Affiliate Marketing vs Dropshipping
It is common that almost every entrepreneur chooses between affiliate marketing and dropshipping. In affiliate marketing, the manufacturer is responsible for carrying the inventory and shipping the products. Although you have to do the marketing, you aren’t allowed to set the price of the product. You are entitled to receive a commission.
In dropshipping, the manufacturer tends to carry the inventory and ships the product to the consumer on your behalf. But, in dropshipping, you set the prices of the product and have to undertake the responsibility of marketing. It is not easy to evaluate them at first sight.
Both these types of online businesses have been a part of many heated discussions at different affiliate forums. In this article, you get to know everything related to affiliate marketing vs dropshipping and decide which can be more profitable to you.
WHAT IS AFFILIATE MARKETING?
In affiliate marketing, companies have an agreement with the affiliate to help drive consumers to the company’s services or products. And in return, the affiliate earns an amount for referring them. Affiliates can’t alter the commission structure. In affiliate marketing, you don’t have to handle the order processing.
PROCESSING THE ORDERS – Because you are referring people to meet their requirements on someone’s online store, you won’t need to process orders. That means, you don’t have to take care of their credit cards and the amount isn’t going to your bank account either.
You don’t need to face queries whenever a potential consumer might say that their card isn’t working. That’s because you are not processing the orders when you are in affiliate marketing. This is one of the biggest benefits people love to have.
CONSUMER SERVICE – Another great advantage of being an affiliate is that you don’t have to take care of the consumer service. If you refer someone to buy a product from an online store, then they would buy the product. It is not your problem if the product reaches the consumer’s house in a broken state caused during shipping.
The consumer won’t contact you and demand that you should replace the product for a good one. Instead, they would call the company themselves and sort out the issue. Not dealing with the support system in affiliate marketing makes it a good choice for many individuals.
Suppose you are promoting an expensive piece of gadget and you don’t have the answers to all the questions associated with the super technical product. It could be a new kind of electronic equipment, and your knowledge could be limited.
When you promote the thing as an affiliate, you don’t need to worry about solving different types of problems connected with the product. The consumer service from the company is there to assist the consumer directly. Not dealing with these issues is a great advantage of promoting and selling a product.
MAKING MONEY – The only way you are going to make money in this type of online business is by earning a commission by doing sales. All you need to do is promote the product to a wide variety of audiences who are interested in the product and sell them. In return, the manufacturer would pay you the commission. Hence, commission-based sales are what affiliate marketing is about.
SO, WHAT EXACTLY HAPPENS IN AFFILIATE MARKETING?
* Promote someone else’s products
* No need to process orders
* No need to handle consumer service
* Earn commissions on sales
WHAT IS DROPSHIPPING?
If you don’t have the least idea about what dropshipping is, it is the retail technique where you don’t keep the products. Instead of warehousing, you tend to partner with a supplier who is responsible for their own inventory. The consumer and shipment details are shared with the supplier so that the consumer can receive the products directly from the supplier.
PROCESSING THE ORDERS – First of all, you are still promoting someone’s products. But, this time the process will be conducted through your online store and not that of the supplier. That means you have to process orders, consumers would put the credit card information on your website, and you have to take care of their queries.
CONSUMER SERVICE – When someone needs to query about a product, or someone received a damaged product, they would come to your website to address the issue. And, you have to handle them effectively.
MAKING MONEY – Earning money from dropshipping means you get money as profit per sale. Suppose, if someone buys a product for three dollars and it cost you a dollar to settle the order, you get to earn two dollars. However, there are other factors to consider such as the cost of paid traffic, hosting, and outsourcing consumer service.
In dropshipping, there is no fixed amount you can earn. It really matters how you price the products you are going to sell and how you maintain your expenses. Although making money with dropshipping can vary in a great way, but it means you have enough control over the situation.
Instead of making an average of around 10% commission from the affiliate sales, you can earn more with dropshipping. It greatly depends on how well you have monetized your website, sales, and your consumers.
SO, WHAT EXACTLY HAPPENS IN DROPSHIPPING?
