Are you looking to find an authentic and steady source of income online but confused about choosing between Affiliate Marketing VS Dropshipping?
Well, both are great eCommerce business ideas. However, the biggest difference between dropshipping and the standard retail model is that the selling merchants don’t keep the product stock in their own inventory but only act as the middleman.
So, let’s study the difference and find out, what is more profitable dropshipping vs affiliate marketing?
Dropship vs Affiliate Marketing — Explained
What is Dropshipping?
In simpler terms, Dropshipping is a method of retail fulfilment.
It is a process where a retail store doesn’t keep stocks of the products it sells. Instead, when a store uses dropshipping for selling the products, it purchases the item from a third party (usually meaning a third-party wholesaler or manufacturer). Then, the retail store directly ships the items to the customers.
As a result, the retail seller doesn’t have to deal with the product but acts as a passage between the manufacturer and the consumers.
What is Affiliate Marketing?
Affiliate marketing can be defined as:
«A type of performance marketing in which business companies collaborate with multiple affiliates for bringing them customers by using affiliate’s own marketing channels.»
The affiliates usually promote the business by marketing their products and services on their own website page, blog site, social media platforms or email list.
What do the affiliates get in return? Well, they get the commission. Whenever a customer clicks on an affiliate link in order to make a purchase, the affiliate earns some amount of commission.
Functional Uniqueness: How Dropshipping works differently from Affiliate Marketing?
Affiliate vs Dropshipping are two very distinct e-commerce business models.
Dropshipping involves selling physical products without holding inventory. You partner with suppliers who ship products directly to customers.
In contrast, affiliate marketing involves promoting products or services from others and earning a commission on sales generated through your referrals.
Note: The amount of commission that an affiliate earns varies depending on the business and the affiliate program. Some businesses pay a percentage of the sale price, while others pay a fixed amount per sale.
How Dropshipping Works?
Dropshipping allows you to focus on marketing and customer service in a more detailed manner, avoiding the costs and complexities of inventory management. It’s like running a digital store without the hassle of stocking products.
It’s a flexible way to start an online business. All you need to do is choose the best and most reliable suppliers and provide excellent customer support for your success.
Here’s how dropshipping works:
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You Choose the Best Products:
Firstly, you have the freehand in product selection. You can select products that you want to sell and find the best suppliers or wholesalers of that product. Just make sure that the products you choose are all related. This helps to make sense of your overall product catalogue as they are going to be listed in your online store.
Whether you have a website or a shopping platform like Shopify, you need to create your own product catalogue.
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Market Your Store:
The next step is to market the products that you have chosen for your store. You can either market the products separately or promote your store as a whole using your blog pages and social media platforms.
Marketing and promotion involve some interesting, eye-catching work like creating attractive product listings, making engaging content, and running product marketing campaigns.
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Time to Fulfill Customer Orders:
After marketing your chosen products far and wide on every possible marketing platform, it’s time to sit back and enjoy the sales revenue. Through the promoted product ads, you’ll find potential customers for the items you have listed in your store.
Now, as soon as they place an order in your store, your job is to get the product from your best suppliers. You don’t have to have the product in the inventory. Instead, you can just be the person who transports one item from the wholesaler to the potential buyer.
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Maintaining Supplier Connections:
After you get an active order from a potential customer, you need to quickly purchase the product from the supplier before it gets sold to others. Here is the part where you are tested for your quick responsiveness.
For this, you must have a good connection with the suppliers. You’ll be able to easily arrange the purchased product. You provide your supplier with the customer’s home address so that the supplier directly ships the product to the customer’s address. This way, you don’t handle the product physically at any point.
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Enjoy Your Profit Margin:
Now, it’s time to enjoy your cut of the deal. The difference between the price at which you sold the product to the customer and the price you paid the supplier is your profit.
You can keep as much profit margin as you want, keeping in mind the average market rates for the chosen items.
How Affiliate Marketing Works?
