Affiliate Marketing vs Dropshipping – which is easier, more profitable and which should I pick as my online business model?
You’re looking to branch into online passive income and you’ve narrowed your Business Model into two choices: Affiliate Marketing vs Dropshipping. Both are valid entrepreneurial fields that are proven to make money, if you put in the work. In this article, we will be looking to define ‘What is?’ in that what exactly is Affiliate marketing and Dropshipping, ‘Which is easier?’ and ‘Which is more profitable?’.
What is Affiliate Marketing?
In its most simple form, online Affiliate Marketing is where someone clicks on your link, goes through to a vendor’s website, buys a product and you receive a commission. The link you use as an Affiliate has a tracking code that attributes the click and sale to you. Sounds easy? Well, like many things in life, it’s simple, but not easy. In a broader sense which will be elaborated on in this article, Affiliate Marketing needs you to master traffic generation, creating content to engender engagement and conversion, and if you choose, follow up – none of which are simple things to get your head around, and make viable and ultimately profitable.
Then what is dropshipping?
Again, taking a really simple straight line, dropshipping is where you sell a product you do not own, say, through an online ecommerce store, then when that product is sold, you order it from a supplier and, in some cases get them to send the product to the customer for you. There are many variations on this basic premise but you get the idea, and if you’ve found this article, I’m sure you know a fair bit about dropshipping anyway. Commonly used products include Shopify or Woocommerce and suppliers are found on sites such as Aliexpress, or if you’re a bit more adventurous, from all sorts of online manufacturers and suppliers.
Typically Shopify is used for Dropshipping or Ecommerce, as it is a leading platform. Having said that there is no reason you can’t add in affiliate marketing to shopify – there’s nothing stopping you adding links that are affiliate to your shopify website. Indeed, Shopify has apps that are specifically based around adding Affiliate Links. As shopify is a fairly easy to use ecommerce platform, this could be a viable beginner option.
Both Dropshipping and Affiliate Marketing have the potential to be lucrative if you’re prepared to put in the hard yards. Neither one is intrinsically more profitable than the other though I would argue Affiliate Marketing’s more passive income nature makes it more scaleable in the long run.
Again this is largely in the eye of the beholder, and largely depends on what existing skillsets you have and which skillsets you are looking to develop. If you prefer the idea of physical products, dealing with suppliers and customers and online ecommerce, dropshipping is probably going to be better for you. If you like digital marketing, content creation and sales funnels then you’ll love affiliate marketing.
Both Affiliate Marketing and Dropshipping require a decent learning curve to be done effectively and profitably. Some trial and error and significant application are required to learn either, some of which can be short-circuited by a course (see my roundup of beginner affiliate courses here). It’s hard to say one is easier than the other though it could be said that affiliate marketing income is more passive than dropshipping income as it does not require dealing with customers.
No, Dropshipping is basically a subset of ecommerce. Dropshipping is a form of ecommerce where you do not own or hold stock of a product, you merely make the sale on a website, and get the manufacturer to send it to the customer on your behalf. You pocket the difference between the sale and the cost from the manufacturer. Ecommerce is a much broader field that includes dropshipping, but could be defined as any consumer product that is bought or sold on the internet.
No, dropshipping and Affiliate Marketing are two separate online business models. They have some crossover in that both require traffic generation and conversion but the big difference is in how the product is supplied. For Affiliate Marketing, you take a commission for referring a customer to a vendor, where as in Dropshipping, you are getting a supplier to fulfil an order for a sale you have made online.
Definitely you can combine Dropshipping and Affiliate Marketing. If you have an ecommerce platform there’s nothing stopping you offering Affiliate products alongside your Dropshipping items. I answer this in more detail in the bonus section below in this article.
Similar to above, you use an ecommerce platform such as Shopify to sell a product online, which you then source from a supplier and get them to send it to the customer for you. You make a profit from the difference of the sale and the wholesale product cost plus shipping.
In simple terms, Affiliate Marketing is about driving traffic and sending them to a vendor site to buy a product offered by the vendor. You receive a commission for the sale. Dropshipping involves selling a physical product you source from a supplier and getting the supplier to send it to the customer for you. Though in neither case do you own the product, in Dropshipping, you can be responsible for the product reaching the customer.
