What is the difference between affiliate marketing and dropshipping? You will often encounter questions like this in online business forums. The common cause of heated debates spring from comparing which one is more profitable.
Affiliate marketing is currently more popular and better known in online businesses. It has gained more exposure over the years. For this reason, only a number of entrepreneurs knew or heard of a business model called dropshipping and how it is different from affiliate marketing.
But before we answer the question: what is the difference between affiliate marketing and dropshipping, let us first talk about their similarities. How are they the same?
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What Are The Similarities?
Don’t worry. We will get to answer the question “what is the difference between affiliate marketing and dropshipping” later. For now, let us talk about their common denominators.
Here they are:
- Product promotion – in both business models, it is your responsibility to promote products that you do not manufacture nor own.
- Product shipping – you do not need to manage product shipping and handling. This is the owner’s assignment.
- Quality – the owner is responsible for ensuring the product’s quality.
- Income – the opportunities to earn money is limitless. All this will depend on your hard work and strategy.
- Start-up – you do not need much (including capital) to start either business model. Set up and launching are fast and done in a few steps.
- Risk – both are low-risk.
Now that we know the qualities that both business models have in common, let us start digging deeper to answer the question “what is the difference between affiliate marketing and dropshipping”. To do that, let us first get to know dropshipping even better.
What Is Dropshipping?
This business model allows you to sell an assortment of products on your online store or site. Many people favor this model as the site owner has the final say on the product pricing. Thus, you determine your own commission from every sale.
Here’s how dropshipping works:
- You decide on a product price. For instance, you can sell a product for $50 instead of its real value which is $30.
- A buyer pays you $50 for the order he placed.
- You forward this order to the owner or product manufacturer and pay $30.
- The owner ships the product to the buyer, and you get to keep $20 as a commission from the sale.
Dropshipping Pros and Cons
We are getting closer to answering the question “what is the difference between affiliate marketing and dropshipping”. But, wait a minute. Let us enumerate the pros and cons of this business model before we get to that part.
- Instantaneous payout – you don’t need to reach a target amount of sales to get your commission. You get paid instantly when you get a sale. In our opinion, this is what makes dropshipping better than affiliate marketing. You don’t have to get scared too of not getting paid for your effort in case you don’t reach the quota.
- Possibly bigger earnings – since you can control the price of your items, you can get more commission from each sale. If you want handsome remuneration, you will have to raise the price of the items you are selling. You can’t do this with affiliate marketing as you need to price the item based on the manufacturer and receive a small percentage of the sale. One thing worth noting is that you have to keep your price reasonable so that your target market will still want to buy your products. Otherwise, you will have to think of a clever marketing strategy to sell.
- Allows retargeting – you have the chance to chase your audience until they decide to buy from you since you manage your own store. This way, you get your buyers’ attention. You can’t do this with affiliate marketing either. Why? The reason is that you are sending traffic to the owner or manufacturer’s website.
See? The answers to the question “what is the difference between affiliate marketing and dropshipping” is slowly being revealed through our pros and cons.
- Customer support management needed – many people mistake dropshipping sites for eCommerce stores because they are similar in nature. When people buy from your site, they will think that you are the original vendor or owner of the products. You need to prepare for this mindset. You will encounter inquiries and complaints (more responsibilities). Fortunately, you can hire people to do this tedious job for you.
- Little to no control over shipping – shipping problems such as delays are common. The thing is that you will get the blame instead of the product owners. You may have the shipping order ID but there is nothing you can do about it to expedite the process. When problems like this occur, you will face the backlash such as getting negative feedback, or worse, losing buyers.
- Targets impulse buyers – practical people will scour the internet for the cheapest buys, so why will they purchase from you? Why will they pay more for a product that they can get for less in other stores? Thus, your target is mostly impulse buyers. If you decide to go for dropshipping, make sure that you have clever ideas to make people willing to buy your overpriced (a bit) items. Moreover, you have to carefully pick your niche. Choosing an overcrowded niche will not allow you to set a higher price. In fact, you might end up selling lower to get noticed which is just sad.
What Is Affiliate Marketing?
This business model involves having a contract or agreement between a company and an affiliate. The affiliate agrees to drive traffic or customers to the company’s site to access their products or services.
The affiliate will get a percentage of the sale as remuneration. However, the affiliate cannot dictate or influence the amount of the commission. They will need to carefully read the terms and conditions.
Anyhow, here’s how affiliate marketing works:
- You put your affiliate link in your site (or anywhere the company considers legal) and promote the item.
- The buyer clicks your link and purchases the item
- The company sends the product to the buyer.
- You get a commission from the sale.
- Get your commission when you reach the minimum threshold.
Affiliate Marketing Pros and Cons
You can find more answers to the question “what is the difference between affiliate marketing and dropshipping” in this section.
- Customer support exemption – you are not obliged to do anything. After your buyers are directed to the main website to buy, you are out of the picture and they will not expect customer support from you. You are merely pointing them where to go or buy. Thus, you do not need to spend time on handling complaints and inquiries. Instead, focus all your effort on driving traffic to your site and promoting the product.
- Beginner-friendly – just like in dropshipping, you do not have to think about order fulfillment, getting stocks, and delivery. You do not need to set up an online domain for this purpose, either as some affiliate programs allow you to post on forums or social media accounts. You will need to spend on marketing your website, such as driving traffic to your site in case you have one. Moreover, most affiliate programs are free to join.
- Passive income – at first, it will not generate passive income. You need to put in the hard work in the beginning to make your site known. You need to think of strategies, and invest in product promotion. If you are successful in getting a huge following, you can just have paid ads run on your site and convert sales because of your authority in the niche.
- Fixed commissions – you cannot decide on the payout just like in dropshipping. Your earnings will depend on the leads that you direct to the company. You might even have to shell out more money just to “call” customers than earn. If you really want to earn more, be smart and work harder. Use the incentives as motivation to do better. Also, you need to reach a specific quota to get your earnings. This can be disconcerting for some, especially if the threshold is too high.
- Delayed payments – as mentioned, you can only get paid after reaching the threshold. However, there are times when problems arise due to financial issues, or payment backlogs. But in dropshipping, you immediately receive cash once the buyer pays you.
- Link removal – many people think that affiliate marketers are scammers or that they demand extra payment for the things they are promoting. You know that this is not true. When potential buyers notice an affiliate link, they sometimes remove your tracking code and bypass your link. Or better yet, they will immediately go to the website. When this happens, all your efforts are put to waste.
What is the difference between affiliate marketing and dropshipping? There are actually many. Just go over each of their pros and cons to refresh your memory. You will get your answers there.
If you want to try affiliate marketing, visit Wealthy Affiliate
to start learning it for free. If you prefer dropshipping, but you have no experience with online business, you should also start with WA to learn how to create your own online business.
Later you can decide if you prefer affiliate marketing or dropshipping to make money. You can also do both.
Click here if you are already an experienced online marketer and just want to learn how to make money from dropshipping.