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Blog / Beginner's handbook / Affiliate Marketing vs. Dropshipping: Choosing the Right Path for Your Online Business

Beginner's handbook

Affiliate Marketing vs. Dropshipping: Choosing the Right Path for Your Online Business

Affiliate Marketing vs. Dropshipping: Choosing the Right Path for Your Online Business
Sandra Ķempele

By Sandra Ķempele

15 min read

Ready to dive into the exciting world of online business? If you’re just getting started, you might be wondering which path to take—affiliate marketing vs. dropshipping.

Affiliate marketing means promoting other businesses and earning a commission for each new sale, while a dropshipping business sells physical products that you don’t have to keep in stock. Both affiliate marketing and dropshipping have low startup costs, which makes them relatively low-risk business models.

In this blog post, we’ll break down the differences between affiliate marketing and dropshipping, so you can decide which one suits your needs best. Let’s get started!

Affiliate marketing

Affiliate marketing is an online business model where you earn commissions by promoting products or services from other companies. 

When you join an affiliate program, you receive unique product links. Then, you promote the products through your website, blog, or social media. When people click on your affiliate link and make a purchase, you earn a commission.

a person holding a phone and typing on a laptop

Source: Unsplash

With an estimated 80% of brands offering affiliate programs, there’s no better time to start taking advantage of this income stream. Below, we’ve gathered some of the pros of affiliate marketing and reasons why it’s taking off.

Easy to start

One of the standout benefits of affiliate marketing is its simplicity. You don’t need to create products, which eliminates the time and effort required for product development and inventory management. 

Instead, you promote products or services from established companies as an affiliate marketer. You can choose to work with large brands like Amazon or market services specific to your niche. 

Typically, there’s a lot of support from the brands to help you get started. For example, the Fiverr affiliate program offers training tutorials and creative assets to help you drive traffic to their website. 

a woman standing in front of a graph

Source: Fiverr affiliates

No need to manage customer support

Running an ecommerce business often involves dealing with customer inquiries. In the affiliate marketing model, this burden is lifted from your shoulders. You act as a middleman between the customer and the merchant in the process of product discovery. 

Once a customer clicks on your affiliate link and visits the product page, they will contact the merchant directly. In turn, merchants are responsible for providing customer service. This way, you can focus on what you do best—driving traffic and sales—without the hassle of managing customer support.

Low startup expenses

Affiliate marketing boasts low startup costs. You don’t need to worry about inventory, shipping expenses, or handling returns. 

Your primary investment is in building your own website and creating content to attract an audience. This affordability makes affiliate marketing a low-risk business model, which is well-suited for anyone with limited initial capital.

Most affiliate programs run by brands are free to join, with some even offering sign-up bonuses to welcome new affiliates. 

As a beginner, you can also start by joining an affiliate network that gives you access to the best affiliate programs out there. They make it easier to find programs and help organize affiliate commission payouts. Some of the most popular affiliate networks include ShareASale, AWIN, and ClickBank.

clickbank affiliate program

Source: ClickBank

Earn passive income

Once you’ve set up your affiliate marketing system and established a strong online presence, you can continue earning commissions even when you’re not actively working on your business. 

In other words, your old content can generate customers for months and even years after publishing. This way, you can earn passive income and have the flexibility to scale your business, explore other ventures, or enjoy more free time.

While affiliate marketing boasts many advantages, there are some drawbacks you should be aware of to make an informed decision. Below, we discuss some cons to affiliate marketing to keep in mind.

Low commissions at the start

Affiliate marketing often starts with relatively low rates, especially for newcomers. So initially, you may find yourself earning modest commissions, which might not meet your expectations. 

The commission model also means little control over your rates. The average rate for an affiliate program is 10%, but some also offer different fixed commissions depending on a product category. 

For items that have lower profit margins, there might be a lower fixed rate, for example, 5% on book sales. Alternatively, high-value categories like electronics have a higher commision rate to encourage affiliates to promote smartphones, laptops, and other items with high earning potential per sale.