* You promote other person’s products
* You’re processing the orders
* You’re responsible for consumer support
* You earn profits after each sale
PROS OF AFFILIATE MARKETING:
1. DOESN’T COST YOU FOR BEING AN AFFILIATE
When you are about to run an affiliate business, the costs are quite low. There is no fee to pay because the merchant takes care of the administrative fees on certain affiliate networks like Amazon Associates and Clickbank. The only cost an affiliate pays includes the cost of server and website, which is pretty less.
Being an affiliate marketer, you need to bear the cost of marketing expenses because you are the person responsible for driving traffic to the vendor’s website. Because it is a business expense, you may write it off during taxation.
2. GREAT SOURCE OF PASSIVE EARNINGS
An affiliate business is a great source for generating passive income. However, there is some upfront work when it comes to figuring the ads and produce content to assist in converting the sale. After that, you have the ads running behind the scene while you earn money.
Also, you don’t have to worry about creating products. And, there is no headache about shipping the products and entertaining queries relating to product damage. All you have to do is send the targeted audience to the merchant’s website and drive conversions.
3. NO NEED TO INDULGE IN CONSUMER SUPPORT SYSTEM
In this type of online business, the affiliate delivers the merchant with potential leads. Hence, you are not a product expert. As such, the merchant has to address the different kinds of consumer issues and provide them with an effective solution.
When the consumer isn’t convinced with the product, the merchant arranges for a refund. If the consumer needs assistance over a specific issue, the executives at the company tend to help them. Therefore, when it is about consumer inquiries, all those issues are directed to the merchant.
CONS OF AFFILIATE MARKETING:
1. YOU EARN A PERCENTAGE FROM EACH SALE
When you are comparing affiliate marketing vs dropshipping, the biggest loophole in affiliate business is that you are paid on commission. Sometimes it is seen that you have spent $100 in ads and made $50 in commission. The payout is quite lower than the dropshipping.
Even when you earn a few hundred dollars in commission, odds are that the price of the product is quite higher. That means, locating the right audience is going to cost you more. On top of that, you don’t have the liberty to set the pricing.
If people are interested in a certain product, for example, but they feel the price is too high, you can’t lower the rate to meet their demand. Because you can’t set the price tag, you are going to earn less than if you were a merchant.
2. PAYMENTS MAY GET DELAYED
Sometimes an affiliate business may have to face difficulties while managing finances. That’s because some merchants can be unreliable when it comes to depositing payments. There are several affiliate programs that make payments on time. Yet, one of the merchants you have chosen may not pay you on time.
In many scenarios, merchants are on the verge of declaring bankruptcy and tend to close down their business. Merchants won’t disclose the matter even when the affiliate is working hard to make their commissions.
As soon as the merchant declares bankruptcy, the affiliate business loses money pending in their name. This includes the amount of money spent on ads and their commission on the sales made.
3. YOU DON’T HAVE CONTROL OVER THE PRODUCTS AND THEIR PRICE
With affiliate marketing business, you don’t have control over the product you intend to promote. The products look, pricing, description, and after-sale service are beyond your control. This is something that may not please everybody.
Being an affiliate marketer, this can hamper you when you look into the matter from the advertising point of view. You can’t mention certain features because of the terms and conditions. If you haven’t received the products personally, the photos are the only resort. Those could be low-quality or even outdated, making it nearly impossible to promote them effectively.
4. SOMETIMES PEOPLE REMOVE THE AFFILIATE LINK
If you don’t make use of a link shortener, sometimes people can look at the link and discover that it’s an affiliate link. As such, they assume the products could cost them more when they buy from that link. In general, many people don’t understand that you only earn a commission on the sale.
Hence, people tend to go to the website directly you are recommending without clicking the affiliate link. If the sale is done, the merchant gets 100% of the amount. That’s because the purchase was done without clicking on the link.
This way, all your marketing efforts went into vain. Many people dislike affiliate marketers, or they are skeptical. They believe that they are about to be scammed, whereas it is not the truth. Sometimes it is quite hard to make people trust you.
In many countries, you have to disclose that the provided links are affiliate links, where commissions are earned if there is a sale. This way, it makes it easier for the person to avoid clicking on the real link.
PROS OF DROPSHIPPING:
1. MINIMAL RISK BUSINESS MODEL
When it is about affiliate marketing vs dropshipping, the latter tend to have lower risks in many ways. Similar to the affiliate business model, dropshipping doesn’t require you to carry inventory or ship products. This makes both of these business models have lower risks.
