Affiliate Marketing VS Dropshipping

Many young people in business with a genuine interest in online earning go for either drop shipping or affiliate marketing. The chronicles of the internet age have yet introduced us with new methods of carrying out trade.

1. Introduction of affiliate marketing vs. dropshipping

Dropshipping allows entrepreneurs to sell the products manufactured by someone else and extract their profit share from the sale. At the same time, affiliate marketing will enable marketers and entrepreneurs to market third party products and earn a commission on the sale. Both the approaches have on thin in common; the promoter or seller doesn't have to procure, produce or build an inventory.

Now and then a new phenomenon emerges that change the lifestyle, businesses and operations. The Internet has proved to be a revolutionary invention, and it has completely changed the way things work. The things that seemed magic a two decades ago are now mainstream. The Internet has not only changed the way of communication and interaction, but it has completely changed the way people work. Different business operations have been digitalized, and various new opportunities and business models, have emerged.

The Internet has created a lot of opportunities and also eliminated a lot of traditional jobs and businesses. For example, a couple of decades ago, public call office business was booming, but now it has become obsolete, and youth might not even know what a public call office was. Similarly, hundreds of new opportunities have emerged. Many new business opportunities, careers and jobs are created due to high-speed Internet, and the best example is the virtual assistant job.

The latest trend that has become mainstream in bloggers, YouTubers and digital marketers is affiliate marketing. However, affiliate marketing was first started in 1994 by PC Flowers & Gifts. This marketing technique is getting popularity with both the bloggers/ marketers and sellers who want to promote their products efficiently and without taking too much stress of digital marketing.

The dropshipping framework is a little different from the affiliate marketing framework. Let's see what the similarities between dropshipping and affiliate marketing are.

2. Resemblances: Dropshipping vs Affiliate Marketing

Both techniques have some similarities and differences. When considering resemblances between dropshipping vs affiliate marketing, following points portray the picture vividly.

• Both business models are at low risk and easy to execute models.
• No large amount of capital amount is required to initiate the business.
• Income potentials are high in both dropshipping and affiliate marketing.
• Both affiliate marketing and dropshipping do not require any warehousing and procurement of products and supply chain.
• These models are easy to execute and easy to maintain and monitor by helping the latest tools available.
• No risk of physical property damage as the entrepreneur does not own any products.
• Both require necessary marketing skills, creating attractive ads and driving traffic to a specific webpage.
• Once the sales are generated, the entrepreneur will start getting his/ her profit.
• With a little homework, you can start working on these projects immediately.

The similarities make them look the same, but critical differences create a clear divide between dropshipping vs affiliate marketing. First, we will figure out the basic concepts of both these models.

3. Affiliate marketing vs Drop shipping: what is affiliate marketing?

Affiliate marketing is a commission-based promotion program in which companies, manufacturers, vendors and retail websites offer a commission against each sale. The promoters or marketers, called affiliates promote the products online, and they get a fixed amount against every sale made through their referral links.

Affiliate marketing got exceptional fame because of Amazon's affiliate program. Affiliate marketing has become the first stop for many people who want another revenue stream and passive income. Let's consider the significant advantages and disadvantages of affiliate marketing.

a) Becoming an affiliate is free!

If you want to start an affiliate marketing venture, then be mindful that it is almost free. Merchants like Amazon Associates cover the fees and administrative costs. All the investment that you will have to make is on the website development and server.

Since both of these will remain your property, no direct costs are incurred by the affiliate programs to become an affiliate. Also, there is usually no minimum requirement for website design or eligibility. So, it is you who decides how much investment needs to go in the website development.

The only cost that you might have to pay include the ads boosting prices. The promotional costs are your headache, but if you have decided to boost ads on various platforms and devise your strategy intelligently, you can get a good return on your investment.

b) Make money even when you are sleeping.

Have you ever dreamt that you make money even when you are sleeping? Yes, it is possible with affiliate marketing, dollars will keep coming even when you are deep asleep. Once your affiliate website or blog is successful and gets loads of traffic and referral links are getting attractions, it all becomes convenient.

You have to invest some efforts in the beginning and create content which helps to convert sales. Isn't it great that you won't have to worry about the product or deliver it? All you have to do is send convertible traffic to the website of the seller.

c) You won't be serving customers.

In affiliate marketing programs, you are not responsible for customer support and customer experience. Your job will be done once the customer has landed on the product page and made a purchase.

If there are returns, replaces or refunds, the seller/ vendor is responsible for handling the customer. You won't have to worry about the product, get product knowledge or worry about other customer related queries.

4. Disadvantages of affiliate marketing

Where there are advantages of affiliate marketing, there are some disadvantages of affiliate marketing as well. Let’s get a view of what are the drawbacks of affiliate marketing.

a) Commissions are low

Affiliates earn just a portion of the profit of the sales, and commissions are low. Whereas in dropshipping you can decide on profits for yourself. Affiliate marketing programs can be divided into three basic categories.

