Affiliate Marketing vs Dropshipping – The Good The Bad and The Ugly of Making Money in eCommerce

If you are looking to start making money online then you are most probably considering affiliate marketing vs dropshipping. It is by far the 2 most popular strategies but by no means the only 2. What makes both affiliate marketing and dropshipping such popular options is the low threshold to get started.

You can get started in both for almost no money. This is both a blessing and a curse. Not needing much money to start a business means that you have almost no risk (unlike most brick and mortar businesses).

The flipside is that this low barrier of entry creates a LOT of competition. Anyone from anywhere in the world can do exactly what you are attempting to do.

Dropshipping and affiliate marketing requires very different skillsets and vastly different mindsets. It has a lot of similarities though and a lot of people move between the 2 – always thinking that the grass is greener on the other side.

Dropshipping vs Affiliate Marketing – A brief overview

For the benefit of those who do not know what these 2 business models are I will quickly explain. Affiliate marketing essentially means that you market other people’s products or services and get paid a commission.

Dropshipping means that you sell physical product without actually handling the products. You create a store (or leverage an existing platform like Etsy) and when someone makes a purchase, you place the order with a vendor who then packs and ships the order to your customer.

You never handle the product or buy any inventory.

In theory both affiliate marketing and dropshipping are very basic concepts to understand but when you get into the nitty gritty there are a number of variations to the theme.

In essence it boils down to where and how you get your traffic. A website or an online store is nothing without traffic.

Generally speaking, affiliate marketing works very well with SEO (search engine optimization) since a lot of affiliate products are based around information. This can be courses, ebooks or even reviews.

Dropshipping and online stores tend to work better with paid advertising. Since you are selling physical products, you can showcase products with images and videos which makes it ideal for advertising platforms like Facebook and Instagram.

This is only a very generalised view and you can make dropshipping work spectacularly with free search engine traffic. You can also make information products sell like hotcakes on Facebook traffic but it will require some experience and going against the grain to some extent.

Paid traffic can be hard with affiliate marketing since most ad networks frown upon affiliates. Affiliates tend to be very aggressive with their marketing and Facebook and Google Ads have made it almost impossible.

Affiliate Marketing

Affiliate marketing comes in a lot of shapes and sizes. You can create a website and use affiliate links with the free search engine traffic you get. If you have an active Facebook group or Instagram following then you can promote affiliate products and earn a commission.

You can also just pick products and match the products to traffic that you can buy from a multitude of ad networks. This becomes a lot more risky because you have to spend money on ads BEFORE you earn a commission and get paid.

Often your ad campaigns will not make any money and you end up losing. It takes a lot of testing to find the right offers and the right traffic to make money with paid affiliate marketing.

Building a website or a social following to get free traffic takes a lot of time and work. Buying traffic is fast but requires a lot of cash.

There are Essentially 3 Categories of Affiliate Marketing:

1.Physical product commissions:
When you get paid a commission for sales on physical products. Typically this will be from product reviews on your website (or Youtube channel) and Amazon or Commission Junction and thousands (if not millions) of products for you to choose from.

2.Information Products:
Mostly courses and ebooks from marketplaces like Clickbank. This lends itself very well to creating niche website around a very specific topic and then promoting these products through the search engine traffic that your website will get.

You can also have a lot of success promoting information products through your social media following, your email list or even through paid advertising.

3.CPA Offers:
CPA stands for Cost Per Action and there are a multitude of CPA Networks that have offers for dating, loans, games ec. Where you will get paid for every lead or subscriber that you generate. This is “easy” because you do not have to get a sale. You just need to get someone to sign up for free to get paid.

CPA tends to be the “dirty” side of affiliate marketing simply because there are a lot of scammy offers, merchants and affiliates that abuse the system. CPA does have a lot of great opportunities though and is probably the fastest way to make money online.

Dropshipping

Dropshipping has been around for some time. I first started dropshipping in 2004 and it was born out of the complications of ordering products in bulk, stocking it and then re-selling. This makes total sense if you have a brick and mortar store but makes no sense if you have an online store.

Having the merchant keep all the stock and handle the shipping and fulfillment means everybody wins. You can sell products for cheaper, the merchant can sell a lot more products and customers save on all the unnecessary costs of shipping to your warehouse and you having to fulfill order.

When Aliexpress became more popular, it became a powerhouse for dropshippers. The ability to quickly and easily find cheap products in China and dropship these products worldwide for 3x to 5x the costs made dropshipping ideal.

Dropshipping is not just dropshipping cheap crap from China.

There are Essentially 3 Categories of Dropshipping.

1.Dropshipping from AliExpress/China
This is by far the easiest way to get started. With Shopify and Oberlo you can get your store set up and running within a few hours. It really is as simple as clicking a few buttons and no technical knowledge is required to get it all set up.

2.Dropshipping from Private Suppliers
Dropshipping high quality products from major USA and EU suppliers is a totally different ballgame. Finding these suppliers takes a lot of time and effort but they are out there. The challenge is that there will be more integration issues and technical skills required.