But, with dropshipping, you are exposed to lesser risk because your funds are available every week. With the affiliate business model, you need to reach a different threshold before you can cash out your earnings.
If you are an Amazon affiliate residing outside the US, you can get the payment through a gift card or cheque. But, in order to receive the cheque, you must have accumulated at least $100. Not everyone succeeds in making over $100, especially when the commission percentage is pretty low. But with dropshipping, you are paid what you have made after a single sale.
2. IT ALLOWS YOU TO MAKE HIGH MARGINS
While choosing from the two different types of online businesses, consider how much earnings you can make. In the affiliate marketing business, the commissions are pretty low compared to dropshipping. In dropshipping, you can purchase a product for $1 and sell it for $19.95, which allows you to keep a major portion of the profit after deducting the marketing costs.
With an affiliate business, commissions constitute a percentage of the price of the product. But, when you calculate the percentage along with marketing and other expenses, you are left with a meager percentage. You get along better in terms of money by dropshipping rather than as an affiliate marketer.
3. YOU TEND TO BUILD AN ASSET
When you are into dropshipping business, you are actually building an asset, which is your brand. With dropshipping, you have your own personalized website. You can make sufficient money that can be utilized in generating advertisements, content, and other sources of traffic to make more money.
After some time, if you want to shift onto another niche, all you have to do is sell your existing business to someone who is interested to take over. But, not all affiliates manage their own assets. Although some affiliates earn money by creating videos on YouTube, no one can sell their channel.
4. YOU HAVE PLENTY OF CHANCES TO LURE A CONSUMER
When you dropship products, there are chances you can retarget your potential buyers to help convert the sale. Because you are sending traffic to a specific website, in the case of affiliate business, you have zero control for retargeting. The traffic comes to your website in dropshipping.
Also, you can control the optimization of your landing pages, website design, product copy, and so on. The checkout process will match your branding. When you have more control over many things, the chances of attracting consumers and converting them increases.
CONS OF DROPSHIPPING:
1. YOU HAVE TO MANAGE CONSUMER SUPPORT SYSTEM
The primary downside of dropshipping is that you have to take care of the consumer support system. Being the store owner, you have to find a solution for all your consumer-related issues. However, you can outsource this kind of service to someone who can manage them efficiently.
You can try freelancers from Upwork.com, Freelancer.com, or similar other websites. All you have to do is provide general responses and proper guidelines for the consumer service executive to follow. When you outsource such work, you make yourself free so that you can focus more on optimization and marketing.
2. ATTRACTS IMPULSE SHOPPERS
Dropshipping is all about impulse buying. Many people tend to search the internet to compare products so as to find the best deal. In this case, those people won’t order your products. That’s because they won’t pay much for something that is available at an affordable price somewhere else.
A small number of people make their presence on dropshipping sites. Dropshippers need to make honest approaches so that people can fall in love with their products and place orders immediately.
3. NO CONTROL OVER SHIPPING
Different kinds of complaints relating to shipping are bound to happen. And, sometimes things can go wrong and you end up making the consumer dissatisfied.
Delay in shipping may happen because the suppliers want to ship as per their convenience. You may have the order ID, but you don’t know its whereabouts during transit. Problems in shipping create trouble for you and for the merchants as well.
But, you will receive a lot of negative emails and tend to lose consumers. People may buy the same product from the same supplier without knowing the fact. Delayed shipping and the consequence that follows is another drawback of dropshipping.
HOW TO MAKE MONEY WITH AFFILIATE MARKETING USING PLATFORMS AND NETWORKS:
Now that you have a clear understanding of the affiliate marketing business, here are five easy steps to create your own affiliate plan and earn money.
1. BUILD A BLOG OR WEBSITE FOR YOUR SPECIFIC NICHE
To generate an online income, you need to sort out two things:
* How to create your blog or website
* What will they carry
For the first part, you would need a server and Webhosting service. There are lots of Webhosting services such as SiteGround, Bluehost, HostGator, and so on. And, WordPress helps you build a professional-looking website in no time. WordPress has lots of tools perfect for affiliate marketing.
Having the right niche is very important here. Remember that your target is to combine expertise and passion that other people might be interested in. That way, you can promote products that your targeted audience wants to buy.
