Dropshipping vs. Affiliate Marketing

When searching for ways to make money online, you’ll almost certainly encounter people talking about dropshipping and affiliate marketing. Both have the potential to be beginner-friendly, but they require unique skills. Moreover, they aren’t perfect for everyone.

It's worth doing additional research before jumping into a business model. By learning the ins and outs to at least a basic level, you’ll find it much easier to decide which is the best for you. You’ll also choose if you don’t want to go through with one.

In this guide, we’ll explain the key differences between dropshipping and affiliate marketing and who should choose each business model.

What Is Dropshipping?

Dropshipping is a business model that involves selling physical products. However, it differs from an eCommerce store. Instead of managing your own inventory, you’ll partner with a supplier to organize this. Your dropshipping partner will fulfill all orders and ensure that they get to your customers.

With dropshipping, you can sell all kinds of products. Some of the most popular ones are clothing, art, and household items. There are numerous ways to dropship; some people focus on a specific market, while others will ship worldwide instead.

To dropship successfully, you need to create a dropshipping website. You then have to promote your products to a target audience. In the beginning, many dropshippers use paid advertising to do this.

What Is Affiliate Marketing?

Affiliate marketing is when you sell someone else’s products. You earn a commission each time someone buys via your links or widgets. For example, a travel blogger might sell hotel stays and make money when someone books through a link on their website.

Blogs are the most common way to market as an affiliate. When starting one, you must have a sturdy hosting plan; this is crucial for the user experience and SEO. You can try numerous blogging niches; many have products you can sell.

In addition to blogs, some people do affiliate marketing through YouTube, podcasts, and social media. In some cases, you might use a combination of these. Pick whichever one makes the most sense for your topic.

To generate affiliate sales, you need a reasonable amount of traffic. On a blog, for example, you can expect to start making consistent revenue at around 15,000 views per month.

Now that you know more about dropshipping and affiliate marketing on a fundamental level, let’s look at how these two business models compare with each

Startup Costs

Both dropshipping and affiliate marketing have low startup costs. With dropshipping, for example, you can pick a supplier where you don’t pay until you make a sale. You also don’t pay for inventory storage, making it a cost-effective option if you don’t have the money to start an eCommerce business.

When starting a dropshipping business, your expenses will typically relate to:

• Website hosting and security

• Premium plugins

• Paid advertising

Affiliate marketing is also cost-effective. Besides your equipment, you don’t need to pay for anything upfront if you market via podcasts or YouTube. If you have a blog, your costs will relate to hosting and premium plugins for the most part.

You don’t need paid advertising to be a successful affiliate marketer, though it certainly can speed up the process. Since you don’t need paid ads, affiliate marketing gets the point here.

Winner: Affiliate marketing

Beginner-Friendliness

Affiliate marketing is very beginner-friendly. Your main job is to create valuable content; as long as you do this, you’ll succeed. Sales and marketing skills certainly help, but you can develop these later as you become more of an expert.

Dropshipping is also beginner-friendly, but it requires more people skills than affiliate marketing. You must be good at sales and know how to write good product copy; your ads and landing page(s) must also be engaging.

As a dropshipper, you’ll also need to be effective at customer support. All of these skills require a specific personality or a desire to learn, and for this reason, we think that affiliate marketing is more beginner-friendly.

Winner: Affiliate marketing

Scalability

Affiliate marketing and dropshipping have uncapped scalability. Your only limitation with dropshipping would be the inventory that your supplier holds. For this reason, it’s important that you partner with the right person. As long as you have that, though, you can sell as many units as the market wants.

Meanwhile, affiliate marketing can be scaled very handsomely over time. If your traffic is more targeted, you can make serious money from this method. Many people make over $10,000 per month through affiliate sales alone, though it does take years to get to this point.

There are some nuances, such as needing to hire customer support as your dropshipping business grows. However, both business models are pretty scalable and have passive income potential.

Winner: Tie

Time to Make Money

If there was ever a business model that absolutely wasn’t a “get rich quick” scheme, it was affiliate marketing. Making your first $100 will take months at least, and to generate sufficient income, you’ll need to be consistent for a minimum of one year. So, you need to be passionate about your affiliate marketing niche.

Dropshipping, on the other hand, has a quicker turnaround for generating income. You could easily start making money within 30 days if you have the right setup. However, you’ll also need to factor in the money you spend on paid ads when considering profitability.

Nonetheless, dropshipping is easier to make money in the short term.

Winner: Dropshipping

Profit Margins

When choosing a business model, it’s also important to think about your profit margins. One key consideration with dropshipping is that when people tell you how much they make, they often are talking about income and not profits. The actual profit number is frequently lower when you consider what they pay the supplier and how much they spend on paid ads. Generally speaking, you should expect profit margins of 10-20%.

Affiliate marketing will often lead to lower commission rates than if you sold a product through dropshipping. Some will be lower than 10%, though there are others that run 50% or even higher.

One thing to remember is that because affiliate marketing has lower costs, profits can be higher. However, you typically need to sell a bigger volume than you would with dropshipping.

Winner: Tie

Not Dealing With Customers

Managing customers can be another source of stress, and you need to think carefully before starting a business where this is your reality. Even if you’re the world’s best dropshipper and you have an amazing product, you’ll still need to deal with customer requests and complaints.

Some people simply might not be happy with the product when they receive it. In other cases, you may have issues with shipping; these will often be out of your control. The best thing you can do is pick a supplier that you trust and have a clear track record.

On the other hand, you don’t have to deal with customers as an affiliate marketer. You’re selling someone else’s product, which means that they’re also responsible for customer support. Having said that, you should still be genuine with what you sell to avoid damaging your reputation.

Winner: Affiliate marketing

So, Which Business Model Should You Choose?

There isn’t a right or wrong answer when choosing dropshipping or affiliate marketing. It depends on your personality and preferences. Regardless of which website you choose, the quality of your hosting matters.

To help you assess which is better for you, we’ll quickly walk through the best business model for different people.

Who Should Do Dropshipping?

Dropshipping is an ideal fit for you if you fall into these categories:

• You like working with customers and suppliers.

• You’re willing to deal with risks like lost products.

• You have a budget for paid advertising (and want to learn how to use them).

• You have an idea for products you want to sell.

• You’d like to start an eCommerce store but don’t yet have the money for an inventory.

One thing worth remembering is that you can minimize the manual workload associated with dropshipping. For example, you can use AI and machine learning for automation.

Who Should Do Affiliate Marketing?

Affiliate marketing is a better fit than dropshipping if any of these sound like you:

• You’re a deeply creative person who wants to build a business around a topic they’re passionate about.

• You don’t want to deal with customers on the front end.

• You’re willing to work on something for years before getting substantial results.

• You don’t want to hire staff later.

If you choose affiliate marketing, it’s worth learning about the different ways you can promote affiliate links.

Summary

Affiliate marketing and dropshipping are both viable online business models, and you should choose your preferred option based on your personality and preferences. Dropshipping is much more hands-on, and you’ll need to feel comfortable working directly with others. With affiliate marketing, you can focus more on content creation – but you still need to be good at sales. You can, of course, always try both to see which appeals to you the most.

Frequently Asked Questions