No control over pricing

As an affiliate marketer, you have no control over the pricing of the products or services you promote. The merchant sets the prices, and any changes can directly impact your commissions. If the merchant decides to increase prices, it might become more challenging to convert leads into customers.

Plus, because of how affiliate marketing works, if a visitor goes to a business and buys several things, you’d likely only get a commission for the specific product that you shared. 

Your affiliate link is the lifeblood of your business, as it’s used to track sales generated through your promotions. Unfortunately, these links can sometimes be removed by users who are cautious about their online privacy or have security fears related to malicious software.

That means you’d likely lose the ability to earn commissions from sales generated through those links, impacting your revenue stream. Additionally, depending on the affiliate program’s terms and conditions, removal of links could lead to the suspension or termination of your affiliate relationship.

Limited to some advertising

Affiliate marketing is not always compatible with every advertising platform or channel. Some platforms, like Google Ads, have strict policies regarding affiliate marketing, making it challenging to run paid advertising campaigns. 

Such limitations can force you to rely more on organic traffic and content marketing, which can be slower to yield results.

Dropshipping

a person typing on a laptop

Source: Unsplash

What is dropshipping?

Dropshipping is an ecommerce business model where you sell products to customers without holding any inventory. Instead, you purchase products from dropshipping suppliers once you make a sale. 

The supplier handles storage, shipping, and fulfillment, allowing you to focus more on marketing and customer service. It’s a low-risk way to start an online store.

Dropshipping pros

Almost 30% of online stores choose dropshipping as their fulfillment method. From scalability to higher profit margins, there are good reasons why dropshipping is so popular. Below are some of them.

Build your own brand

One of the standout advantages of dropshipping is the chance to build your own brand. Unlike affiliate marketing, where you promote other companies’ products, dropshipping allows you to curate your product catalog and establish a unique brand identity. 

This means you have control over your product customization branding, product descriptions, and customer experience. In other words, you have full ownership over your own business, its reputation, and, ultimately, its long-term success.

Higher profit margins

Another advantage? Dropshipping is known for better profit margins compared to affiliate marketing. Since you aren’t limited to fixed commission rates and can set your own prices, you have greater potential to earn substantial profits per sale.

While dropshipping involves product costs, shipping fees, and other expenses, savvy ecommerce entrepreneurs offer top-selling products with competitive prices, allowing for a healthy profit. 

One thing that can help you get higher profit margins is finding a high-value dropshipping niche. For inspiration, check out the Bicycle Booth, a print-on-demand business catering to cycling enthusiasts and selling cycling accessories, gear, and apparel through a quality online store.

a collage of a man and a woman wearing cycling gear

Source: Bicycle Booth

Instant payment

In the dropshipping business model, you instantly receive payment from customers. Unlike affiliate marketing, where you often need to wait for commissions to accumulate or reach a payout threshold, dropshipping provides instant cash flow.

If you use Shopify for your ecommerce store, many different payment methods are already supported, including Visa, Mastercard, Apple Pay, and more. You can also opt for PayPal, which is one of the best payment gateways for dropshipping, especially for international payments. 

Easy to scale

​​Dropshipping is highly scalable. As your brand gains traction, you can easily expand your product range, test new designs, and target additional customer segments. 

It’s much easier to scale compared to an affiliate website, which largely depends on the merchants who initiate the affiliate programs and want to have their products promoted.

Compared to traditional ecommerce stores that need substantial investments in inventory, warehousing, and logistics, scaling up your dropshipping business requires minimal additional investment. With the right strategies in place, you can rapidly increase your sales volume and revenue to scale globally.

Dropshipping cons

Even though dropshipping is one of the easiest business methods to try out, it’s not suited for everyone. Here are some dropshipping cons to keep in mind.

