The most profitable way to earn money online is Dropshipping vs Affiliate marketing. Those who are entrepreneur in the digital market world will get confuse about which of the two is more profitable to start.
Are you sure which is the right choice for your business? If you are not sure, hope this article will help you to make understand which one is profitable to earn money.
We will focus on the comparison, advantage and disadvantage of these two earning models to decide which one is better for you.
Both Dropshipping and Affiliate marketing are hard to start. It is the common mistake of most of the people that, they just think to create an website to start online business. But keep in mind always whether it is Dropshipping business, Affiliate marketing or any other online business, it requires consistent effort to carry out the business.
Dropshipping vs Affiliate Marketing:Comparison
|Comparison Criteria||Dropshipping||Affiliate Marketing|
|Way of work||You don’t need to store inventory of products.||You refer a customer to another business and get certain percentage as commission.|
|Model of business||The amount of profit you can calculate with the following formula:|
Selling price minus the wholesale price.
The amount of profit you can calculate is just the commission on the product you sell.
|Way of payment||You sell products from your store. Customer pay to you and then you pay to manufacturer.||Whenever any customer click on the affiliate link on your website, it redirects to merchant’s website. The tracking cookies remains for a certain time on the visitor’s browser.|
|Customer support||You are directly responsible for customer support.||You are not responsible for handling the customer.|
|Commissioning option||There is no commissioning option in this model.||You will get a fixed commission by the merchant.|
|Growing Prospect||An online store will naturally grow over time.||An affiliate website will grow over time but the affiliate marketer will always dependable to affiliate website.|
|Recurrence||You will get recurring order from the customer.||An affiliate purchase is one time transaction.|
|Control of offers||You have full control over the dropshipping offers that is available to you.|| |
You don’t have the full control over the affiliate offers available to you.
|Customer data||You will have the own customer data||You will not have the own customer data, since you are not directly dealing with the customers.|
|Future||With dropshipping business your store can become a full-fledged business.||You are dependent on the retailer/manufacturer as a affiliate marketer whose products you promote|
Dropshipping vs Affiliate Marketing: What Is Dropshipping?
Dropshipping is a business model where you don’t need to keep products in stock as well as the inventory. Whenever a customer place an order of a product, you pass the order to a supplier who then ships the product to the customer. Finally you will receive your share.
The beauty of building a drop shipping business is it removes the back end inventory management.
Dropshipping vs Affiliate Marketing: Advantage of Dropshipping
The main advantage of the drop shipping model is that you don’t need to own any stock. Instead of, you sell virtual inventory that being stored and shipped directly from suppliers to customers.
- Zero Capital Need to Get Star: You don’t need to buy any product inventory, you only pay for the stock you sell. So, the risk of spending a lot of money on unsold stock item is zero.
- A wide range of Products: With Drop Shipping business you can offer a very wide variety of products. This is a plus point because wide range product selection is one of the key factors that influences customers’ purchasing decision.
- Time Saving: Having suppliers dropship for you, basically means that they are taking care of of the practical operations for you. The only things you have to focus on listing products, marketing, optimizing, supporting customers etc.
- Scalability: When you’re Drop Shipping a product with single quantity or multiple products with huge quantities, the amount of work is same for you. You just need to transfer the order information to your supplier. That means a Drop Shipping business is highly scalable and is virtually limited by the processing capacity of your suppliers. If your suppliers have limited stock or can’t handle the huge volume of your orders, you can source another dropship supplier.
Dropshipping vs Affiliate Marketing: Disadvantage of Dropshipping
- High Risk: All business has some risk. Physical aspects of the business like high packaging quality, quick handling and shipping times and stock availability are out of your hands. Sometimes you need to rely on your dropship suppliers, who are often times from the other side of the world and have a different business culture than yours. There are also a lot of moving parts which are out of your hands.
- Low Profit Margins: The most challenging part is that dropshipping world is a very crowded space. The crowd increased during the last few years. Sellers must find a unique competitive product rate in order to stand above the competition.
