Most online businesses fall in these two key categories: affiliate marketing and dropshipping. These two are the most prominent methods of making money online in 2020.
Many people want to make money from the internet but they are confused what kind of internet business model they can start. Let’s move on to:
Dropshipping vs Affiliate Marketing. Which is better in 2020?
You have to first understand the dropshipping and affiliate marketing meaning.
What is affiliate marketing?
The basic concept in affiliate marketing is you will charge the commission from the company when someone buys their product from your affiliate link. Simply, we can say that affiliate marketing is charging commission from the company on each sale.
Let me make it more simple for you to understand.
Suppose John builds a website on WordPress and starts writing and publishing blogs on the website. Sooner or later John will get traffic on his website and then John will join affiliate programs which are related to his blog content.
John will get a link from the company that link is affiliate link, so that company will track the sales from his affiliate link, John will use that link in his blog and when someone from the John’s audience click on that link and purchase that product then that affiliate company will pay commission to John.
In this way, John will make money from the website, without creating his own product just by selling the product of other companies.
This is how the affiliate business model works.
Now, the next thing you need to understand is the dropshipping business model.
In a dropshipping business model, you can sell the product on your ecommerce website or online store without having any inventory or warehouse. You just have to partner with the dropshipping supplier and they will deliver the product to your customer directly.
In this dropshipping model you can set your own product price and sell according to your profit margin.
Let’s suppose you decided to start a dropshipping business in USA and you used an online store builder to build an ecommerce website. Now you find the dropshipping supplier in US to partner with them.
Boom….. You got your first sale from the website.
Now, you will contact your supplier for that product and ask him to deliver the product directly to the customer’s address.
Let’s say customers buy from you for $76 + $4 (shipping charge) = $80 and the supplier provides you that same product for $50 (shipping chargers included), it means you will get a profit of $30 in that product without stocking the product.
This way dropshipping business model works and you can make money by selling online.
The most important thing while starting a dropshipping business is to find the dropshipping suppliers.
Read Here: Best dropshipping suppliers
Affiliate Marketing Vs Dropshipping: Similarities
While both affiliate marketing and dropshipping business models have many differences but they also have some similarities which you need to know.
- You don’t have to build your own product to sell online and make profits.
- Both business models allow you to start selling without having any inventory or warehouse.
- You can start both businesses easily from home.
- Both business models have high earning potential.
- Both require a similar set of skills to start such as creating and running ads, sales skills, basic SEO, and marketing mind.
- Both business models have relatively low-risk.
Now, you know the affiliate marketing and dropshipping business, you are ready to understand which business model is better and more profitable for you to start.
Let’s talk about the pros and cons of affiliate marketing vs dropshipping business.
Affiliate Marketing Business: Pros
1. No investment need for being an affiliate marketer
You don’t need money to start an affiliate marketing business, you can join affiliate marketing programs like Clickbank or Amazon Associates for free, they allow you to sell products from their website and get your commission on the basis of your sale.
You can start building community on facebook groups or Quora and add your affiliate link there. If you build your own website for blogging and then start affiliate marketing then you have to invest for domain and hosting.
You need to find the most suitable product to affiliate and start creating content to get sales.
2. No technical expertise needed
It is not necessary for you to have technical knowledge to become a successful affiliate marketer. You just need to know the basics of HTML or WordPress, only if you build your own website for affiliate marketing and you can learn these basics in a few hours for free from youtube.
3. No packaging and shipping hassle
When someone buys from your affiliate link, you are not responsible for packaging and shipping the product to the customers. You only need to do marketing for their product and get a sale, the company itself manages the delivery of the product.
4. No need to face customer
You are an affiliate marketer not a customer representative of that product, the company for which you are doing affiliate handles all the customer queries and issues and resolve according to the company policy.
These are the pros for being an affiliate marketer, but we know there are two sides of everything so let me reveal the cons of this business.
Affiliate Marketing Business: Cons
1. Unreliable affiliate programs
As we know in this world everyone is not the same, there are bad people too. Some companies are fraud who provide you affiliate links and when you make a sale for their products they ban your affiliate account and not give the commission you earn. These kinds of fraud companies can ruin your hard work so choose affiliate programs wisely.
2. Low commission
Some affiliate programs give very less commission on the products. The time and effort you make in getting a sale is not worthy enough for the small amount of money.
You need to get a high number of sales for making a large pool of money.
As you see the commission percentage varies according to the product category from 1% to 10%, suppose you sell a book for $10 through your affiliate link then Amazon will give you 4.5% commission on that book price, that means you will earn $0.45 for selling that book and that’s too less to earn.