Affiliate marketing is like being a digital middleman working as a bridge between the producers and the consumers.
As an affiliate marketer, you will promote products or services offered by other business companies through your blog or social media pages. When someone clicks on your unique affiliate link (specific to your blog site) to make a purchase, you earn a commission.
Here are five key characteristics of affiliate marketing:
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Performance-Based:
Affiliate marketing is based on a performance-driven approach where you earn commissions through making actual sales. Your earnings depend upon customer actions triggered by your effective affiliate marketing of the business product links.
This means you only pay for the results and use performance marketing for promotion.
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Low Risk:
Affiliate Marketing has relatively a lower risk index as compared to the dropshipping business. It’s a low-risk model meant for affiliates to earn money online. So if you’re an affiliate marketer, you don’t need to invest money in product research, manufacturing or inventory management.
Instead, your sole focus or investment is your time and efforts that you put into promoting the products to your ideal buyers.
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No Inventory or Customer Support:
Being an affiliate marketer, you get to enjoy a more relaxed income stream since you don’t have to manage product inventory or customer support.
Once you refer a customer through your affiliate links, the responsibility of producing a quality product, product delivery, and answering customer inquiries is not your headache. The business company itself is responsible for the product vs customer experience.
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Diverse Product Range:
As an affiliate marketer, you are not limited to any particular product category or niche. You can freely pick any product whatsoever. You have a wide range of selection opportunities to take your favourite pick of products or services.
So, make sure you choose items that are suitable for your blog niche and audience. This diversity allows you to adapt to changing trends and audience preferences.
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Flexibility:
Affiliate marketing offers flexibility in terms of when and how you promote products. You can integrate affiliate links into various content types, including blog posts, social media, email marketing, and more.
These characteristics make affiliate marketing an attractive option for people who are looking to monetize their online presence without the complexities of product management. It helps to generate more leads for the businesses.
What’s the Difference Between Dropshipping and Affiliate Marketing
The main difference between affiliate vs dropshipping is that in dropshipping, you are the seller of the product, while in affiliate marketing, you are simply promoting someone else’s product.
Here is a table that summarizes the key differences between dropshipping and affiliate marketing:
Advantages and Disadvantages of Dropshipping
Dropshipping and affiliate marketing are two different ways to make money online and both the business models have their own set of advantages and disadvantages.
Advantages and Disadvantages of Dropshipping
Overall, dropshipping can be a good business model for entrepreneurs who are looking for a low-cost and easy-to-start business.
Advantages and Disadvantages of Affiliate Marketing
Overall, affiliate marketing can be a great way to earn money online, but it’s important to be realistic about your expectations. It takes time and effort to build a successful affiliate marketing business.
Affiliate Marketing or Dropshipping: What’s Better?
The best business model for you will depend on your individual skills, interests, and resources. If you are looking for a business model that is easy to start and has low overhead costs, then dropshipping may be a good option for you.
If you are looking for a business model that is low-risk and requires minimal upfront investment, then affiliate marketing may be a better choice.
So, which one is better for you: Affiliate vs Dropshipping?
Dropshipping allows more control over the products you sell, while affiliate marketing doesn’t require you to handle inventory. You can also choose to do both affiliate marketing and dropshipping at the same time. This can be a good way to diversify your income and reduce your risk.
FAQ
What is the main difference between dropshipping and affiliate marketing?
Dropshipping involves selling physical products without holding inventory, while affiliate marketing involves promoting products or services from others and earning a commission on sales generated through your referrals.
What are the advantages and disadvantages of dropshipping?
Advantages of dropshipping include low costs and easy startup, while disadvantages may include the need to manage inventory and handle customer support.
Is it possible to do both affiliate marketing and dropshipping at the same time?
Yes, it is possible to do both. Some people choose to diversify their income and reduce risk by combining affiliate marketing and dropshipping. This allows for more control over the products you sell while also benefiting from not needing to handle inventory.