There are so many entrepreneurial business models in the world today, and they are divided into two major categories: Affiliate marketing and Dropshipping. Some people have confusion about dropshipping and affiliate marketing. There are similarities between them, no doubt about that. But, there are also significant differences, and in this article, we will be looking at what Dropshipping and affiliate marketing are, their similarities and differences, and also which one is better in the long run.
Dropshipping is basically when a manufacturer sends the inventory to the customer or consumer on your request. In this type of entrepreneurship, you are able to set your prices of the product, and you are also responsible for any marketing-related actions.
Affiliate marketing, on the other hand, is also when the manufacturer carries the inventory and, at the same time, ships the product. Only this time, you may be responsible for marketing, but you do not get to set the price of the products. You are only entitled to a commission.
As it was stated earlier, dropshipping has some similarities with affiliate marketing, despite a lot of differences between them. Now, these similarities are:
Both Dropshipping and Affiliate marketing have potential for high earnings.
They both have relatively low startup costs.
They also have low-risk models for business.
You can start both businesses without shipping goods or requiring inventory.
To start up both businesses, you need a similar skill set, which includes the ability to drive traffic to pages, the ability to create ads, and other skills for marketing.
You can also start both businesses whenever you like.
What exactly is dropshipping?
Dropshipping may have been discussed above, but here is a more detailed description. Dropshipping is an entrepreneurial business model that allows anybody to sell manufacturers’ products on their site. They do not need to carry inventories around. When a buyer wishes to buy a particular product from the website of the drop shipper, the drop shipper, in turn, places the same order with the manufacturer or supplier. Then, the manufacturer ships the ordered products straight to the consumer. This business model is great for a first timer in the E-commerce business, or for anyone who wants to check product categories with their audience. You can also multi-task when you run this business model. Examples of drop shipping companies are Oberlo, SaleHoo, Spocket, Wholesale2B, etc.
What are the pros of dropshipping?
- Dropshipping runs a lower risk: Compared to affiliate marketing, dropshipping is less risky. First, it does not ship goods or carries inventory just like affiliate marketing, but with drop shipping, your funds are available weekly, making the risks even lower. In contrast, in affiliate marketing, there may be levels you should reach before making any withdrawals.
- Dropshipping can create chances for higher margins: When considering dropshipping, it is wise to put into consideration how much money you can make. You can buy a product at a lower cost and sell it at a higher cost, thereby forming a bigger profit even after the deduction of marketing costs. In affiliate marketing, commissions are just a certain percentage of the price of the product, and if you include other expenses, you will be left with little profit.
- Dropshipping makes you build a valuable asset, which is your brand. First, you should have your professional website. Then, make enough money through it. When you decide to quit, you can sell the brand and business. It is not the same for affiliate marketers.
- As a drop shipper, there are chances to target a customer: When you are drop shipping, it is possible to convert sales by targeting your audience. With affiliate marketing, you cannot do that since you are sending traffic to another site.
The only disadvantage of drop shipping is as the site owner; you will have to manage customer support. But, you can always outsource it for a low price, freeing up time for optimization and marketing.
What exactly is affiliate marketing?
This business model is based on the principle of commission. An affiliate marketer gets a percentage of any sale they are responsible for. Just like drop shipping, it is also a low-cost, high-profit business model. Examples of affiliate marketing companies are AffiliateNetwork, AvantLink, ClickBank, ShareASale, etc.
What are the pros of affiliate marketing?
- There is little or no cost for affiliation: The costs of affiliating are very low. The only costs in this business model are payments for their servers and websites, and also marketing costs since you drive the traffic to another website.
- It creates a good source of income: Passive income is guaranteed with affiliate marketing. There are some underground works to be done, and once it is, your ads keep making you money while you sleep. You need not concern yourself with product creation or shipping. Just send high traffic to the landing page of the merchant’s website, and you are good.
- You do not have to worry about customer support: Since you do not own the site, your work is supplying the merchant with leads. So, you need not concern yourself with customer support.
The cons of affiliate Marketing
- You only make a cut when there is a sale. You may spend more on ads to make less in commission fees. Also, you cannot set product prices, making you earn less than the merchant.
- You may also experience payment delays, as some merchants may not be trustworthy. There are affiliate programs that make prompt payments, but they are hard to find.
- Also, the merchants may be facing bankruptcy without telling the affiliate marketer, making it a significant loss to the marketer if the business closes down.
- As an affiliate marketer, you have no say over the products whatsoever. This means you cannot influence the description, price, look, or after-sales services.
Affiliate marketing and Dropshipping are both great business models with their advantages and disadvantages. So, it is up to you as a young entrepreneur to choose which suits you. If you are skeptical about the two business models, you can always try them out. Whichever works for you, stick to it.
© Lifestyle Tips by Antoaneta
Recommended books for further reading:
- Principles of Marketing, Global Edition
- The Business Book: Big Ideas Simply Explained
- The Business Book: Big Ideas Simply Explained
- Marketing 4.0: Moving from Traditional to Digital
- This is Marketing: You Can’t Be Seen Until You Learn To See