does not involve product development or fulfillment, but a lot of work still needs to be done. For example, you have to manage your supplier relationships, and it takes time to find the right suppliers for you.

2. A Lot Of Competition.

There are many more people involved with dropshipping than there were ten years ago. However, as more people are attracted to the idea of making money without carrying inventory or managing product fulfillment, it becomes increasingly difficult to stand out from the crowd.

3. Hard To Scale.

Many drop shippers will tell you that scaling your business is difficult because you have less control over how many orders you get than if you were selling your physical products. You don’t control the production or fulfillment of your supplier’s items, so it becomes difficult to predict how many units you will sell and when you will get them.

4. Price Competition.

Your suppliers may also decrease their prices over time to attract more customers, which means you could end up with an unprofitable business. However, if you are quick to react, there are ways of keeping your prices competitive.

5. Out Of Stock Items.

Although having out-of-stock items is not necessarily bad, it can inconvenience your customers, which means fewer repeat purchases and refunds. To avoid this, some drop shippers will offer pre-orders for items that are temporarily unavailable.

6. Payment Issues.

Dropshipping is not as popular as it used to be, and there are now many beginners who have jumped on the bandwagon. This makes it difficult to find suppliers that will accept a new business with no record of selling in the past. It would be best to always prepare for this by setting up a payment system that protects you from chargebacks and minimizes disputes with your suppliers.

7. Unreliable Suppliers.

Another issue with dropshipping is more competition for reliable suppliers who will provide you with quality products. As a result, these suppliers are not always easy to find, and it takes time to establish relationships with them.

What Is Affiliate Marketing?

Dropshipping vs Affiliate Marketing

Affiliate marketing is an online marketing model where you promote someone else’s product and earn a commission every time somebody purchases the item due to your promotion.

You send customers to another company’s (the supplier) website, and they handle all customer service, order fulfillment, etc. So you only have to worry about promoting the product, but you don’t have to worry about any of the responsibilities that come with owning a dropshipping business.

How Does Affiliate Marketing Work?

You promote another company’s product through various ways, including social media, blogging, email marketing, YouTube videos, etc. The key is to provide as much value as possible through your promotion so that people will be interested enough to click on your affiliate link.

If somebody clicks on your affiliate link and they go on to purchase the item within a predetermined timeframe (usually 30 days), you will earn a commission from that sale. In most cases, you can select from a variety of commission structures, including tiered and percentage-based.

Benefits of Affiliate Marketing

Now that you have a little bit more insight into what affiliate marketing is, here are some of the benefits that come along with this type of business model.

1. Value-Based.

Your customers come first, and you only get paid when somebody purchases due to your promotion. Affiliate marketing is value-based which means that you will be rewarded for providing quality recommendations to potential customers.

2.No Business Responsibility.

As an affiliate marketer, you never have to take any responsibility for your customers. This includes shipping, customer service, and any other issues after the order is placed. Your customers will never know that you ever had anything to do with their purchase. You can promote a product and get paid when somebody buys it as a result of your promotion!

3. Potential To Scale Easily.

With affiliate marketing, you can earn money from every sale. This is good because it means that your earnings will grow exponentially as you use more promotional platforms to increase traffic and conversions.

4. Flexibility To Work On Other Projects.

One of the best parts about affiliate marketing is that you can be flexible with your schedule and work on other projects while your affiliates do all the work. You can even create multiple websites that promote different products if you want to maximize your earnings.

5. Affiliate Networks.

There are many affiliate networks that you can join that will help with product sourcing and give you access to a large pool of suppliers. In addition, affiliate networks make it easy for affiliates who don’t know where to start when promoting a new product. All you have to do is sign up, promote the products, and earn money whenever somebody purchases due to your promotion!

The Cons of Affiliate Marketing

Although affiliate marketing has many benefits, there are a few cons that you should be wary of.

1. Taxes and Reporting.

With most online businesses, you won’t have to worry about taxes or reporting unless you make a substantial amount of money every year. However, since most affiliate marketers don’t make huge incomes each year, you will likely have to report this income on your annual taxes. If you don’t, then the IRS may come after you later down the line. You can learn more about reporting affiliate marketing income here.

2. Commissions Are Usually Lower Than Dropshipping.

Although affiliate marketers earn money for each sale they bring in, the commissions are usually much lower than running your own dropshipping business. This is because it’s up to the supplier to set the commission for each sale with affiliate marketing, which is usually much lower than what you’d get with a traditional business model.

3. Availability of Products Can Be Limited.

One downside of using an affiliate network is that they usually have a limited number of suppliers they work with. That means that you will probably have fewer options when it comes to promoting different products. This can be both good and bad because the lack of competition may mean more sales for you, but it also limits your potential to diversify your income streams.

4. Competition Can Be Intense.

The affiliate marketing industry has gotten very competitive, and it’s hard to get ahead if you don’t know what you’re doing. This means that it may take you a little while to build up your website, create compelling content, and learn the ropes of affiliate marketing. If you want to earn good money with this business model, make sure that your website is better than your competitors and provides great value to your visitors.

Dropshipping vs. Affiliate Marketing the Final Verdict

So, which is better? Dropshipping or affiliate marketing? If you’re struggling to decide where to start with your eCommerce journey, then the answer might be easier than you think.

You need to ask yourself what’s more important for you—time or money. If time is of utmost importance and every hour counts when building up your business, then dropshipping may be worth considering as an option.

However, if making sure that each dollar invested in your online store pays off ten-fold matters most to you financially, then affiliate marketing could make sense because this model allows for a higher return on investment with less work involved.

No matter what route you choose, though, you’ll have a lot of work to do if you want to build a profitable business, so make sure that you stick with it and stick with something long enough to see some results. That’s the only way you can tell if a particular model will be worth your time and effort.