Are you new in the online business world and confused between what to choose from Affiliate Marketing and Dropshipping? Worry no, this article will clear your confusion.
One term you are most likely to hear with affiliate marketing is dropshipping. People tend to confuse the two, especially on the grounds of profitability. However, affiliate marketing is more common to the general public. Hence those who have just entered the affiliate marketing business model find it difficult to understand the other business model, dropshipping.
And well, it could be a little difficult to see the thin line of difference between the two for a newcomer. In both business models, you are promoting some other company’s products. This means you are responsible for all the steps from product shipping to promotion processes
Let’s move ahead by studying affiliate marketing and dropshipping side by side.
|Areas Of Comparison||Dropshipping||Affiliate Marketing|
|How It Works||No shipping or storing inventory. Just get orders and make sales.||Refer customers to another business and earn a commission.|
|Business Model||Profit= selling price-wholesale price.||Commission on the product you sell is your profit.|
|Ease Of Use||Have to consider customer care.||Not responsible for the store-related duties.|
|Control||Full control over dropshipping offers||No control over the offers. You market the product you are given.|
|Future||A dropshipping store can be turned into a business.||As an affiliate, your future success is dependent on the organization you choose to sell products to.|
Affiliate Marketing vs Dropshipping: All You Need To Know
Keep reading to gain a better insight into the two business models. This article will talk about:
- What is affiliate marketing?
- Pros of affiliate marketing
- Cons of affiliate marketing
- How to get started
- What is dropshipping
- Pros of dropshipping
- Cons of dropshipping
- How to get started
- Which of the two is better
- Which of the two is more profitable
What Is Affiliate Marketing?
Affiliate marketing helps an organization to grow its business with the help of third parties. This is a commission-based reward by performance way of earning money. This whole process can be defined as a performance-based business setup that can help affiliates get income based on revenue sharing methods.
Did you know that more than 25% of affiliate programs are in the fashion industry?
Affiliate marketing is a revenue-sharing business. The affiliate here is a third party. It gets a fixed percentage of commission once they reach a certain specified goal of sales. These percentages are pre-defined.
But how does Affiliate Marketing work?
Affiliate marketing works by choosing a product, a niche, and then selling it to the market. This could either be a single product or a range of products. However, to generate better commissions, an affiliate needs to think of quality techniques and strategies accordingly.
For instance, a person chooses a company who sells shampoos. The affiliate will then promote this product with whatever means he has access to. Once the sales generate and the affiliate earns money, he will get some percentage of it in the future.
To conclude the answer, affiliate marketing is the process of selling products or services by affiliates in exchange for a commission by a company or an organization.
Pros Of Affiliate Marketing
- Easy to start
- Low start-up cost
- Can be operated from anywhere in the world
- Serves as a great source of passive income by adding affiliate links to social media
Cons Of Affiliate Marketing
- Low commission percentages of certain companies.
- No control over the pricing
- Payments can be delayed
- Some niches might have a lot of competition
How To Get Started
Now that we know what affiliate marketing is, let’s now have a look at how you can get started.
- Deciding a platform: You can choose any platform and get started. Some examples are Instagram, YouTube channel, or simply by starting a blog.
- Deciding a niche: If you opt for blogs, you would find a lot of competition. What helps you stand out is the kind of niche you select. Think out of the box, be creative.
- Content: If you want to make a few extra dollars from affiliate marketing, work on quality and not quantity. Your content is your way of communication with your customers; make it engaging.
- Affiliate site and traffic: Once you have the above mentioned sorted out, it is time to generate traffic to earn money. You can either get paid traffic, make your content SE optimized, or communicate with your customers through email lists.
- Time and expectations: Affiliate marketing is not a month’s game. You need to give it time and patience. Set realistic goals and it is ok if you take time to reach the goals as long as you generate sales.
What Is Dropshipping?
Unlike affiliate marketing, dropshipping is a business model that helps you run an online business without having to stock any products. You can sell other client’s products on your website. This way you will have the freedom to influence the final price along with determining the commission.
Did you know that more than 50% of sales on Amazon Marketplace are dependent upon third parties?
