Affiliate Marketing vs Dropshipping: Which to Choose in 2021
MMO (Make Money Online) is a form of business that is growing extremely strong today. With many different types of businesses such as Affiliate, Dropshipping - FBA, PPC, CTC, PTC (Paid to click), etc. If you have experience with MMO, you probably know that Dropshipping and Affiliate Marketing are two of the best ways of earning money today.
But if you are a newbie and want to choose a path to pursue, you will be wondering what to choose. In this article, I will analyze Affiliate Marketing vs Dropshipping: Which To Choose In 2021.
Table of contents
- An overview of Dropshipping
- An overview of Affiliate Marketing
- What are the similarities of Dropshipping and Affiliate Marketing?
- Affiliate Marketing vs Dropshipping: Pros and Cons of each
- Affiliate Marketing vs Dropshipping: Which option is better?
An overview of Dropshipping
Dropshipping is a method of sales that bypasses shipping. It is a retail method that you do not need to store inventory. Instead, you transfer customer orders and shipment details to another manufacturer or supplier. These people will then deliver the item directly to the customer. With this way of doing business, retailers do not need warehouses and goods in the warehouse, and no need to care about the shipping.
You can simply understand that you buy a product at a low price, sell it at a higher price, and profit from the gap. The profit you get is the price difference between the supplier and the price you sell to customers minus shipping costs. The difference will be more or less depending on the type of product and how you choose a supplier.
The biggest difference between Drop Shipping and other retail models is that merchants do not need a warehouse or inventory. Instead, these traders buy inventory when needed by a third party - usually wholesalers or manufacturers - to complete their orders.
An overview of Affiliate Marketing
Affiliate Marketing is a form of promoting products or services of the Supplier, the company whose products or services want to go through the websites of partners promoting goods and services to end-user. Partners making money online receive a commission when a user visits the Partner’s website to manage and perform actions that the supplier wants from the end-user, such as Purchasing, registering to use services, filling in the information, etc.
Participants in Affiliate Marketing include:
Advertiser: Known as someone who has a product, or service and they are willing to pay people to promote their products through online marketing channels.
Publishers: Individuals or companies promoting Advertiser products via social networks, websites or blogs and getting a commission from the Advertiser.
Affiliate network: Acting as an intermediary partner connecting product suppliers with affiliate marketers. The affiliate network will provide technical platforms such as advertising links, banners, statistics, click-through rates, conversion rates, commission. And they will be the dispute solver, collecting money and paying commission for Publisher
Customer: The person who directly sees the Publisher ad and performs an action (purchase, fill out the registration form, etc.)
What are the similarities of Dropshipping and Affiliate Marketing?
Although Dropshipping and Affiliate marketing are two distinct areas of two different industries, these two methods also have many similarities, such as:
They enable you to start a business without requiring inventory and freight
They are relatively low-risk business models
They both have high-income potential
You can easily start working with both of them immediately
They require similar skill sets such as advertising ability, the ability to drive traffic to the landing page (Sale page), and other marketing skills.
You can start with a relatively low capital.
Affiliate Marketing vs Dropshipping: Pros and Cons of each
Currently, Dropshipping and Affiliate Marketing are becoming attractive business models for both traders and long-time traders. However, none of the business models are perfect. Any type of business will have its advantages and disadvantages. So let’s take a look at what are the advantages and disadvantages that Dropshipping and Affiliate Marketing bring.
Pros and Cons of Dropshipping
Pros of Dropshipping
Does not require much capital
Perhaps the most signiadvantage of Dropshipping is that you can start an online business without investing a large amount of inventory. If you do business in the traditional form, you will have to spend a significant amount of inventory. With the Dropshipping model, you won’t have to buy any products unless you’ve sold and paid customers. If you don’t need the cost of inventory, you can start a successful dropshipping business with very little capital.
Easy to start
Starting an online sales business is usually easier when you don’t have to deal with physical goods. With Dropshipping, you don’t have to worry about:
Manage or pay for warehouse
Packing and shipping orders
Keep track of inventory
Handling domestic declarations and shipments
Constantly ordering products and managing inventory levels
Since you don’t have to deal with inventory purchases and warehouse management, your overhead will be quite low. In fact, many successful drop shipping businesses are setting up offices right at home with just one laptop and spending less than $100 per month. As you grow, this cost may increase, but it will still be less than traditional businesses.
A dropshipping business can move anywhere with an Internet-connected device. As long as you can easily communicate with suppliers and customers, you can start and manage your business.
Free to select product type
Because you don’t have to buy the items you sell, you can offer a range of products to your potential customers. If the supplier hosts a list of goods, you can list them all on your website for free.
Easy to scale up
For a traditional sales business, if you want to get three times more sales, you will have to spend three times more time and effort than usual. By taking advantage of drop shipping vendors, most of the additional order processing work will be handled by these suppliers, allowing you to expand the sales scale with less effort more to increase these sales. Growth in revenue will always bring more work - especially in relation to customer service - but businesses that use the drop shipping model are only more relative to traditional online businesses.