Which is easier?
Ok so this is a big and, well, subjective topic. I’ll present the facts from my own experience and research as well as I can.
Let’s start with the skills required. As I said briefly above for Affiliate Marketing, you need to be able to:
generate traffic, using methods such as:
- Search Engine Optimisation (SEO)
- Social media advertising or organic Social Reach
- Native Advertising
- Search Engine Marketing
- Guest Posts linking to your site
- and many, many more.
My suggestion for a beginner to the field is to concentrate on one method of traffic generation, or two at most. You’re better off mastering one method than being moderate at several. Also, unless you have deep pockets, I recommend using a free method (for example SEO, which I talk about in my article here).
You also need to be able to:
Create Content – your audience needs something to be engaged, and ultimately convert by clicking on your link. This requires knowledge of:
- Video producing – (think Youtube, don’t worry, the bars not set that high)
- Copy writing/Sales writing for a blog or landing page
- And other forms of content, for example podcasts or social posts.
Don’t forget to-
Retain your customers in some manner by collecting their details for follow up; think email or facebook messenger details so you can communicate out to your audience at any stage. This is of huge benefit for any business – affiliate marketing is just one of these; even dropshipping or more traditional businesses are likely to benefit from this method.
So a lot of skills there, I’ll summarise these in a matrix after we look at:
The skills required for dropshipping have some crossover to Affiliate Marketing. Again, you need a method of generating traffic into your ecommerce or dropshipping store (eg Shopify) and the methods are same as for Affiliate Marketing or any other online presence. I won’t list them all again, but think SEO, Social etc. Again, conversion is a key skill – you need customers to want to buy the products you are selling. If you’re clever, you’ll retain customer details to be able to follow them up and sell to them again and again via email or other communication means.
There are several skills that are needed for dropshipping that are not used in Affiliate Marketing. For example, you will have limited interaction with your customers and suppliers – particularly if an order goes astray, and to negotiate your terms with suppliers up front if you wish.
Another key factor of Dropshipping is that you set your prices. You will have to work out a price that is profitable to yourself and appealing to your customer. From the front, a dropshipping store looks just like an ecommerce store – so you need to know how to build, or pay someone to build the site. Shopify makes it easy, for a bit more advanced you could use a platform such as Woocommerce on WordPress.
One of the downsides of dropshipping is many niches are overcrowded (though this can be an issue in affiliate marketing as well). This can make price competition high, forcing your profits down. So yet another skill is intelligent niche selection.
So, here’s a comparison skills matrix:
|Niche Selection & Analysis||Niche Selection & Analysis|
|Traffic Generation (Marketing)||Traffic Generation (Marketing)|
|Copywriting (Product Descriptions)||Copywriting (Product Reviews, sales copy, etc)|
|Ecommerce Site Management||Website or other content platform management|
|Customer Service||Content Creation|
|Follow up marketing||Follow up marketing|
As you can see, it’s a bit ‘same same but different’ with these two business models. The biggest difference is that in Dropshipping, you are likely to actually set prices, engage in customer service and possibly manage suppliers. For Affiliate Marketing, it’s likely that the customer will remain anonymous and that you will never set prices.
Again, which is easier?
For those of you who like creating content, little work after the initial content is created, and appreciate how to generate traffic to a viable offer then Affiliate Marketing may be your go. If you like the idea of control over tangible products sold, at a price you set and are happy to manage customer orders and information, you may find Dropshipping more appealing.
There are huge benefits to both business models – both can be made into a passive or semi-passive business that does not require constant maintenance and attention. I would regard Affiliate Marketing as the more passive of the two, requiring little ongoing work after initial content creation as you will not manage the product fulfillment.
Neither business model has a high barrier to entry, as both require little more than a website or content platform. In neither business model do you own the product, which keeps initial costs way down.
So now we’re talking money, which of these is more profitable?
Again, this is highly subjective and it’s hard to say which of the two is better than the other, and even if that’s a relevant argument. Let’s examine again how they make money:
You sell a product to a customer via an ecommerce store. You then source that product through a supplier such as Aliexpress and get them to fulfil the order for you. In essence it’s an arbitrage between your price as the seller and the price you can source and ship it at. You control the selling price.