Customer support needed

Dropshipping is more hands-on than affiliate marketing and requires customer support. You are the face of your brand, so customers will turn to you with questions, concerns, and issues related to their orders.

Excellent customer support is important for building trust and retaining customers, but addressing inquiries, resolving issues, and handling returns can be very time-consuming. This is an additional responsibility when compared to affiliate marketing.

If it sounds like too much work, don’t be discouraged! Outsourcing customer support can be a smart move, especially if you’re looking to streamline operations and focus on other aspects of your business. Platforms like Upwork, Freelancer, or specialized customer support agencies can be great for hiring a virtual assistant.

Limited control over the quality of service

When you dropship, you rely on third-party suppliers to fulfill orders and deliver products to your customers. In turn, you have limited control over the quality of service provided by these suppliers. 

If a supplier makes mistakes, ships the wrong products, or experiences delays, it can reflect poorly on your brand. In the worst cases, it can lead to customer dissatisfaction and negative reviews.

Managing supplier relationships and ensuring consistent quality can be challenging, so it’s essential to find a supplier with an excellent reputation and solid market experience. Do some research to find what other customers are saying and get sample orders to check the product quality.

If you’re looking for a dropshipping supplier, Printful is one of the most reliable companies to work with. Printful offers print-on-demand dropshipping services for apparel, accessories, and home & living items.

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Price competition with other businesses

Dropshipping is a popular business model, which means you’ll likely face stiff competition. Choosing the right dropshipping niche is crucial for success, but it’s a constant challenge. Many other entrepreneurs may be selling similar products, which can lead to price competition. 

Learn more: Etsy Dropshipping: What’s Allowed in 2024?

Alternatively, lowering prices too much to attract customers can erode your profit. So, it’s important to find ways to differentiate your brand and increase your product value to stay competitive.

Affiliate marketing vs. dropshipping: How do they compare?

a laptop on a table

Source: Unsplash

Now that we’ve covered the pros and cons of each business model, how does affiliate marketing differ from dropshipping when it comes to earning potential and the skills you’ll need? Let’s explore which is the more cost-effective option.

Read also: Dropshipping vs. Ecommerce: A Beginner’s Guide to Selling Online

Ease of start

Affiliate marketing is renowned for its low barrier to entry. Plus, you don’t need to choose products to sell and worry about customer service as you do with dropshipping. Instead, you promote products or services offered by established companies.

To become an affiliate marketer, you don’t need a full-fledged ecommerce store. You can start with a blog, social media presence, or email marketing. This means you can be up and running within days.

Dropshipping also offers a relatively straightforward entry into the world of ecommerce, but it has some distinctions compared to affiliate marketing. While you don’t need to create products, you do have to choose the right products to sell or customize. Researching profitable dropshipping niches and reliable suppliers is crucial for success.

To get started, you’ll need your own online store, which can be easily created with platforms like Shopify or WooCommerce. If you’d like to sell products and be in charge of your brand, dropshipping is a great, simple alternative to traditional retail.

a man sitting on a couch

Source: Shopify

Overall, the affiliate marketing business model holds a slight advantage for beginners due to its simplicity, low financial risk, and quick setup. You can join an affiliate program with minimal resources and technical expertise.

Skillset needed

In the world of ecommerce, building and maintaining an audience is a crucial skill you’ll need. Understanding your target audience’s needs and preferences is key, whether you’re an affiliate marketer or running a dropshipping business.

In fact, skills in online marketing like search engine optimization (SEO), social media, and paid advertising, can greatly benefit affiliate marketers and dropshippers. In both cases, effective marketing skills are essential for driving traffic to your website or online store and converting visitors into customers.

If you take the affiliate marketing route, you’ll need to excel at writing engaging and persuasive content. This can be writing product reviews, blog posts, email campaigns, and social media posts. 

