Looking For A New Income Stream? Affiliate Marketing Vs. Dropshipping

In recent years, affiliate marketing and dropshipping have been two of the most popular ways to make money online. However, most newbies in the digital marketing world often need clarification about these two options and wonder which can offer a more profitable business.   

This article compares affiliate marketing and dropshipping to help you decide which online business model to go with.   

Affiliate Marketing Vs. Dropshipping: A Brief Overview  

Affiliate marketing means promoting other brands and their products and services to help them generate revenue. Meanwhile, dropshipping allows you to set up an online business on dropshipping-enabled platforms like Oberlo and sell another business’s products under your brand name.   

Both business models eliminate the need for you to carry inventory and take part in the shipping process. Let’s take a closer look at each business model.  

Understanding Affiliate Marketing  

Affiliate marketing is performance-based advertising. With this method, you promote services and products you believe in and earn money in the process. Businesses reward affiliate marketers for every visitor or sale from their affiliate links. Generally, there are three ways to earn through affiliate marketing—commissions on sales, generated leads, or link clicks. Affiliate marketing is performance-based advertising, but it's important for affiliate marketers to be cautious of potential scams and ensure the legitimacy of the programs they engage with for avoiding affiliate marketing scams.

Due to its nature, affiliates are usually influencers, publishers, writers, or web content creators.   

Pros Of Affiliate Marketing  

• Low Cost  

The costs are low when running an affiliate marketing business. Typically, there are no fees for affiliates to pay since the merchant often covers admin fees on most networks like Amazon. You only pay for your server, website, and marketing costs.   

• Passive Income  

Affiliate marketing is one of the best sources of passive income today. Although it will need upfront effort to produce content and run ads, once you’re done, this side hustle allows you to generate a continuous income stream for the long term.  

• No Customer Support  

With affiliate marketing, you advertise a business’s product or service. That’s all. You don’t have to worry about customer service since users are directed from your website to the business’s store or website through your links.   

Cons Of Affiliate Marketing  

• Commission-Based  

As mentioned, affiliate marketers are paid via commissions. So, even if you spend more money and time bringing visitors to the store, you’ll be paid a fixed commission—which is often lower than what you spend—and there’s nothing you can do about it. Fortunately, it won’t require much effort once you set it up and allows you to earn passive income.   

• Wasted Links  

People sometimes ignore the affiliate link accidentally or on purpose—whether they missed it and Googled the product after reading about it from your blog or skipped the link because they think it costs more to buy through it.   

Either way, since they didn’t click your affiliate link, the business takes 100% of the profit, wasting your marketing efforts.   

Understanding Dropshipping  

Dropshipping allows you to run a business without creating or storing products. It enables you to sell products from manufacturers and suppliers under your brand name. Whenever a customer orders a product, you pass it to your supplier for manufacturing, packaging, and distribution.   

This option is best for amateur e-commerce entrepreneurs or those who want to test products in various markets.   

Pros Of Dropshipping  

• Potential For Higher Income  

Unlike affiliate marketing, where you earn a commission for every successful purchase, dropshipping allows you to set your own price and get whatever profit you make from sales. So, as you increase the price of a product, you also increase your earnings.   

• Immediate Payouts  

Dropshipping allows you to receive and cash out your first sale straight after the customer pays for the items. Unlike affiliate marketing, there’s no need to accumulate a specific amount to get paid.  

• Easier To Scale  

You’ll have a higher chance to attract and re-target customers with dropshipping. You can sell various products and reach a wider audience, allowing you to scale your business long-term and build more wealth.   

Cons Of Dropshipping  

• Customer Support Can Be Problematic  

Since you’re building your own brand, you are responsible for customer support, ensuring client satisfaction.   

• No Control Over Quality  

Choosing the wrong manufacturers and suppliers can cause customer issues such as product defects or shipping delays, which can ruin your brand’s reputation.  

• High Competition  

As a low-risk business model, more people are starting their e-commerce stores using this method. This has created a saturated market where other merchants may sell the same products as yours, making it difficult to stand out from the crowd.  

Takeaway  

As you can see, affiliate marketing and dropshipping are newbie-friendly business models. Both options allow you to run a business without the stress of manufacturing and shipping products, but they will require some work and effort to start. However, once you have everything set up, affiliate marketing and dropshipping allow you to generate steady streams of income with minimal effort in no time.   

Having its own set of advantages, which business model works for you will ultimately come down to your skill set and drive to succeed. And while some people will likely choose only one, others take advantage of both options to increase their income.