3. People think it cost them more
Everyone wants to save money, so the first thing which clicks in people’s mind is, buying from an affiliate link costs them more money. They think the cost of product is higher in affiliate links in comparison to the price on the company’s website, which is not true no extra money charge from the customer who buys from affiliate links, but due to this misunderstanding affiliate marketer loses many sales.
4. No control over product
You cannot control the quality and price of the product. The company fixes the price and you can only sell the product at that price and get your commission for the sale.
This makes things harder for you because you cannot give offers and discounts to the customers to get more sales.
You know the pros and cons of this business, now you can think about whether the affiliate marketing business model is good for you or not.
It’s time to know about the dropshipping business model pros and cons.
Dropshipping Business: Pros
1. High profit margin
Dropshipping products have much higher profit margin in comparison to the affiliate marketing. It allows you to sell at any prices you can sell to the customer, no restriction in profit margin.
2. Dropshipping is an asset – a brand
This business model is an asset which allows you to make your own business website or online store and it will drive traffic to your website and make it a brand not like an affiliate marketing business where you drive traffic to other websites.
In a few years if you want to sell your online store you can easily get buyers for online stores, but you can’t sell your affiliate marketing website, so dropshipping is a better option for a person who wants to turn their business into a brand.
3. Product diversity
Dropshipping allows you to experiment with your business, it allows you to sell different categories of product. Suppose you start an online home decor store so you can also sell furniture, and kitchen appliances. This helps your customer in buying a variety of products from your online store and you will make more money.
4. No delivery managing hassle
The dropship supplier you choose to partner with will handle all the packaging and shipping issues. You are the one who gets the sale and rest all other things will be taken care of by the supplier itself. This allows you to focus more on getting more traffic on your online store which increases the sales.
5. No physical store
One of the greatest advantages of dropshipping business is you don’t need a physical store or warehouse to stock the products. It allows you to run an ecommerce business without having any inventory. Since there is no inventory so this saves your money and that’s why dropshipping businesses need low initial investment.
As you read above there are lots of pros in starting a dropshipping business but every business has flaws, but I must tell you there are very few flaws in dropshipping business.
Let me reveal the flaws in the dropshipping business.
Dropshipping Business: Cons
1. Customer support
In dropshipping business, you have to resolve the customer issues, not like affiliate marketing where the company will take care of the customer. Customers directly contact you for any issues they face.
This cause the issue in running a business, you can’t manage the customers by
yourself so you can source this work to the virtual assistant who will manage your customer support.
2. Stock management
As I told earlier, you are not responsible for packaging and shipping of the product and also don’t have to stock the products in the inventory but you are responsible for the products which are listed on your store is in a stock or not.
Let suppose, if someone orders a particular product from your store, now you will contact your dropshipping supplier to deliver that product to the customer but he tells you that he doesn’t have that product then you have to cancel that order and it creates trust issues with the customer.
So manage all the products listed on the website should be in stock to the supplier.
The pros and cons for Affiliate marketing vs Dropshipping is done.
Here are some stats which helps you more in deciding which is better for you to start in 2020.
Affiliate marketing vs Dropshipping: Stats
- The number of digital buyers increase from 1.52 billion in 2016 to 2.41 billion in 2021
- Retail ecommerce sales hit $2.29tr in 2017 and $4.08tr in 2020.
- In 2017, 23% of online sales were filled via dropshipping, which amount to about $85.1 billion of total online revenue.
- 81% of brands provides an affiliate programs to improve their business.
- In the USA affiliate marketing is expected to reach $6.8 billion in 2020.
- Only 10% of affiliate marketers generate 90% of the sales in most of the affiliate programs.
Affiliate Marketing vs Dropshipping: Conclusion
The growth of both internet business models are growing rapidly, people are earning good amounts of money in both the businesses either it’s affiliate marketing or dropshipping.
The stats which shows that most affiliate sales are achieved by only 10% of affiliate marketer that means it’s tough to get a sale in affiliate marketing as a beginner and it takes a lot of effort to compete with them. But in dropshipping everyone is making money because of the diversity of the product so you must consider dropshipping over affiliate marketing.
After analyzing all the stats present on the internet, I can say dropshipping is the best online business you can start if you have some money to invest and want to get sales quickly and if you are a student who doesn’t have much money to invest but you have more patience and time to grow your affiliate business then you can start an affiliate marketing business.
In Affiliate Marketing vs Dropshipping business, dropshipping has an edge over Affiliate marketing for those you want to be the successful internet entrepreneur.
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