Considering the recent turn of events where people are forced to work from home, online businesses have become a norm, and we can positively predict that online business will increase in the days to come.
Work from home has fulfilled the dreams of many who wished to earn money online with little to no effort. Affiliate marketing and Dropshipping are considered the most profitable ways to make money online in 2022.
Let’s take a look and see what these two business models offer, the vital differences between the two, and which one is better for you.
What is Affiliate Marketing?
Affiliate marketing is one of the ways to make money online by recommending products and services from different businesses to your audience using an affiliate network.
It works on the concept of revenue share, where brands will pay you a commission for the leads you refer to their website.
Most businesses have an affiliate program, which allows you to share their website’s links and referral codes in your blogs, videos, or any medium where you engage with your audience.
What is Dropshipping?
Dropshipping is an online business model where you can sell products online without holding any stock.
When a customer orders from your website, the Dropshipper purchases the item from the manufacturer or wholesaler, who then directly ships the products to the customer.
This model allows a Dropshipper to work without worrying about having a warehouse to stock products.
With Dropshipping, you can start a business with almost no investment as it eliminates the need and cost of creating a business.
Similarities between Affiliate Marketing and Dropshipping
- Both have low startup costs
- Start a business without inventory or shipping goods in a short period of time
- Both are Low-risk business models with high earning potentials
- Both require similar marketing skillsets like creating ads, driving traffic to your landing page, etc.
Difference between Affiliate Marketing and Dropshipping
Despite the fact that both of them are Passive Revenue generating models, the major difference between affiliate marketing and Drop shipping is how they work.
In Affiliate Marketing, you can promote products or services of different brands and earn a commission if they purchase using your affiliate links. Check out our blog on Affiliate Commission rates.
On the other hand, in Dropshipping, you can sell products without having an inventory.
In affiliate marketing, the customer is directed to another eCommerce website via an affiliate link, whereas in dropshipping, you are selling a product from your website.
In affiliate marketing, the brand selling the product will handle any customer service issues, whereas in dropshipping, you have to handle customer service by yourself.
If you’re an affiliate marketer, you have no control over the price or the commission rate. But as a Drop Shipper, you set your own prices, enabling you to have higher profit margins.
As an affiliate marketer, you will receive commissions at a delay of 1-3 months, but in Dropshipping, you will receive payment instantly, as soon as the transaction completes.
Comparison Table: Dropshipping vs Affiliate Marketing
|How it Works||Dropshipping allows you to sell products online without holding any stock.||You promote products or services of different brands and earn a commission if they purchase using your affiliate links|
|Business Model||The profit you make is the selling price of your product minus the manufacturing cost of the wholesaler||The profit you make is the commission on the product you recommend to your audience.|
|Customer Support||You are responsible for customer support||You are not responsible for Customer support, the brand is|
|Earnings and Profit||You have control over the price||You are paid a fixed commission for the conversions using your affiliate links|
|Customer Data||You are the owner of customer data||You don’t have to deal with customers or customer data|
Pros and Cons: Affiliate Marketing vs Drop Shipping
Pros of Affiliate Marketing
- Easier to get started, you just need to start a blog
- Low start-up costs
- Seller/brand will take care of Customer Service
- Can operate your business from anywhere
- Great source of passive income
- Add your affiliate links to your online content such as blogs, Youtube
Cons of Affiliate Marketing
- Some brands pay low commissions and might take a long time to pay out commissions
- No control over the pricing and commission rates may change without warning
- Some niches of products are saturated and have a lot of competition
Pros of Dropshipping
- Low risk, pay for a product only when an order has been placed
- Low startup costs, the basic requirement is a website
- Control over product pricing
- Higher profit margins
- Building your brand with the potential to expand and start selling self-made products in the future
- Offer a wider range of products
- Advertise to retarget your existing customers
Cons of Dropshipping
- You have to provide customer service
- No control over the quality and packaging of your product.
So, which one is more Profitable?
It’s difficult to answer this question as both Affiliate Marketing and Dropshipping are profitable. Although Dropshipping seems promisingly profitable as you have control over the price of your product, you can still earn more in some scenarios via Affiliate Marketing as well.
In certain niches, you can get higher commissions in affiliate marketing such as SaaS products and even online courses, where you can get more than 5-10%. However, these niches have a lot of competition and can take a while to attain such high commissions.
Is Dropshipping Easier?
The answer to this question is No. Affiliate Marketing is a little easier in comparison to Dropshipping. The reason for this is the amount of effort you put in is considerably less than Dropshipping.
To begin with, you don’t have to deal with customer service and manufacturing. Moreover, in Dropshipping, you are responsible for the faults of the manufacturers and wholesalers in terms of product quality, packaging, and delivery.
Even though there is low commission and you need higher conversions to improve your commissions, it is much easier for you to recommend a product than to sell a product.
The Bottom Line
There are a thousand different ways to earn passively online, and both Dropshipping and Affiliate Marketing are equally viable options with less investment and are easier to implement.
Yes, there are complications in both these models, but ultimately, all you need is the skill and effort to start working on these models to reap the benefits.
If you want to be a Dropshipper, you have to be active on social media or have a basic understanding of digital marketing and how ad targeting works.
On the other hand, if you have an established audience and you are passionate about a particular category of products such as technology, health, beauty products, and many more, you can be an Affiliate Marketer.
Regardless of your choice between Dropshipping and Affiliate Marketing, both are solid options to start your online marketing career with the freedom of working from home.
If you want to know more about affiliate marketing, get in touch with Trackier.