Thanks to many advancements in the world of online entrepreneurship, it is now easier than ever to start your own business online. There are countless ways to get started and make your own mark in the world of online business, but there are two most common paths that people take – dropshipping and affiliate marketing.
Thanks to the low barrier to entry for these two ways to do business online, people from all walks of life choose them as their main or additional source of income. However, which one is the better and more profitable of the two?
Let’s find out.
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Dropshipping vs. Affiliate Marketing – Things in Common
Before going into the differences between these two, let’s first discuss what they have in common:
– Both have low barrier to entry (minimal investment)
– Both can be done without keeping inventory or stock
– Both can bring in significant earnings
– Both require knowledge of digital marketing, SEO and social media to bring success
In the end, both are increasingly popular with budding entrepreneurs looking to make an income without devoting full-time hours to a growing business.
Affiliate Marketing – Pros and Cons
In an affiliate marketing setup, the biggest benefit is not having to pay any costs in order to run a business. Traditionally, the merchant is the one handling all of the costs for creating and delivering the product.
However, does this mean that there are absolutely no costs? Not entirely. Since your main aim is to sell the merchant’s products and collect a percentage, you need a way to drive new customers. This requires your own website, as well as an intricate system where you run ads. However, if you have the know-how, you can decrease the costs to a minimum.
The second benefit is the ability to run the business on your own. As you’re merely providing a channel for the sale, you don’t need to have a person dedicated to sales, customer support or order fulfillment. If there are any issues, complaints or problems with the end product, the merchant is in charge of them, while you can relax as the middleman.
Third and very important benefit is that there is no limit in terms of a niche. With dropshipping, choosing the right niche is what makes or breaks your business’ success. In affiliate marketing, you can toy around with different niches without having to pivot as soon as you hit a financial wall.
Finally, affiliate marketing is as close as it gets to living the dream of a fully passive income. If you take the time to set up a great website, social media and Google ads and funnels, it can bring in income without any work on your behalf.
As for the cons – the biggest one is that you will only be making a percentage from the sale, while the bulk of the profit goes to the merchant. Even though the income can be completely passive, it’s still nowhere near the amount you can get from a full sale. Moreover, you are not in control of the amount being charged, as you cannot influence the final price.
Finally, the biggest drawback with affiliate marketing is that your ability to generate income depends solely on the merchants. In other words, even if you work hard to reach your commissions, you still depend on the merchant making their payment at the end of each month.
Dropshipping Pros and Cons
Right off the bat, the biggest pro of dropshipping is the ability to set your own prices and determine how much you want to earn. As you’re setting up a shop, you can create your own margins instead of settling for a fixed percentage as you would with affiliate marketing. Although you can hardly rake in 500% profits, the advantage is being in control of the amount charged to the customers.
Similarly to affiliate marketing, there are low initial investments (website and ads, for the most part) and there is no need to have any inventory or stock. However, over time, as your content marketing efforts and organic traffic grow, you can decrease your investment in ads compared to affiliate marketing.
By far, the biggest advantage of dropshipping is the ability to work on your business. In affiliate marketing, you are focusing all of your efforts into building a streamlined channel for another company that swoops in and makes a sale. As you build a dropshipping store, you’re working on your own brand, which you can cash in as time goes by. You don’t depend on merchants sending out commission payments – you are your own boss, building a brand.
As for dropshipping cons, the ultimate one is that even if you’re moderately successful, you can hardly run a good store on your own. As demand grows, you need a dedicated person for customer support, shipping, order fulfillment and even website marketing and content. The more the business grows, there more hands will be necessary for it to be successful.
Moreover, there’s the issue of picking a niche, which makes dropshipping a lot more limiting compared to affiliate marketing. You can only achieve success if you’re aiming a very specific target market, so there’s little room for experimentation.
Dropshipping vs. Affiliate Marketing – Which is Better?
Which is the better option for a budding entrepreneur, dropshipping or affiliate marketing? At the end of the day, it boils down to how much time you are willing to devote to growing your business.
If you want to play the long game, build a brand and an ability to bring in more profit, dropshipping is the better choice. However, it will also demand more time and there are more chances to fail.
If you want more immediate results, the ability to have passive income and not worry about setting up your own brand, affiliate marketing is the better of the two options.
Bear in mind that whichever of the two you choose, you need to have ample knowledge of internet marketing and patience to see the results through, as success doesn’t come overnight.