Entrepreneurs can have trouble figuring out which is the most profitable business model for them.
Is dropshipping the least stressful way to get sustainable profit?
Does affiliate marketing provide the best returns?
Which one suits you, as a business owner, best?
Find out these answers and more in this comprehensive guide, and use it to start your first successful online business.
- Affiliate Marketing vs Dropshipping Overview
- Affiliate Marketing vs. Dropshipping Success Rate
- Affiliate Marketing vs. Dropshipping: How Much Can You Make?
- Affiliate Marketing vs. Dropshipping Advantages and Disadvantages
- Which Is Easier: Dropshipping or Affiliate Marketing?
- Which Is Better: Affiliate Marketing or Dropshipping?
- Affiliate Marketing vs. Dropshipping: How to Get Started
- Can You Do Dropshipping and Affiliate Marketing at the Same Time?
- Final Thoughts
Affiliate Marketing vs Dropshipping Overview
Affiliate marketing and dropshipping are popular models for selling online, but each comes with its unique benefits and drawbacks.
Below, check out the key differences between affiliate marketing and dropshipping:
What Is Affiliate Marketing and How Does It Work?
Affiliate marketing is a low-risk business model where the marketer or business owner turns a profit by recommending the products and services of other companies.
You can promote these products and services online using your unique affiliate links.
When a person makes a purchase, you get an affiliate commission, which is a percentage of the cost of the product or service.
What Is Dropshipping and How Does It Work?
The dropshipping business model involves selling products without needing inventory management or handling the delivery process.
A customer places an order on the dropshipper’s website, and while they process the order, fulfillment falls to the supplier.
It’s a great business model for emerging entrepreneurs who don’t have the resources to handle the actual inventory and shipping costs.
Affiliate Marketing vs. Dropshipping Success Rate
Both models provide a convenient way for entrepreneurs to enter different markets and start turning a profit by mostly focusing on the advertising component rather than logistics.
What Is the Success Rate of Affiliate Marketing?
The average conversion rate for an affiliate business is between 0.5% and 1%.
Affiliate marketing accounts for 15% of the revenue generated by the online media industry. It’s used by around 80% of advertisers and can generate a 12:1 return on ad spend, according to a 2019 report.
What Is the Success Rate of Dropshipping?
Around 23% of all online sales are fulfilled through the dropshipping industry, which accounts for around $85 billion in sales worldwide.
Even so, it’s estimated that only 10% of dropshipping businesses are profitable in their first year.
Affiliate Marketing vs. Dropshipping: How Much Can You Make?
Both affiliate marketers and dropshippers have good profit potential.
You need to account for your target audience, the products you’re promoting, as well as how much you invest in your advertising budget to get accurate price predictions.
Here are the average earnings for affiliate marketing and dropshipping businesses:
How Much Can You Make from Affiliate Marketing?
Around 15% of affiliate marketers earn between $80,000 and $1 million per year, while 80% bring in less than $80,000. The remaining percentage is said to make up to 6 to 7 figures per month.
How Much Can a Beginner Make in Affiliate Marketing?
Beginner affiliate marketers can expect to bring home up to $1,000 per month.
How Much Can You Make from Dropshipping?
Dropshipper profits can range between $1,000 and $50,000 a month or more. The platform where a business promotes its products can influence revenue.
For instance, the average income for eBay dropshippers sits at $2,587 per month, and top sellers can make up to $13,000 per month.
For Amazon, very successful dropshipping store owners make as much as $50,000 per month.
How Much Can a Beginner Make from Dropshipping?
Beginners can make up to $1,000 per month or more, similar to first-time affiliate marketers.
Affiliate Marketing vs. Dropshipping Advantages and Disadvantages
Before you choose either business model, check out the main pros and cons of affiliate marketing and dropshipping:
What Are the Advantages of Affiliate Marketing?
Your affiliate efforts could present you with the following benefits:
- Low startup costs – as an affiliate marketer, you do not have to pay for anything other than your website and advertising. All the logistics are handled by the merchant to which you are diverting paid and organic traffic. Affiliates also don’t pay merchants any fees for their activity;
- Passive income – this business model does involve some upfront work, but once you create your content and set up the ads, it can bring in a profit on its own. If done right, this business model can even allow you to focus on other efforts;
- Less responsibility – as an affiliate, you don’t have to worry about customer service issues. If a buyer is not happy with their purchase, they’ll take their complaints directly to the merchant;
- No special skills are required – with this business model, you don’t need any special skills other than digital marketing. And for that, you can collaborate with an agency to set up your campaigns and website.
