Ecommerce is a significant player in the digital marketing scene of today’s society. As a matter of fact, marketing analysts predict a staggering growth in the eCommerce industry of $4.8 trillion in revenue by 2021. Therefore, it is never too late to join the bandwagon and earn a high return on investments from eCommerce.
Ecommerce involves both dropshipping and affiliate marketing, which are both viable business models for entrepreneurs, each with a unique set of advantages and disadvantages. These two business models have become one of the most popular ways to make money in recent years.
Both of them require hard work and dedication to start and earn money consistently. Let us quickly delve into this comparison article and discuss the pros and cons of dropshipping vs. affiliate marketing.
Dropshipping Vs Affiliate Marketing Quick Comparison
| Dropshipping | Affiliate marketing | |
| Business model | Directly outsource products from wholesalers or manufacturers and deliver them to the customer directly | Refer customers to a specific business or brand |
| Mode of payment | Dropshipper’s wholesale price minus the wholesale price amounts to the total profit made by the dropshipper | Earn a specific monthly commission depending on the number of referrals you make |
| Customer data and support | Drop shippers possess customer information and handle customer support as if they are the manufacturers of the delivered products | Affiliate marketers do not have any access to customer information and are not responsible for dealing with customer support |
| Recurrence | There is a possibility of getting recurring orders from the same customer | Often, an affiliate purchase is a one-time transaction |
| Growth | The dropshipping business is similar to an online store, which is bound to grow naturally over time | An affiliate marketer is always dependent on the success of the affiliate website. Luckily, the affiliate website is likely to continue growing over time |
In-depth Comparison Between Dropshipping & Affiliate Marketing
Business model
Dropshipping and affiliate marketing are both profitable means of making money in the digital market. Dropshipping involves outsourcing manufactured and processed products to a wholesaler, who, in turn, handles the shipping of these products to the customer.
It is a supply management chain whereby the seller does not keep goods in stock but instead transfers the customer’s orders to either a wholesaler or drop shipper, who is responsible for shipping the products to the customer directly.
On the other hand, affiliate marketing involves referring a customer to a particular product page that you are affiliated with, making sure you promote the products sold to ensure the customer makes a purchase.
The more promotions and purchases your customers make, the more commission an affiliate marketer makes. Unlike dropshipping marketing, you do not have an inventory of products, and you do not get involved in the final sale and delivery of the products.
Mode of earning
The primary role of a drop shipper is to drive traffic and make sales of the specific products in their inventory. The drop shipper sets their own prices for the items, ensuring they maintain a good profit margin for themselves.
They earn a profit from the difference between the wholesale price that you pay to the manufacturing company and the selling price. Often, the wholesale price is much lower than expected, increasing the profit margin even more.
As such, dropshipping has been winning the mantle for the most lucrative business model over affiliate marketing, mainly because of its flexibility.
In affiliate marketing, it involves making referrals or pre-selling specific products. Affiliate marketers earn a fixed commission by using a particular link given to them by the specific brand or company they are marketing.
The more referrals and marketing you do, the more commission you earn, which is paid every month.
Customer support
As a drop shipper, you are responsible for ensuring that the customer receives their products on time and that the description physically matches the product.
In case of any issues arising with the delivery or state of the products upon the customer receiving them, the drop-shipper is the one to deal with them directly, just like the manufacturer would.
Affiliate marketing only involves marketing and making referrals to various product pages.
The sale and delivery of the products do not include an affiliate marketer. If there are any queries with the products delivered, the customer directly contacts the manufacturer or brand.
Growth
Similar to the business in a brick-and-mortar shop, the business of a dropshipper consistently grows over time, depending on the quality of its goods and services.
It is likely to develop into a fully-fledged online business store with a growing base of clients as you continue fulfilling more orders in a timely fashion. On the other hand, an affiliate website is also capable of growth over time due to the number of referrals made.
However, the business of the affiliate marketer is directly dependent on the success of the affiliate website. Therefore, if the affiliate website is to cease business for various reasons, the affiliate marketer’s business also stops.
Offers
The dropshipping business model allows the dropshipper to have full control of the dropshipping offers available. Drop shippers have complete discretion when it comes to fulfilling orders and setting the price of products sold by manufacturers.
Often, their fixed amount is usually 30% above the wholesaler’s price, but sometimes, the wholesale price is much lower than expected. Affiliate marketers do not have any control over the affiliate offers available.
They are solely involved in marketing and referring to the product page. These marketers are also not included in the actual sale of the products, but they only receive their monthly commission payouts after the completion of a purchase.