2. SELECT AFFILIATE PRODUCTS OR SERVICES TO PROMOTE
If you have a clear picture of your preferred niche, selecting affiliate products for promotion should be an easy task. Joining an affiliate network is the best way to choose your affiliate products. Here are some of the many affiliate platforms and networks you can try.
* CJ Affiliate
* Amazon Associates
* eBay Partner Network
Affiliate networks are nothing but businesses that connect affiliate marketers with merchants so that both of them can make some money. Affiliate networks have enough data on how well a specific product sells. You can use the data to improve your profits.
3. CREATE QUALITY CONTENT AND PROMOTE YOUR PRODUCTS
Remember that some affiliate networks need you to have sufficient good content, site traffic, and average monthly views before they accept you as their partner. This means you need to make content creation your first priority before starting out.
The two most popular contents are videos and blogs. While you create your content, place the affiliate links where they get maximum exposure. For blogs, place the links within 25% of the post. For videos, it should be within the first few minutes of the recording.
4. MAKE USE OF AFFILIATE MANAGEMENT PLUGIN
While you go deeper into affiliate marketing, a time comes when you need to keep track of where you have embedded the affiliate links. This becomes quite important when your affiliate partner tends to update the product links.
Going through hundreds of expired links and updating them especially when you have forgotten their location, is a massive task. Affiliate management plugin allows you to keep better track of all your affiliate links.
5. ATTRACT MORE TRAFFIC TO YOUR WEBSITE
With more quality traffic, you can attract more sales from your affiliate program. Make sure that your website has a great traffic inflow. Entertaining and engaging content is bound to attract visitors and convert them.
You can give content to other websites for free, and that could bring in more traffic to your site. Email marketing and personalized newsletters can work wonders for your affiliate marketing website.
HOW TO MAKE MONEY WITH DROPSHIPPING USING DIFFERENT PLATFORMS:
Here are some important steps to make sure you earn more money with dropshipping.
1. PICK THE RIGHT PRODUCTS
Extensive market research is required to understand what consumers are looking for. When you sell a niche product, chances are that you won’t have lots of competition. And, there has to be a demand for the products you intend to sell.
Thoroughly research each and every aspect of the products you need for your dropshipping website. Pay close attention to the reputation of your supplier by going through consumer testimonials and reviews.
2. UNDERSTAND YOUR TARGET MARKET
It is pretty crucial to know whether there has been a demand for the products you desire to sell. Double-check to find out whether your products should be able to provide an effective solution. When you have a distinct understanding of the market requirement, it would help you a lot.
You may notice that certain products tend to move only in specific times within a year. Having information about the right keywords lets you know what people are looking for. Try to target the right person with appropriate products.
3. KEEP A CLOSE EYE ON WHAT YOUR COMPETITORS ARE DOING
You would get lots of valuable information when you keep a close watch on what your competitors are pursuing. See what kind of products they have in their inventory. Find out if they use other kinds of platforms rather than the eCommerce ones.
While doing so, you may find some of them operating on Alibaba, Etsy, Amazon, and eBay, among others. Sometimes you need to buy from them. This way, you get a chance to see how their products appear when they are delivered to consumers.
4. DEVELOP A GOOD MARKETING PLAN
Having a great marketing strategy keeps you ahead of the competition. Don’t forget that there is a huge competition in the online arena. And, your competitors are doing everything necessary to stay ahead in the business.
You should, therefore, invest more in marketing your business. Make good use of your blog content, social media platform, and analog advertising. Optimize your website for mobile and SEO. This improves your rankings on search engines.
5. LOCATE THE RIGHT SUPPLIER
There are plenty of suppliers available, and you can find them by searching the internet. Some of them are:
* Dropship Direct
* Sunshine Wholesale
* Worldwide Brands
Make sure you pay attention to the following when you’re searching for a supplier.
* The supplier must have a good reputation
* Testimonials and reviews should be encouraging
* Smooth integration of your platform with supplier
* Sufficient room to earn profit
* Produce extra effort to fulfill your orders
* Variety of products with outstanding quality
Going through affiliate marketing vs dropshipping, you may think that there isn’t a fast response. Some drawbacks can ask for attention in favor of one of the business models. But, the overall comparison reflects that you can earn lots of money with both the options, with some efforts.