Dropshipping gives you the freedom of setting the prices and commission percentages. This way you can keep a fair margin for your profits.
But how does dropshipping work?
In the business world, dropshipping is an organized manner for a supply chain i.e. a chain of sharing above trailers, manufacturers, to customer delivery. There are three parties involved in dropshipping:
- Manufacturers: The ones who manufacture the product. They do not directly communicate with the public. Instead, they sell bulk quantities to wholesalers and retailers.
- Wholesalers: The ones who buy from the manufacturers. They stock products from different manufacturers and mark them up before selling them.
- Retailers: The ones who buy products from the wholesalers. They communicate with the public directly by selling products at a markup.
Dropshipping works in the following manner:
- The customer (mostly a retailer) places an order with your business.
- Your business is then responsible to alert the dropshipping partner (the manufacturer or wholesaler) who then ships the product to the customer.
- The retailer is then charged by the dropshipping partner for the services.
Pros Of Dropshipping
- Low-risk business model. Payment is due once an order is placed.
- Low startup costs
- Wide range of products
- Better and higher profit margins
Cons Of Dropshipping
- Low margins
- Has a lot of competition
- A factor of reliance and dependency
- Requires customer service
How To Get Started
Now that we know what dropshipping is, let’s now have a look at how you can get started.
- Commitment: The first step while getting into the dropshipping business is to commit to the idea of dropshipping because it requires both; time and effort.
- Choosing an idea: The second step would be to choose a strong, sustainable idea. You can do so by doing detailed market research to know your audience, their preferences, and choices.
- Competitor research: There is a lot of competition in the dropshipping business model. Look out for your competitors. Do a google search, use spy tools, or subscribe to a competitor’s email list to gain better insights.
- Construct a dropshipping website: Another very important point to note when entering the dropshipping business is to have a good, reader-centric, and engaging website. The better the content, the more traffic you will get.
- Finding dropshipping suppliers: Once the dropshipping website is good to run, find suppliers who are willing to collaborate and supply their products to you. Once done, get started!
How To Find Dropshipping Suppliers
When finding dropshipping suppliers make sure you consider that the supplier::
- Must be reliable
- Must provide good quality products
- Is looking for a long term partnership
- Shipping times are also important
Affiliate Marketing vs Dropshipping: Which Is Better?
Well, it is difficult to say which one is the better option since it solely depends on how you tackle your business and what you want from your business.
Many people prefer affiliate marketing over dropshipping as they find it easier to create content, make it SEO friendly, and reader-centric. Moreover, affiliate marketing does not even require a website. So anyone with a great social media following on any platform (Instagram, YouTube, or any blog page) can benefit from affiliate marketing.
However, Dropshipping has a different approach. People prefer dropshipping because of its benefits — especially because of the freedom to choose prices and profit margin. But dropshipping involves a lot of work, from customer services to create a website!
Both the platforms are equally beneficial. However, affiliate marketing can be the better option for you if you can market the product and talk to clients and dropshipping can be the better option for you if you want to avoid writing blogs and interactions to sell the products online.
Affiliate Marketing vs Dropshipping: Which Is More Profitable?
Although affiliate marketing is the easier one, dropshipping is the more profitable one.
Dropshipping has a lot more freedom. You can set your prices and profit margins. In affiliate marketing, the organization decides the percentage of commission you get whereas in dropshipping, this authority is in the hands of the retailer.
The difference in profitability between the two business models is fairly between 3% to 10%.
Affiliate Marketing vs Dropshipping: Takeaway
Affiliate marketing and dropshipping have revolutionized the business world. They serve as a source of passive income for many people who do not prefer 9-5 jobs. Each of the business models has its own advantages and disadvantages.
Affiliate marketing is preferred by people who have a huge following on different social media platforms whereas dropshipping suits those who want to turn this into a full-fledged business. Both of these are equally beneficial; however, dropshipping is more profitable.
Every business requires hard work, time, and effort. Stay motivated and consistent to reach the top. For more updates and insights, head over to http://kilocash.com/blog.