3.Print on Demand
Print on demand products are products that are created “on demand”. These are typically blank products where you provide a Print on Demand supplier (like Printful) a design. They will then print this design on a T-shirt, mug, cap ec. when your customer places the order. They will also ship the order and in essence you do not handle the product yourself.

The Pro’s and Con’s of Dropshipping

affiliate marketing vs dropshipping

When you start to weigh up affiliate marketing vs dropshipping you will soon discover that dropshipping is riddled with potholes.

The advantages of drop shipping

1.It is cheap and easy to start:
You can get a free trail with Shopify and install the Oberlo app for free. Register for paypal and you are good to go. This gives you everything you need to start selling – with $0 spent.

2.No inventory or upfront costs
The beauty of dropshipping is that once your store is set up, you have no expenses to buy inventory, handle products or fulfillment. You only “buy” the products after you get paid.

3.Huge profit margins
When you source products from AliExpress you can get some huge profit margins. Typically you can 3x to 5x the product cost. This means that you can build up a big cash flow fairly quickly

4.An amazing selection of products
AliExpress has millions of products for you to choose from. You can build a store around almost any product you can think of. Even if you use Print on Demand, there is a huge selection of products ranging from T-shirt to shoes and even jewellery.

The Disadvantages of dropshipping:

1.Shipping times
The biggest drawback for dropshipping from China is the slow delivery times. Even if you do use ePacket shipping your customers will have to wait 2-3 weeks to get their stuff. Most customers do not like that at all.

2.Quality
Since you never handle the products yourself, there is no quality control. A lot of the times the products from Aliexpress is just really poor quality. This means you will have a lot of angry customers.

3.Language barrier
Communicating with sellers on Aliexpress can be a pain. Most of the time it happens through automatic translation and this can be incredibly frustrating. Chinese sellers also have a different mortal ethic and they will do anything to get a sale.

4.Customer support
Even though you are dropshipping and not handling the products yourself, you still have to do customer support. There will be a lot of customers complaining about slow shipping times and you will have to handle refunds and returns.

5.Print on Demand Pains
One of the unique problems with dropshipping Print on Demand products is that it is fairly easy for copycats to copy your designs. There are a few things you can do to prevent this but for the most part you can get copied and you can’t do anything about it.

The Pro’s and Con’s of Affiliate Marketing

dropshipping vs affiliate marketing

Just like dropshipping, affiliate marketing has a low barrier of entry and almost anyone can get started. With affiliate marketing you can leverage any special knowledge you have or even hobbies and topics of interest.

You really can build a “passion business” if that is something that is important to you

The Advantages of Affiliate Marketing

1.Cheap to get started
While you can start marking with only your affiliate links, you will probably need to register your own domain and have your own hosting. You can do this with Bluehost on the cheap.

This will allow you to set up your own website to either build a full website or just to create landing pages. You can also use something like Clickfunnels but this is a bit more expensive and well worth it if you plan on building sales funnels.

2.Very nimble
Affiliate marketing allows you to quickly and easily change the products you promote. You basically just need an affiliate link and you are good to go. With affiliate marketing you can quickly and easily adapt and change. If a particular niche or product is not working for you, just change. There are an endless amount of affiliate programs you can join.

3.Huge commissions
A lot of affiliate programs pay huge commissions. If you get your traffic for free then this can be very lucrative. Some affiliate programs even pay recurring commissions.

4.No hassles of handling products
Since you are the affiliate you have absolutely zero worries about handling products or doing customer support. This can free up your time to only focus on the marketing.

The Disadvantages of Affiliate Marketing

When you consider dropshipping vs affiliate marketing then you also have a lot of hassles that you may not anticipate when you first get started.

1.Getting traffic
This is by far the biggest challenge with affiliate marketing. Free traffic strategies like SEO is low and uncertain. Running paid ads to affiliate products is always tricky because ad networks typically do not like affiliates.

2.You are not in control of the product(s)
You are only promoting a specific product and you have absolutely no input or control over the product. Often times a product will be updated or the product website will be updated and your commissions can plummet overnight.

3.Lead Quality (CPA)
One of the big pain points with CPA marketing is that you can be kicked off certain offers, have your payouts reduced or even not get paid if your lead quality does not back out for the merchant. This can be a huge problem if you buy traffic and you can lose a small fortune this way.

4.Not getting paid
This is a very real problem and the reason why you should try and stick with tried and tested networks like ClickBank, Commission Junction and Share-a-Sale.

Almost every major business now have their own affiliate programs but you need to proceed with caution. They are ultimately in charge and it has happened a thousand times where affiliates did not get paid and you can lose uot big time.

Dropshipping vs Affiliate Marketing – Which One?

One is not necessarily better than the other. Both are super competitive. Both require a lot of hard work and/or a lot of investment to be successful. Ultimately you need to play to your own strengths and focus.

This is the real key to success with dropshipping and affiliate marketing.

Pick one. Stick with it. Learn, grow and be persistent.