1. High commission affiliate programs but low sales volume.
2. High commission affiliate programs with high sales.
3. Low commission affiliate programs with sales.

It's challenging to get into high commission programs with high sales volume, but the low commission programs cannot give you a good investment return. If you haven't chosen the products with a better sense, then you may lose money. Consider that you have spent 100 dollars on promoting the products through ads but made only 50 dollars in commission, in such cases you will be losing money rather than earning. Making a wise choice while choosing affiliate programs and products to promote is essential to generate good revenue.

b) Delay in payments

One of the most significant setbacks that an affiliate can suffer is if some of the companies you are affiliated declare bankruptcy, affiliates will lose money. Many great affiliate programs are consistent with their payments, but some sellers can delay payments due to various reasons.

c) Affiliate links can be ignored.

No matter how great your ad is, how good your content is and how tactically you have placed the links, there are still chances that viewers won’t click on the affiliate link. There is a perception amongst people about higher prices of products associated with the affiliated products.

It would be best to use a link shrinking tool to make the links small so that users don't get annoyed. Sometimes people can go directly to the website after reading your content about the website; in such scenarios, the seller will be getting all of the profit.

People do not trust affiliate link, and they think that this is some scan. This fear of being ripped off makes people of sceptical of the efforts made by affiliates. According to new laws, it is now mandatory to disclose your content if you are using affiliate links. So, this makes people even more conscious of the links, and they ignore the links easily.

d) You have no control

As an affiliate marketer, you are getting paid for the promotion, but you do not dictate the product's price, quality, and after-sale services. Sometimes seller increase the prices without informing affiliates which puts customers off, and your content might not align with new merchant strategy.

You won't be getting a product to test for yourself; you will have to base your content on the photos and description that the seller provides. Now, if the product is not good enough, you might lose credibility.

5. Affiliate marketing vs Drop shipping: What is dropshipping?

Dropshipping is a business model in which the entrepreneur chooses products from manufacturers, market them on his/ her website, and after receiving orders, the supplier delivers the product on behalf of drop-shippers. The dropshipping model allows the drop-shipper to sell products without keeping the inventory.

Let’s consider the advantages and disadvantages of the dropshipping business.

a) Low to zero risk

Dropshipping is a shallow risk model as you won't be having to procure any products to sell on your eCommerce store. It is even less risk in comparison to affiliate marketing. Dropshipping model is more convenient as you will be the middle man receiving the payment directly from customers. After receiving payment, you will instruct and pay suppliers with the details of the product.

Your payments are readily available to you in dropshipping whereas in dropshipping, there is minimum funds threshold you have to achieve before applying for withdrawal. If you are affiliate marketer working outside the US in Amazon affiliate, it will become difficult for you to withdraw payments. Outside the US payments can only be withdrawn by cheques or gift cards. However, dropshipping allows you to get what is yours immediately.

b) You set prices yourself.        

When you index the products from different suppliers on your eCommerce store/ website, you have complete control over the products you want to sell promote and their prices. So, this attribute of dropshipping allows entrepreneurs to earn a fair amount of profit against each sale. As an affiliate you have to worry about the commissions whereas in dropshipping you can make more from one sale then you will make from 10 sales as an affiliate.

c) Building your brand

Dropshipping will benefit in multiple ways and will help you create your own identity. The brand-building aspect of dropshipping makes it even more feasible to pursue as a long term entrepreneurial venture. This will help you grow your eCommerce store and ensure a fair amount of revenue as your eCommerce website grows. There are several other advantages of dropshipping, including the fact that your site will become your asset.

d) Multiple revenue channels

As you own the eCommerce website, you can host ads and products from other vendors. You can add a call to actions, acquire and analyze visitor data. By utilizing data, you can retarget potential customers. You can optimize your webpage efficiently and rank it on google for specific product categories.

6. Disadvantages of dropshipping

The only drawback of the drop shipping is that you have to entertain the customer's queries and get involved in customer support services. It will be a good experience if you think it that way, but there's another way you can offload the support to someone else on freelancing platforms. In this way, you can quickly free up your time and invest in some productive activity.

7. Conclusions

After exploring both the fields, we have concluded that between affiliate marketing vs drop shipping, dropshipping is the clear winner. It offers higher profits, low loss risk and brand-building opportunities. Following reasons make the dropshipping a clear winner over affiliate marketing.

1. You will be building your brand.
2. You will earn higher profits against a single sale.
3. You have the freedom to set prices and sort products to sale on your eCommerce platforms.
4. You can engage affiliates to increase traffic flow to your website.
5. Customer retention and gaining customer trust is easy.
6. Customers are more likely to order from your platform again if they are satisfied with the previous purchase quality.
7. You can promote products as your own and won’t have to disclose if you own the inventory or not.