Cons of Dropshipping
Low profitability is the biggest drawback to a highly competitive drop shipping business environment. Because it is easy to get started and the investment and operating costs are minimal, many traders will set up a store and sell bargain items in an effort to increase sales. They have invested very little to start a business so they can afford to operate with low turnover.
If you stock all your goods, it’s very easy to keep track of items that are still in stock or out of stock. But when you have supplies from different warehouses and also orders from many other traders, it is difficult to keep track of where your goods are. Meanwhile, there are a few ways you can better synchronize your inventory with suppliers, which are not always possible and not always supported by all vendors. technology for you.
If you work with multiple vendors the products on your website will be sourced from different vendors - this will make your shipping business more complicated.
If a customer places an order with three products at different suppliers, you will incur three shipping costs for each product sent to the customer. But you probably won’t be able to ask the customer to pay shipping for these three products because customers often take it for granted. And even if you want to collect shipping costs on each product, automating these calculations is difficult.
Have you ever been blamed for something that was not your mistake, but you still have to take responsibility for those mistakes? Even the best Dropshipping suppliers make the mistake of completing an order - mistakes they will be responsible for and apologize for. Trivial and poor quality suppliers will cause endless frustration when losing goods, damaging goods and poor quality packaging, which will harm your business.
Pros and Cons of Affiliate Marketing
Pros of Affiliate Marketing
No Cost for Being an Affiliate
When doing Affiliate Marketing, you will not have to spend too much money. You just need to create your own website or a blog that is related to your business products, sources of goods that you can deeply understand them and manage them effectively.
Source of Passive Income
Affiliate marketing policy will probably create you a sustainable business model that provides a source of income on a regular basis for you over many years. You do not need to worry about creating products, no need to worry about shipping costs and other complicated things. All you need to do is make sure you are sending highly targeted traffic to the merchant landing page to drive conversions and you will receive money. So we can see that Affiliate Marketing gives us a pretty good and sustainable source of income.
No need to do customer support service
In an Affiliate Marketing business, affiliate suppliers provide merchants with their potential customers. Therefore, you are not necessarily a product expert. Merchants handle all customer support issues. If the customer is not satisfied with their product, the merchant will process the refund. If a customer needs help to solve a specific problem, the merchant is responsible for helping them. So when you have a customer’s inquiry, all you need to do is direct the customer directly to the merchant.
Cons of Affiliate Marketing
The profit earned when selling 1 product is low
If you are an affiliate, your profits will be calculated based on Commision. For example, you make an Affiliate for Amazon, the Commission you receive ranges from 4 ~ 10%. That is, if you spend $ 100, you can only earn $ 50 or less. This profit is much lower than Dropshipping.
Payments May Be Delayed
Those who do business in the form of Affiliate often have difficulty in financial matters. Because some providers may not be reliable in paying on time.
People Can Remove the Affiliate Link or not use your link to buy products
Sometimes, if you don’t use link shorteners, people might hover over the link and find that it’s an affiliate link. Therefore, they can assume that the cost is higher to buy through the link. Most people do not acknowledge that you only receive a commission for the sale. Therefore, people can choose to manually access the website you recommend directly without clicking on your affiliate link. When customers want to buy next time, they usually will not visit your blog but they will go directly to the product link to buy. Since they didn’t click the link, you will not earn any commision for that.
No Control Over Products and Pricing
With Affiliate Marketing, you can not control the product you are advertising. You can not control the interface, description, price or post-sales service of the product. This may limit what you can do as an Affiliate Marketer from an advertising standpoint. You may not be able to mention certain features due to your terms and conditions. You can rely on photos to advertise products. But these may be outdated or low quality that make product promotion less effective.
Affiliate Marketing vs Dropshipping: Which option is better?
Clearly, Dropshipping and Affiliate Marketing have different advantages and disadvantages. These points will suit different audiences. Dropshipping will be suitable for those who want to make money online but have little capital, those who love real business. Meanwhile, Affiliate Marketing is suitable for people who are good at web design, have web experience and SEO knowledge. In addition, doing Affiliate Marketing also requires more effort and financial investment than Dropshipping. Those who are doing Dropshipping, FBA who want to invest more in other money channels can also consider this field.
While Affiliate Marketing is great for beginners who don’t want to take on too much of a business such as customer support, Dropshipping is a much more lucrative choice. Running an online Dropshipping store can help you make more money than an Affiliate Marketing site. You can easily market your products by uisng Facebook Ads and Google Ads. Moreover, if your store is providing excellent product quality, you will soon start receiving a consistent order line.
Moreover, a dropshipping store can also be turned into a passive business by hiring employees for the marketing and management activities of the e-commerce dropshipping store.
So with the comparison between Dropshipping and Affiliate Marketing above, I have given the similarities and pros and cons of both forms. In an increasingly technological age, MMOs like this will help us get businesses that benefit without spending too much capital to invest in. Hopefully after the article, you will find yourself the most suitable direction.