Dropshipping vs affiliate marketing, which is better and what should you know before getting started? Although these are 2 of the most popular ways to make money online, the similarity really ends there.
You will have to weigh the pros and cons of each business model to decide what the best fit is for your lifestyle.
After being involved with both, I have my favorite and I will disclose it at the end of the post.
- Dropshipping vs Affiliate Marketing Growth and Popularity
- Which Is Better Dropshipping vs Affiliate Marketing
- Differences between Dropshipping vs Affiliate Marketing
- Dropshipping vs Affiliate Marketing | Daily Routine
- Dropshipping vs Affiliate Marketing | Products
- Dropshipping vs Affiliate Marketing | Expectations
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Dropshipping vs Affiliate Marketing Growth and Popularity
Both of these different business models have been growing in popularity due to people becoming more comfortable buying products online.
The chart below shows the growth starting from back in 2013.
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As you can see they both were growing steadily running parallel with each other.
Affiliate marketing had been the more popular model up until July of 2017 when dropshipping started to become more popular and has seen a surge.
Which Is Better Dropshipping vs Affiliate Marketing
A common dilemma for those of us looking to make money online is which business model to choose? Which one will make the most money and give us the lifestyle were looking for?
So first let me define each so that everyone is familiar with them.
Is promoting someone else’s product or service in return for a commission. An affiliate doesn’t handle the products, deal with any customers or handle the payments.
The commission is set by the merchant.
Is typically a retailer that sells products direct to the consumer without actually having the inventory on hand. Inventory is purchased as needed and shipped directly from the manufacturer or wholesaler to the customer.
A dropshipper will handle the customer service and payments.
They make a profit based on the difference between their cost and what they sell a product for.
Differences between Dropshipping vs Affiliate Marketing
So comparing the 2 business models you can see that there will be a lot less work as an affiliate than there would be for a dropshipper.
Let’s compare some of the specifics here.
1. Retail Customers Service
For example even though you aren’t handling the product as a dropshipper, you will still need to deal with the retail customers. Calls and emails are common regarding product availability, refunds or shipping problems.
One of the most annoying things that I hated dealing with while dropshipping was the customer calls about their products not arriving on time or at all.
Some vendors wouldn’t have accurate shipping information. Which made it hard to relay the tracking information to the retail customer. Then the angry customer calls or emails looking for the information.
Another problem was returns.
Many times I had customers order the wrong product or just didn’t like it once they received it.
In the case of a return the dropshipper will either have to take the return and keep it for a loss or return it to the vendor and get hit with a restocking fee.
As a affiliate marketer there is no interaction between you and a retail customer, so I have to give the win to AM on this.
(Affiliate Marketing = Win)
2. Accepting Payments
As a dropshipper you will need to accept payments on your website which means setting up a merchant account and gateway such as Authorize Net.
Plus you will need to get a tax id number and business account set up at the bank.
The cost for a merchant account will typically be $15 to $20 per month plus whatever the percentage is they take out for processing the customers credit cards.
There’s also the possibility of chargebacks that a dropshipper may have to deal with.
As a affiliate marketer there is no need to accept credit cards, so the win goes to AM on this one.
( Affiliate Marketing = Win)
3. Startup Costs
Costs for setting up a dropshipping business will vary depending on the e-commerce cart used, automation services, merchant account, email autoresponder, licenses required for your state and accounting software.
Just as an example a hosted e-commerce cart from BigCommerce or Shopify will run $29 to $300 per month. Then include the other expenses and your basic monthly expense will range from $50 to $100 per month for a minimum set up.
Starting an affiliate marketing business will require web hosting and an email autoresponder which will run $25 to $40 per month basic setup.
( Affiliate Marketing = Win)
4. Potential Profit
Trying to figure out which one of these two business models is more profitable is a little harder because of the different variables.
For example if your an affiliate marketer commissions range from 1% to 10% for Amazon, 33% commissions on email autoresponders which is also residual and some commissions can go into the $1,000’s for membership sites.
There are some membership sites where affiliates earn up to $8,000 to $12,000 commissions.
With dropshipping it can depend on what category of products you sell.
If you dropship electronics, then your profit margins will be low in the 10% to 15% range. While dropshipping jewelry will net margins 30% and up.
So its really impossible to say how much money you can make on average with either and due a head to head comparison.
(Winner = ? )
Dropshipping vs Affiliate Marketing | Daily Routine
I see a lot of people online talking about how easy it to make money with these 2 business models. I can tell you that there is nothing easy about making money online.
So what is it like to run a dropshipping or affiliate marketing business everyday?
Dropshipping Daily Routine
Updating Products – If you have a online store then one of your daily duties will be to make sure all your products are updated as well as adding new ones or removing discontinued products.If you have a large e-commerce store with 1,000’s of products, this can be a daunting task. Knowing how to use spreadsheets like excel will come in handy.
Advertising – most likely you will be doing some type of advertising if you want to generate an income from your online store. Google Adwords, Bing Ads and Facebook Ads are just some of the different advertising channels. So placing new ads as wells as updating bids for existing ads would be part of your daily routine.
