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Affiliate marketing vs Drop shipping: Which is better to opt?

Affiliate marketing vs Drop shipping: Which is better to opt?

Both affiliate marketing and drop shipping can potentially bring you a lot of profit with minimum income. But what is more profitable? Or which one will suit you more? Then, in this guideline, we will show you the similarities and differences between them

Similarities between affiliate marketing and drop shipping

In simple term, they are business models that you won’t be responsible for inventory or delivery. Your main duty is selling products to customers. 

Low inventory cost

If you want to start up, but have a little savings, then these business models might be for you. You won’t have to invest too much money since you are not responsible for inventory. Most of the time, you only need to spend money on ads or sales. 

Low-risk business model

Since you don’t need to spend too much money on these business model, the risk is quite low.

Affiliate marketing
Both of them are low-risk business model

No responsibility for inventory or delivery

Suppliers will take care of inventory and shipping process for you

You can start a business immediately

These business models require little investment. Also, they are quite low-risk. Therefore, with little saving, you can start your own business in a short time with these

Potentially gain a lot

If you execute your selling process well, you surely gain a lot of money. Moreover, you can work as a freelancer with affiliate marketing or drop shipping. As a result, this will be a high-income second job.

Differences between affiliate marketing and drop shipping

Affiliate marketing and drop shipping have a lot in common. However, they are dramatically different. Overall, with affiliate marketing, you will receive a commission after selling products. The price of products is set by the suppliers. Whereas in drop shipping, you can freely set your price.

To thoroughly understand the differences, firstly, let’s go over some definitions

What is affiliate marketing?

Affiliate marketing is a high-profit, low-cost business model. As a affiliate marketer, you will earn a commission for every sales. You don’t need to worry about inventor or delivery. You main duty is selling and advertising products of suppliers. 

Affiliate marketing
What is affiliate marketing?

Affiliate marketing pros

This is a billion-dollar worth industry. The spending on affiliate marketing is expected to reach $6.8 billion in 2020. One main reason is that it can bring you a lot of benefits. Here are some of them

There’s no or low – cost investment

There’s hardly cost you anything to be a affiliate. You don’t need to spend money to buy inventory, hire employees or take care of delivery. The only thing you must do is selling and advertising products to customers. 

No need for customer support

You won’t have to worry about the customer support. Instead, marchants will take care of that. As a result, you don’t need to be a product expert to work with this business model.

A great source of passive income

With affiliate marketing, you will need to set up ads or product content upfront. After that, your only mission is selling products. With carefully prepared advertisements, you can attract many customers. Thanks to that, this is a great source of passive income

Affiliate marketing
Affiliate marketing is a great source of passive income

High convenience and flexibility

You can work as a freelancer with affiliate marketing. You can work anywhere at anytime, at home or at office. Therefore, it creates a great convenience working environment and flexibility. 

Moreover, you can still maintain your current job while being an affiliate.

Affiliate marketing cons

Just like everything, affiliate marketing is not perfect. It still has a lot of drawbacks. 

Fixed commission

You can’t control the price and commission. As a result, you will receive a fixed amount of money for each products. If you want to earn more, or have higher commission, you will have to contact merchants

Affiliate marketing
You will get fixed commission

You can’t get the money immediately

After selling, you need to wait for merchant to give you the payment. Of course, most merchants will pay you on time. However, there are still many unreliable merchants who will delay your commission. Thus, you should choose suppliers very carefully.

Without any sales, you will get no income

Needless to say, affiliate marketing is the pay-on-performance model. If you can’t sell products, it means you can’t get any money.

This is the main drawbacks of this business model. It can’t guarantee income for you.

High competitive industry

Affiliate marketing is low-cost, high-profit industry. As a result, it is very appealing to many people. Therefore, there are many people besides you want to join in this industry. If you want to start your business with this model, you will meet lots of competitors.

Affiliate marketing
This is a competitive market

People can hijack affiliate links

This problem doesn’t happen very often, but still. Since this is a competitive business, many people can steal your affiliate links and get the commission. 

What is Drop shipping?

Moving on Drop shipping. Different from Affiliate Marketing, with drop shipping, you can sell products directly on your website, at your price. However, you don’t need to hold inventory.

For example, a customer order your products. Then, you will contact to suppliers and ask them to deliver the products to customers. 

Drop shipping
What is drop shipping?

Drop shipping pros

Dropshipping nearly can solve every affiliate problems.

Low-risk online business model

Just like affiliate marketing, you won’t have to invest too much money with drop shipping. However, drop shipping is still less risky than affiliate marketing. The main reason is the instance of income. Your income will be available each week with drop shipping. On the other hand, being an affiliate, you need to reach a KPI before you receive commission.

Instant income

Since you sell products on your website, whenever a customer buy the products, you will receive money instantly. There won’t be delayed payment

Higher profit margin

You can set the price according to your preference. Therefore, you will have higher profit margin compared to affiliate marketing. In affiliate marketing, you earn a fixed amount of commission for every product. But when it comes to drop shipping, you can alter the price to earn the most profit.

Drop shipping
You’ll get higher profit margin with drop shipping

Building your brand

With drop shipping, you have your own website and your own brand name. The greatest about this business model is building your brand. Thus, you will be able to sell your website when you don’t want to continue anymore. 

Customers are likely to come back to your business

You will direct customers to your website. Therefore, when they need that product again, they will comeback to your website to make the purchase. On the other, affiliate marketers direct customers to different website. Therefore, they hardly can gain long-term buyers.

Drop shipping cons

In need of customer support

Customers buy products on your website. Then when they meet problems, they will come to your website to find support. Therefore, drop shipping requires customer support. As a result, you also need to improve your understanding about products to effectively resolve customers’ problems

Hardly have control over delivery

One of the common complaints is about shipping. However, since you are not responsible for delivery, it might be difficult to solve this problem.

You need to set up effective business plan

To gain high profit, you might set the price higher than market price. However, if customers go online and compare your price with others’, they may choose lower-price product. Why they need to pay higher for the same products.

Therefore, to encourage customers to buy immediately, you need to come up with effective marketing plans. One of them is psychological pricing.

You need to set up effective marketing plan

In conclusion

Both affiliate marketing and drop shipping have their worth. Therefore, you should consider them carefully before choosing. This will ensure the optimum income for you.

If you consider opening a website for your business, you need to contact ArrowHitech. With 12+ years in e commerce, we can guarantee you the best performance, from consulting to web developing. You will be able to make the right decision with our help. Moreover, we also sell and develop Shopify themes and Shopify apps. Working with our decade-long experienced developers, you will surely receive your dream website. Contact us here or via website support@arrowhitech.com or hotline + 84 243 7955 813

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