- Shipping Time: Shipping time is a vital factor in an online shoppers buying decision. Drop shipping your orders from suppliers instead of managing your own logistics to minimize the slower shipping time.
- Customer support: The main disadvantage of dropshipping is that as the store owner, you’re responsible to give the customer support. You can also outsource this process by hiring a virtual assistant on freelancing websites.
Dropshipping vs Affiliate Marketing: What Is Affiliate Marketing?
Affiliate marketing is the process by which you can make partnership with more established eCommerce entrepreneur in your niche and asking them to promote your products to his or her audience. In return, you pay a piece of the profit from each sale they make.
In other ways, affiliate marketing connects a eCommerce business that has a product to sell with a marketer who can sell it. It can be a great channel for first time eCommerce entrepreneurs. It’s one of the only marketing channels where you can get a 100% return on investment each and every time. All sales are tracked via affiliate links from one website to another.
The tracking of affiliate links is handled automatically by the retailer’s affiliate platform. Any time a visitor clicks on a link, a tracking cookie is stored on the visitor’s web browser that informs the retailer which publisher sent the visitor to their site.
Those cookies are valid for a set period of time(maximum 365 days or minimum 1 hour). That means the publisher only gets payment if the visitor makes the purchase within that time period,
Besides affiliate links, publishers can get access to tracking reports, additional promotional materials like banners, copy, email templates inside the retailer’s affiliate platform. These platforms also handle commission payments so publishers can expect to get payment around the same time each month, usually by PayPal or direct deposit.
Dropshipping vs Affiliate Marketing: Advantages of Affiliate Marketing
Free to start: Every eCommerce store has an affiliate program which is free to join. Anybody can sign up and join the affiliate program to promote links of the merchant. It is free of cost. The only cost of an affiliate marketer is just to manage domain and hosting.
No technical expertise: It is not necessary to have technical knowledge for affiliate marketing.
No Physical setup: There is no need to invest a capital to establish a store. Affiliate marketing does not need any physical set up of store and you can earn money right from your home.
No hassle of Shipping and Packing: You have no responsibility for packing and shipping the products. As an affiliate marketer the only responsibility of you is just marketing the product and earning an income from every sale made using your link.
No customer support: With compared to Dropshipping business no customer support is required. Customers only get redirected from the website to the eCommerce store through the links and you get a commission.
Dropshipping vs Affiliate Marketing: Disadvantages of Affiliate Marketing
Commission Based: The main disadvantage of affiliate marketing is that you are getting only commissions. This means, even if you spend more money on bringing visitors to the store through your affiliate link, you will still get fix commission – which can be lower than the amount you actually spent.
Payments Can be delayed: In the battle between dropshipping vs affiliate marketing, an affiliate marketing business may have difficulty to manage finance. This is because some merchants may be unreliable to pay the commission. That’s why the affiliate commission can get delayed due to a backlog or some other financial issue with the merchant store.
People Can Remove the Affiliate Link: Most people don’t trust affiliate links even they know it. If they come across a review website that has an affiliate link of the product, these type of people will simply remove the affiliate link or manually enter the URL of that website in the search bar to visit it. This can seriously reduce the commissions of the affiliate link.
Dropshipping Vs Affiliate Marketing: Which one is profitable?
While affiliate marketing is great for starters who don’t want to manage customer support, we believe dropshipping is a much more lucrative option. Running an online dropshipping business can make you more money than an affiliate marketing website. You can easily market your products through Facebook Ads, Instagram and Google Ads. Further, if your store is providing great quality of products, you will soon start to get valuable customers.
However, let me go through some of the reasons why drop shipping is more beneficial than affiliate marketing.
- You can set your own product prices which are higher than affiliate marketing commissions.
- Dropshippers earn more money from physical goods than affiliates do.
- You can have good traffic when running a store.
- Customers will be more likely to come back to your website to buy more.
- The cost of goods is marginal for customers.
- The everyday workload will reduce thus saving you time.
- You can build a bigger audience as your online store will gradually develop.