Dropshipping Overview
Dropshipping is an eCommerce business model whereby you establish an online store on platforms like Shopify, choose the products you want to sell, and outsource them from a wholesaler or manufacturer.
Once a drop shipper sets up an online store, he/she lists the products they want to sell on their website page, and customers can choose which products they wish to purchase.
Once the customer checks out and makes the necessary payments, you automatically or manually send their order to the wholesaler for fulfillment.
Upon delivery of the offer, the wholesaler or manufacturer sends the tracking number to the drop shipper, who then forwards it to the customer. The drop shipper does not store or deliver the products directly.
With dropshipping, the drop shipper sets his/her own price for the products, a percentage higher than the wholesale price to ensure you have a good profit margin. Once the customer purchases goods from your online store, they contract with you and not with the manufacturer or wholesaler.
As such, drop shippers can grow a customer base naturally over time, where they can remarket or market their products.
Since a drop shipper is the one who directly deals with the customer, he/she is also responsible for customer support and after-sales services. If the customer has any issues with the delivered goods or the delivery fails, the drop shipper must handle and manage those issues.
One of the main advantages of dropshipping is that you can choose whatever products you want to sell to your customers without having much investment. Once you establish your product niche, it is easy to get your dropshipping business started.
The only expense that you will have to cater to is setting up a domain and hosting your eCommerce website. Even the products from the wholesaler or manufacturer are paid for in advance by the customer.
Pros
- Profitable business with minimal investment
- Easy to scale up and grow your customer base
- You can choose to sell any type of product to your customers
- Lower prices and increased supply
- Shipping and delivery are out of your hands
Cons
- Challenging to find a reliable supplier
- No control over inventory
- Manage customer support
- Less control over shipping and delivery
Affiliate marketing review
Affiliate marketing involves marketing and promoting the products or services of a business or a brand to earn a specific commission. Some may refer to it as referral marketing.
The fixed commission an affiliate marketer receives depends on the program you are associated with or with the product you are promoting.
An affiliate marketer does not get involved with order fulfillment, customer service, or selling products through an online store like in dropshipping.
Instead, they merely drive traffic to the product or landing page, or insert affiliate links in the content; thus, affiliate marketing is also referred to as the epitome of passive income.
In affiliate marketing, you establish a website where you write reviews of the products you are promoting. You do not have to buy your stock upfront.
Once you place your affiliate link within your written review and your reader clicks on the link provided, goes to the product page and makes a purchase, the affiliate marketer gets their commission.
If you write a compelling and relatable product review, your readers will easily navigate to the product site, ready to buy, allowing you to receive your commission. This type of marketing allows you to build a mailing list by offering a discount for your site visitors if they use your affiliate link.
The inducement also enables them to subscribe to your regular newsletters, allowing you to build rapport with your readers. However, the product owner sets a fixed price on the products, and the marketer receives a fixed commission monthly.
The more products you promote, the more commission you earn.
Pros
- Extremely low start-up costs
- Passive income at its finest
- No customer support
- It is free to join and requires minimal investment
- Affiliate marketers can promote several products or businesses at once
Cons
- Commission-based payments
- It requires effective content creation
- It builds other brands and businesses
- No control over pricing and product shipping and delivery
Frequently Asked Questions
Is affiliate marketing profitable?
Affiliate marketing is one of the most profitable eCommerce businesses in the world. It is an excellent means to earn extra income for starters in the digital marketplace and those who stay at home.
Is dropshipping more profitable than affiliate marketing?
Dropshipping is a more lucrative eCommerce business model than affiliate marketing because you can efficiently market your products through other sales channels, like Facebook, Instagram, and Google Ads. Furthermore, drop shippers have more control over the pricing of the products they sell, and they can generate good traffic over time if their business is professional and reliable.
Is MLM the same as affiliate marketing?
Also known as network marketing or multi-level marketing, MLM is an eCommerce business model that has several similarities to affiliate marketing. MLM involves recruiting a team of marketers to promote certain products.
The more people you recruit in your team, the more commission you earn. Affiliate marketing consists of using an affiliate link to promote products or a specific business or brand. The more people click on your affiliate link and purchase the product, the more commission an affiliate marketer earns.
Is affiliate marketing a pyramid scheme?
By no means is affiliate marketing a pyramid scheme. Unlike MLMs, affiliate marketers do not pay anything to become an affiliate. You choose the goods or services you want to sell, and the merchant or manufacturer gives you a commission for anyone who buys using your affiliate link.
