Drop Shipping vs Affiliate Marketing – Which is Right for Me?Last Updated:
Drop shipping and affiliate marketing are two business concepts that have filled multiple pockets with a whole boatload of money. Given the ease of starting and maintaining both, more people are trying their luck in these business ventures. But a lot of curious individuals still cannot distinguish one from the other. In this article, we will take a closer look at each of them, see what makes them similar, spell out their differences, and hopefully help you in choosing which one to start.
Drop shipping and Affiliate Marketing Defined
First, let’s define each business concept for a basic distinction between the two: Drop shipping is when you partner with a manufacturer or a supplier for the products that you sell. They will be responsible for managing the inventory, carrying out the order, and delivering the items to the customers, meaning all that’s left on your plate is to run the store front and answer all customer communications that go with it. In short, you are the middle man between the supplier and the customer.
On the other hand, affiliate marketing is an arrangement wherein you take commissions for sales coming from traffic directed from your website to another website. In this case, the affiliate website usually has a special link to direct visitors to the main store. You do not sell any products, you only maintain a website that redirects visitors directly to the product page of the partner stores where users can complete the purchase.
Two Sides of a Coin
The two actually have a couple of similarities, the first one being that they can both be passive ways to earn. All you have to do is maintain your page or website, and ensure that you are getting traffic to your site. There is no need to maintain a warehouse or keep up with delivery schedules.
Given this simple process, both are easy to start with, and can be set up with minimal expenses. The risk for losses is also relatively low, since you aren’t buying any items or investing any large amount upfront.
Another similarity is the skill set needed for each, given that the marketing aspect is entirely on your shoulders. You will have to draw attention to your pages, so there will be customers placing orders (for drop shipping) or visitors clicking the link to make their purchase (for affiliate marketing). In both cases, you are creating and maintaining a website and making an effort to drive traffic to it.
Moreover, in both scenarios, you will only profit if the customer actually buys something (as opposed to ads for instance), whether from your own store for drop shipping or from the main seller for affiliate sites. Traffic alone is not the determinant for the sale or commission, although you definitely have a better chance of hitting sales if there is plenty of traffic coming to your pages.
What Makes Them Different?
First and foremost, their main difference lies in the structure of their process. In drop shipping, you are basically running a retail business- you are selling the products directly to the customers. While you are sourcing out inventory and item delivery to a third party, you are still the face of the store, and managing it is your responsibility. The buyer directly transacts with you, gives the payment to you, and talks to you for any questions or issues with their order.
Meanwhile, in affiliate marketing, you are not selling anything from your website. You post articles, reviews, and possibly recommendations to entice customers to buy the product (hence, the marketing aspect), but you aren’t selling anything- you just post links which direct them to buy the item. You have no control on the transactions of your visitors. Your role ends when the visitors click on the link on your website.
Another difference between the two is with the product listing within the website or page that you are running. In drop shipping, since you are the owner, you get to choose which products are offered in your virtual shelves. You have total control over what is offered and what is not.
In affiliate marketing, you don’t have this kind of power. Your choices are limited to what is available in your partner store’s offers. You can create a partnership with several online retailers so you can create links for items from multiple categories, but you are still limited to what the partner stores have.
A crucial aspect that separates the two is profit setting. You dictate the prices in drop shipping, so you set the amount of profit that you will gain for each sale. For example, let’s say a camera drone costs $30 per unit from your partner drop shipper. You decide to offer it at $50 in your store; therefore, you are setting your profit at $20 for every camera drone sold. Not only are you in control of the products offered, you also have the power to set the prices.
Affiliate marketing does not offer this kind of power. The online store where customers buy the product has the control over how much affiliate marketers will receive. For example, Amazon offers their affiliates a starting commission of 4%. Rates can go up to 10% depending on the item bought by the customer that came from your website, but this still depends on their affiliate policies.
Lastly, customer loyalty is on different sides of the pole in each case. In drop shipping, since you have an online store or have an account in an online retailer platform, customers can simply search for you if they want to purchase another set of products. Establishing a customer base is easier and repeat purchases can be easily done.
The case is opposite for affiliate marketing. Visitors can come and go without even knowing the name of your website. There is no drive for them to return to your website every time they need to purchase an item. For recurring purchases, they can just go directly to the website where they previously bought an item and save time in the process.
The Million Dollar Question- Which is Better?
The answer is entirely up to you. The difference of the two will make all the difference, so choosing what is best for you depends on your preference. Here are some questions that can serve as a guide when deciding which way to go:
- Are you willing to spend time researching and contacting suppliers and various drop shipping companies?
In drop shipping, since you are the store owner, you have the task of sourcing the suppliers of the products you intend to sell. This may mean hours upon hours of searching online for reputable sources and cheap partnership rates, not to mention waiting for responses from contact points. Nevertheless, it will all payoff when you have finally sealed your partnership with them, and you can start earning with minimal effort.
- Do you prefer writing articles, telling stories, and giving recommendations?
Creativity is essential in affiliate marketing, since you are trying to convince readers to that they need to purchase a specific product. If you enjoy- and excel- in this line of work, then being an affiliate marketer may be better for you.
- How much control do you want to have?
As explained earlier, affiliate marketing distances you from any responsibilities involving the customer’s purchase. Your purpose is to convince them to buy the product- it starts and ends there. You don’t have any responsibilities over the actual transaction process between the store and the buyer. Once your page and affiliate link is up, your job is essentially done.
In drop shipping, a majority of the elements in play is in your hands- the partner drop shippers, products offered, and pricing. You also have control over how much you will make per item bought in your store- a compelling power for most. This does come with a great responsibility, though, which is slated in the next question.
- How well can you handle customers?
Let’s face it- customer interaction is not for everyone- some people have more patience and skills to deal with irate buyers and unpleasant personalities than others. Affiliate marketing frees you from any customer service responsibility, since you are not providing any service.
Drop shipping actually gives you a heavy load when it comes to customer service. Remember, managing the inventory and delivery is outsourced to the partner drop shipper. Any error on their part automatically translates to your mistake, since they are invisible to the customer’s eyes. You are responsible not only for inquiries prior to purchase, but also for after sales service, which can be a highly stressful task.
There you have it- drop shipping versus affiliate marketing. May this comparison and contrast- and guide- help you in deciding which path to take. If you want to start a business via drop shipping, check out our top drop shipping companies which can give you an insight of their offers, rates, and service. If you choose to be an affiliate marketer instead, you can also check the best affiliate marketing networks and tools to help you get started.