What Are the Disadvantages of Affiliate Marketing?
The affiliate marketing model has the following cons:
- You don’t get all the profit – affiliate marketing can be lucrative, but you’re ultimately helping the merchant make the most of the money. You only get a percentage of the sales, which can vary greatly from program to program;
- High competition – since affiliate marketing has a low entry barrier, you might be competing with several marketers in the same affiliate marketing program. This can require more aggressive advertising approaches to convince potential customers to use your links.
What Are the Advantages of Dropshipping?
If you’re starting a dropshipping business, you can enjoy:
- Low startup costs – since you’re selling products through the supplier, dropshipping businesses don’t require the traditional upfront investment like product manufacturing, storage, office space, and shipping expenses. Most eCommerce entrepreneurs invest in marketing costs;
- Profit margins – you can shop the market to find the best supplier with the best price. You decide the selling price, and once you start making sales, you can keep the profits;
- Efficient inventory – because you’re not responsible for product inventory, you don’t have to worry about your products getting damaged by staying in storage for too long. This can allow you to sell time-sensitive items such as perishable goods or equipment.
What Are the Disadvantages of Dropshipping?
Some hurdles with dropshipping models can include:
- No control over product quality – you have no say regarding how your products are manufactured and stored. This can create problems with quality, which leads to unsatisfied customers;
- Supply chain issues – this business model depends on the supplier fulfilling the order and keeping its inventory updated at all times. If they don’t, the end customer could encounter issues that lead to dissatisfaction or even refunds;
- Managing multiple dropshipping suppliers – if you don’t use the same supplier for all your products, shipping, and keeping track of inventory for two or more suppliers is difficult and could complicate your business activity.
Which Is Easier: Dropshipping or Affiliate Marketing?
While both are simple business models that don’t require special skills, affiliate marketing is easier to run.
As an affiliate, you only have to focus on advertising your links to divert traffic to the merchant’s site. The merchant is then responsible for order fulfillment and customer service issues.
Dropshipping requires more responsibilities. As a dropshipper, you are the merchant, even though the supplier makes and ships the products. Customers turn to you to make purchases, ask questions about their orders, and ask for refunds if they aren’t happy with their orders.
Which Is Better: Affiliate Marketing or Dropshipping?
Dropshipping has higher profit margins since you are free to establish the prices. Affiliates only receive a small percentage of the retail price set by the merchant.
It also has a higher earning potential thanks to repeat customers.
If a person purchases a product from an affiliate link, they’ll go directly to the merchant if they want to repurchase it.
On the other hand, if you’re more concerned about earning passive income, affiliate marketing involves less effort, as you’re not involved with solving customer issues.
This means you can focus on other business ventures while earning from your affiliate links.
Affiliate Marketing vs. Dropshipping: How to Get Started
Both affiliate marketing and dropshipping businesses are easy to set up, even from the comfort of your home.
Check out the following guide to get started:
How to Start Affiliate Marketing
The first step is to choose your niche and find an affiliate network to join. You can Google “brand name + affiliate program” to see if the company you’re considering has set up such a program.
Then, you can follow these steps:
- Pick a content platform to promote your links (website, social media, emails, etc.).
- Create amazing content and add your links naturally.
- Add compelling CTAs to encourage customers to click on your affiliate links.
- Drive traffic to your content through SEO and paid ads (Google Ads, social media ads, etc.).
- Monitor your traffic and sales to tweak your strategy.
How to Start Dropshipping
With dropshipping, the most important thing to do before you get started is to find the right niche and a reliable supplier that can offer high-quality products.
You can use tools like DSers to find products to sell online. Be sure to pick products that generate a lot of interest from potential customers and a supplier that offers a good wholesale price.
Once these two critical steps are handled, you will need to:
- Set up an eCommerce store.
- Decide on the business model (sole proprietor, LLC, etc.).
- Get a license (if applicable).
- Start promoting your products through paid ads, content marketing, email, etc.
Can You Do Dropshipping and Affiliate Marketing at the Same Time?
Yes, the two business models are easy to manage simultaneously.
If you already have a dropshipping business, you can use your existing brand to promote affiliate links to your new or loyal customers.
If you’re just getting started, an affiliate marketing business is the easiest to get off the ground.
Once it’s generating passive income, you can turn your attention toward opening a dropshipping company.
Both affiliate marketing and dropshipping still have great potential in 2023, but there are possible drawbacks that need to be considered.
Carefully go over this guide to see which one might work best for you. If you plan on jumping on the bandwagon, pace yourself.
Focus your attention on one model at a time, and scale your efforts once you’re generating profits.