Making money online is easier than ever, and more people are learning how to cash in on the internet, even if they’re only doing it as a side hustle. With affiliate marketing and dropshipping, you can run a home-based business without ever dealing with products or inventory. Here’s what you need to know about affiliate marketing vs. dropshipping.
One thing that affiliate marketing and dropshipping have in common is that you never have to hold inventory or maintain stocked shelves. In fact, you never touch a product. That’s part of the charm of these types of home-based, online businesses. You don’t pay out-of-pocket for product to sell.
Another similarity is that both business models take time to produce results. With dropshipping, it can take six months to a year to turn a profit, and affiliate marketing might not mature for 12-18 months. Neither model is a get-rich-quick scheme.
Affiliate marketing: You use videos, blogs, and other digital marketing tools to prompt a viewer to make a purchase through a link that you’ve provided. The affiliate network (such as AWIN or ShareASale) with whom you are working uses cookies to track that viewer and your link so that if the viewer makes a purchase within a certain amount of time, you get a commission. You’re clear, up-front, that you’re an affiliate marketer representing another company’s product. Since you’re only referring customers to another business, you don’t ever deal with customers.
Dropshipping: With dropshipping, you’re representing your own brand. You set up an e-commerce site, post the products, and set up a virtual storefront. While the wholesale company, or the dropshipper, sends the product to the buyer with your branding on the packaging, you are the one responsible for taking payment, placing the order with the wholesaler, and handling any customer service issues like returns or refunds.
Getting Paid
Dropshipping has the potential to earn more money and earn it faster than you can with affiliate marketing.
Affiliate Marketing: With affiliate marketing, you have no control over the price of the products. When someone purchases a product using your link, you get a small percentage, which won’t be paid out until your commissions reach a certain amount. The amount you earn will vary depending on the affiliate company’s program.
Dropshipping: When you list a wholesale item on your website, you’re able to put any price tag on it that you like. You’ll price competitively, so you’re on par with other similar products but can work with any margin. Not only are you in control of your profit, but you also get paid the moment your customer pays you for the product. You take the total amount of the sale, subtract the wholesale price of the product, and keep the remaining profit.
Domain Name Website Setup and Hosting
You’ll need a website and web hosting regardless of which business model you choose. But the website’s structure will be completely different. You can figure these into your up-front costs to get your business off the ground.
Affiliate Marketing: For affiliate marketing, you’ll need a domain name, a web platform like WordPress, and web hosting so that your website goes live. Your website’s blog is its most critical element and is what will drive traffic to your site and increase sales.
Dropshipping: The focal point of a dropshipping website is its e-commerce system or its shopping cart. Since you’ll be showcasing each product individually, creating product descriptions, and uploading photos, setting up a dropshipping website is more complicated and time-consuming than setting up an affiliate marketing website. Many Dropshippers use Shopify to build their store.
Payment Processing
Affiliate Marketing: Since you’re not selling products, you don’t need to set up payment processing with PayPal or Stripe. You won’t be handling money at all.
Dropshipping: Because you are presenting a storefront and facilitating the sale, you’ll need a way to process payments on your website.
Fulfilling Orders
Affiliate Marketing: There are no orders for you to tend to since people are not ordering directly from you.
Dropshipping: Although you’re not handling products, the customers do place their order directly through your website and pay you at the time of order. Your job, then, is to go to the dropshipper’s website and place the order to be shipped to the customer.
Repeat Business
Affiliate Marketing: There is no opportunity at all to build repeat business with affiliate marketing. It’s a one-and-done deal; when the viewer buys, you earn your commission, and there’s no further engagement.
Dropshipping: You’re building a business brand and selling products through your store. This gives you an opportunity to build trust with your customers, encouraging repeat business. You can also host a sale at your leisure or have customer appreciation events, which you cannot do with affiliate marketing.
Business Licensing
Affiliate Marketing: Although several affiliate marketers opt to set up their business as an LLC, a business license is not required for affiliate marketing, although some states’ requirements may differ. Instead of obtaining a business license, the affiliate companies with whom you do business will have you complete a W9 tax form for proper tax filing.
Dropshipping: You will need a business license for a dropshipping business because most wholesale companies require you to provide a tax ID.
Frequently Asked Questions
Which is Easier, Affiliate Marketing or Dropshipping?
Affiliate marketing is easier to set up and manage than dropshipping. Dropshipping requires a shopping cart, payment processing, order fulfillment, and customer service. Affiliate marketing only requires a website with a blog to get started.
Which Makes More Money?
Dropshipping has the potential to earn more money because you can set your own prices rather than earn a small commission.
Which Earns Faster?
Dropshipping produces financial rewards faster than affiliate marketing, although they both take time to gain momentum. With drop shipping, you’re paid when the customer orders, whereas affiliate marketing is paid monthly, depending on the affiliate partner.
Which is Riskier?
Dropshipping is riskier than affiliate marketing because you’ll invest more money up-front getting your website and e-commerce set up. Your reputation as a store owner, your business brand, is also on the line based on how you process orders and provide customer service.
Can You Do Affiliate Marketing and Dropshipping Together?
You can absolutely combine both business models and run affiliate marketing projects simultaneously with your dropshipping products.
Conclusion
Dropshipping and affiliate marketing are both lucrative forms of business. If you’re not able to invest your time and energy in maximizing both avenues, you’ll have to choose which is best for you.
If you’re looking for a passive income that requires less of a hands-on approach, you’ll do best with affiliate marketing. All that’s required is content promoting someone else’s products. It’ll take you about a year to year and a half to produce results, the commissions may be small, and payments may not be timely.
Dropshipping takes more of a commitment financially and in time and energy. You’ll manage a storefront without the hassle of dealing with inventory. As a storefront, you’ll need an e-commerce system, you’ll process payments, fulfill orders, and provide customer service. But you’ll also be able to establish a database of customers to whom you can market in the future to encourage repeat sales.