Someone clicks on your link, and if they buy a product from the vendor you have directed them to, you earn a commission.
Really, it comes down to what your existing skills are, if you have an existing budget and what your preference is. Certainly, both models can be extremely profitable when done well.
How to make dropshipping work for you
Effective dropshipping uses many of the elements of any online business; marketing, ecommerce development and price setting just to name a few. If and when you start a dropshipping business, even from the start you should think of it as a small business rather than just a ecommerce website. There are many efficiencies you can build into the process – you can use plugins such as AliDropship or Dropified, which take much of the work out for you, or you could hire a virtual assistant through Fiverr to handle the customer service for you and manage all the time critical components. Even from the start, you should consider outsourcing some parts of the process to make your dropshipping store as passive as possible.
Affiliate Marketing – how does it work
Well, you’re in the right place. This website is dedicated to bringing you tips and tools to make your own Affiliate Marketing success. Check out some of my other articles to see if it’s a fit for you.
While you’re here, here’s how I believe affiliate marketing should be started. You need to generate traffic, convert traffic and retain traffic. To generate traffic? Well there’s free and paid traffic (traffic is effectively eyeballs on your site, people visiting your site). I recommend people attempt to master ‘free’ traffic such as Search Engine Optimisation (SEO) or Social Media before trying paid traffic. This is simply because though the word ‘free’ can be a misnomer, as at least it will take up a considerable amount of your time and possibly money, it will most likely be cheaper than paying a Google Adwords or Facebook ads to direct traffic to your site, which can be a very fast way to spend your budget. Converting Traffic is a real technique and can involve persuasive sales copy or videos, split testing, or just really good content, be it written, graphical, video or other. Retaining traffic is a sometimes neglected question – this means retaining a customer’s details such as their email, and then following them up with a drip campaign or other method using an autoresponder (see my articles under affiliate marketing tools for more information on this highly effective technique). The benefit is that you can now sell to your customers without needing to generate traffic in the first place – all you need is to send out an email.
I hope this has given you an insight into which of the two business models, affiliate marketing vs dropshipping, would work best for you. For more information on Affiliate Marketing check out the rest of this website – particularly the affiliate strategy articles.
Bonus – Combining Affiliate Marketing and Dropshipping
Though I would not recommend this as an initial strategy for a beginner to online business, if you are more experienced and have say an ecommerce store for dropshipping, there’s no reason you can’t look to increase your business revenue by adding Affiliate Marketing to your repertoire.
As an example, consider the following:
You have a dropshipping store that sells pet items such as dog collars or leads. You are making a steady income stream, dropshipping these items and steadily building a customer base by retaining customer details. There are a number of ways you can use Affiliate Marketing as a ‘free hit’ for your business. One may be adding written content to your ecommerce site, which is easily done using a platform such as woocommerce/wordpress, and within that written content you can link out to an affiliate vendor. The benefits are basically you can now ‘sell’ products that you previously could not; for example in the pet niche there are dog training programs that offer affiliate commissions. As a dropshipper it would have been very difficult to sell a training program, but now you can add it to the products you offer while barely having to lift a finger.
Also as a dropshipper you are likely (or should have) built up a decent email list of your customers. It’s not too hard to appeal to these customers by sending out a broadcast email with an affiliate offer; yet again, people who bought dog collars are likely to be heavily interested in training their animal; and you can create a great email around how this is done, and recommend an affiliate training program.
There’s no time like the present to start your online business, whether it be Affiliate Marketing vs Dropshipping, whichever you choose. Do your research and figure out which is the one you want to do, and double down on a technique and niche that suits you best. I hope you’ve enjoyed this article, and feel free to leave a comment.
I’ve really drilled own on some of the key questions in these posts:
- What is the difference between affiliate marketing and dropshipping?
- Can you combine dropshipping and affiliate marketing?
- Is dropshipping affiliate marketing?
Affiliate Disclaimer: In case you were in any sort of doubt, yes, I’m an Affiliate in some manner for some of these programs and products. I like to practice what I preach. If you are intending to utilise any of these offers I’d love if you went through one of these links to support my site.