Nearly 65% of affiliate marketers worldwide generate traffic by blogging alone. You can quickly create a blog on a platform like WordPress and then focus on creating content. It’s a competitive online space, so you’ll need to have strong writing skills to create persuasive, engaging content that attracts readers. 

wordpress blogging platform

Source: WordPress

In contrast, running a dropshipping business requires a broader set of skills. In addition to marketing, you’ll also need to do product research and handle customer service. It’s a good fit for those who want more control over their brand and product selection.

Managing an online store is central to dropshipping, so you should be comfortable with setting up and maintaining an ecommerce website. Alternatively, you can establish your own online shop on a global marketplace like Etsy. If you’re managing customer service, excellent communication skills are also a must.

Most importantly, the success of a dropshipping business hinges on selecting the right products to sell. You need to have good market research skills to identify profitable niches and trending products. Since the market is constantly changing, you should also be quick to respond to emerging trends.

Investment needed

Whether you’re starting an affiliate business or launching a dropshipping store, it’s important to understand how much you’ll need to invest.

As an affiliate marketer, you can get started with minimal upfront costs. The primary expenses typically include domain registration, website hosting, and some basic advertising tools. 

Generally, the affiliate model relies on free marketing channels, including content marketing, SEO, and social media. If you do go for some paid advertising, marketing costs can still be as low as a few hundred dollars per year.

While dropshipping is a more cost-effective business model than traditional retail stores, it still involves some financial investment. Similarly to affiliate marketing business, you’ll need to cover expenses like setting up and maintaining your own website, including domain registration and hosting. 

Because of the stiff competition, dropshippers often allocate a budget for marketing efforts. This can be paid advertising, social media campaigns, or SEO optimization. Marketing costs vary widely based on your strategy.

Earning potential in 2023

As ecommerce sales are expected to grow year-over-year, it’s a good time to look for ways to earn money online. Evaluating the earning potential of different ecommerce business models is a must when considering your options. 

The good news is that both dropshipping and affiliate marketing segments are experiencing growth in 2023. Affiliate marketing is currently a $17 billion industry. The global dropshipping market size is expected to grow to a staggering $243.42 billion in 2023.

Affiliate marketing offers substantial earning potential when done strategically. As you build your audience and establish trust, your ability to promote products and earn commissions can increase significantly.

One of the greatest strengths of affiliate marketing is the potential for passive income. Once you’ve set up a successful affiliate website, you can continue to earn commissions on past and future promotions.

For both dropshipping and affiliate marketing, your niche has a big impact on how much you can earn online. You’ll also need to build a following and be quick to capitalize on emerging trends

When dropshipping, your earning potential depends on your ability to find high-value products with competitive prices. Is dropshipping worth it? If you’re ready to invest effort into building a strong brand, then the answer is yes! A well-established brand can command high prices and increase your earning potential. 

In short, affiliate marketing offers the possibility of passive income, with earnings closely tied to content quality and product promotion. A dropshipping model can also be very profitable if you’re good at selling trending products and responding to market trends.

Which one is best for you?

Whether you’re leaning more toward content creation or product curation, both affiliate marketing and dropshipping can get you impressive results.

The affiliate marketing industry continues to thrive, offering promising opportunities for those who can produce high-quality content. A dropshipping store, on the other hand, boasts profit potential driven by strong branding and trending, high-value products.

In 2023, your success depends on your dedication, skills, and commitment to staying informed about industry trends. Before you dive in, take the time to assess both business models and how they align with your goals.

Affiliate marketing vs. dropshipping—which do you prefer? Let us know in the comments!

author

By Sandra Ķempele on Oct 2, 2023

Sandra Ķempele

Guest author

Sandra is a freelance writer and educator with a background in art and communication. She holds an MA in Art Museum and Gallery Studies, and in her free time enjoys reading, museum visits, and outdoor adventures.

Sandra is a freelance writer and educator with a background in art and communication. She holds an MA in Art Museum and Gallery Studies, and in her free time enjoys reading, museum visits, and outdoor adventures.