Customer Service – before a customer buys they may have questions so you will be answering emails or returning phone calls.Its also possible that customers will want to change something on their order or change the shipping method.
Accounting – at the end of the day you will need to reconcile the bank account and make sure all transactions posted. Also make sure there were no billing errors from the vendor which can happen.
Sourcing New Products – In order to grow the business you will have to add new products to your online store, so looking for new suppliers should be done on a regular basis although this may not need to be done daily.
Education – learning new things is essential to growing any business. Part of the day should be spent staying on top of whats new in the industry or learning how to grow your existing business.
Also See : How To Do Affiliate Marketing On A Budget
Affiliate Marketing Daily Routine
Keyword Research – in order to get your blog ranked in the search engines doing keyword research for your blog posts is essential. So part of the day would be dedicated to looking for new topics to write about as well as which keywords to use.
Writing & Updating Blog Posts – some affiliates post everyday to their blogs while others only post a couple times per week. Either way new content needs to be added and the old posts need to be updated or tweaked to improve ranking in the search engines.
Advertising (optional)– if your using advertising such as Google Adwords, Bing Ads or Facebook Ads then placing new ads and updating existing campaigns will need to be done.
Education – things are always changing and there are always ways to improve that will increase income. Part of the day will be spent improving existing systems and learning whats new.
So when it comes to the dropshipping vs affiliate marketing daily routines, both are going to be a full time endeavor if you want to have any success.
Overall though from my experience affiliate marketing with a blog is less stressful and time consuming than dropshipping on a daily basis.
Dropshipping vs Affiliate Marketing | Products
Finding products to promote isn’t hard with either of these business models.
Finding Products For Dropshipping
When it comes to finding products to dropship there are directories such Worldwide Brands and SaleHoo that offer a list of vendors as well as products in different categories.
This streamlines the process of trying to locate vendors on your own.
The only problem is that everyone else has access to these same directories. So the same products show up all over the web creating cut throat competition between dropshippers.
To have the most success with dropshipping finding unique products or hard to get products (customizable) are the best option. Although this can be time consuming in the beginning, the benefits would be seen later on in higher profits and sales.
Finding Products For Affiliate Marketing
It is a simple process to find products for affiliate marketing as well.
Similar to the directories that list dropshipping products there are affiliate networks such as ShareaSale and Rakuten for affiliates. These affiliate networks list vendors in different categories along with the commission that they will pay an affiliate for a sale.
Signing up is fairly simple and can be done with a click of a button.
As an affiliate there is also the opportunity to sell digital products such as e-books and courses. ClickBank is a popular affiliate network that lists the different digital products that can be promoted.
Dropshipping vs Affiliate Marketing | Expectations
When starting any business online you need to think long term.
If you plan to get started online and do affiliate marketing or a dropshipping business you must realize that neither of these business models will produce an instant income.
It can take months to years to make any money if any at all.
A dropshipping business is going to be more expensive to start up and is going to require more time and resources than a affiliate marketing business.
What most dropshippers don’t realize is that it will also take money to advertise because everyone is selling the same products, using the same e-commerce carts and using the same manufacturer descriptions for the products.
So how are you ever going to get noticed?
After having experience with both business models I can truly say that when it comes to the dropshipping vs affiliate marketing question, I prefer to be an affiliate instead of a dropshipper.
Some of the main reasons are:
- Can be done with just a computer
- Only need a small budget
- Passive ( not tied to the business everyday)
- Promote big brands like Nike, Apple,MasterCard
- Residual income opportunities
Some people want you to believe that there is more money in doing dropshipping, but that is not really the case and here is why.
Unless you are selling some unique product, you will be competing with millions of other sellers. In order to get a sale its going to be based on the lowest price which results in low profit margins.
Are you going to be able to compete against Walmart, Ebay or Amazon as a dropshipper? The answer is no, but you can make money as an affiliate working with all 3 of those companies.
So along with low profit margins with a dropshipping business the expenses will be considerably more than a affiliate marketing business and will eat away at your profit.
After experiencing these things I made the decision to get out of dropshipping.
I realized that by sitting at a desk all day answering emails and phone calls from customers along with competing in price wars with other merchants wasn’t my idea of the lifestyle business that I wanted.
I did want to do my own thing but I didn’t want my life to revolve around a dropshipping business.
That is when I made my discovery.
The affiliate marketing business model was exactly what I saw as the perfect lifestyle business.
No dealing with customers, no dealing with inventory and the opportunity of earning passive income.
So after this realization I decided to learn as much as I could about affiliate marketing so that I could take advantage of everything that it offered. I joined Wealthy Affiliate a program that offered a training course and all the tools that I needed. I got started with their free account and took advantage as much as I could.
Now I am helping others discover the benefits as well.
Best of all you can get started for free the same way that I did and build your first couple affiliate websites in 5 simple steps with my help.
So if your ready to get started with affiliate marketing and your free training, then click the link below and we can get started building your lifestyle business today.
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