Honesty Michael
Affiliate marketing and dropshipping are like two sides of the same coin. You flip both sides and find out that they are both very popular business models that enable you to earn money online. Because of this, many people assume they are the same and often become confused about which one to pursue.
However, affiliate marketing and dropshipping differ significantly in their operations, responsibilities, required skill sets, and earning methods.
In this guide, we’ll break down the 10 key differences between affiliate marketing and dropshipping so that you can make the best decision for your goals.
Key Takeaways
- Affiliate marketing enables you to sell other people’s products without the stress of creating your own.
- With dropshipping, you can sell physical products without having to handle inventory.
What Is Affiliate Marketing?
Affiliate marketing is an online business model where you earn a commission for recommending other people’s or companies’ services or products to your audience. So, essentially, you act as a middleman and use your unique affiliate link to redirect interested buyers to the website where the product or service you promote is available.
When someone purchases through your affiliate link, you will receive a certain percentage of the sale as your affiliate commission. This affiliate commission is not fixed; it varies for different merchants or vendors and usually ranges from 1% to 80%.
It is essential to note that there are various types of affiliate marketing, and understanding the kind used by your chosen affiliate platform is crucial. Here are some of the common types;
Pay-per-sale: You earn a percentage when you make a sale.
Pay-per-click: You are paid for every click you get through your affiliate link.
Pay-per-lead: You get paid when someone signs up or takes a required action
Getting started with affiliate marketing is pretty straightforward. Simply search for affiliate marketing platforms like StakeCut, sign up for an account, and begin promoting the available affiliate offers on their website.
What Is Dropshipping?
Dropshipping is an eCommerce business model that enables you to sell physical products from suppliers online. You can either sell these products on your social media handles or website.
The advantage of dropshipping is that you don’t need to maintain an inventory. All you need is to partner with a reliable and trusted supplier who can package and ship the products directly to your customers.
How do I earn from dropshipping? Well, you earn from the profit you add to the price given to you by your supplier. Which means that if your supplier sells to you at a wholesale price of $10, and you add $5 to it when selling to your audience, the buyer pays $15, the supplier takes $10, and your profit becomes $5.
As sweet and straightforward as all of this sounds, it does not mean that you will be doing nothing. There is a substantial amount of work to be done to achieve success with dropshipping. You will be responsible for setting up your online storefront, running paid ads, creating marketing campaigns, taking customer orders, forwarding orders to the supplier, handling customer complaints, and a variety of other tasks.
Top 10 Differences Between Affiliate Marketing and Dropshipping
1. Ownership & Control
With affiliate marketing, you do not own the platform, product, or service, so you are a promoter. As a promoter, your job is to direct traffic to your affiliate link and earn a commission when someone takes the desired action.
Aside from that, you have little control over many aspects, including pricing and customer experience.
However, with dropshipping, you have complete control and ownership over the business operations. You set your product prices, choose your suppliers, and so on.
2. Startup Cost
Getting started with affiliate marketing requires a very low startup cost.
Dropshipping, on the other hand, is more capital-intensive, as you may need to set up a website and purchase the product you intend to dropship first, either for promotional purposes or to test its viability if it works.
3. Earning Potential
You earn a fixed commission from every sale made through your affiliate link, which often ranges between 1% and 80%, depending on the affiliate platform or product. On the other hand, as a dropshipper, you set your prices, thereby enabling you to earn as much as you want.
4. Customer Service Responsibility
In affiliate marketing, you are not responsible for handling any customer complaints, as the merchant takes responsibility if anything goes wrong.
Whereas, in dropshipping, you are fully responsible for all customer services, including complaints and refunds, as you are the face of the brand.
5. Branding
As an affiliate marketer, you are more likely to build other people’s brands than your own, since you are promoting their products or platforms. In contrast, dropshipping allows you to own a storefront and be the face of your brand.
6. Technical Skill Requirements
You need basic knowledge of promotional tools and platforms with affiliate marketing, compared to dropshipping, where more technical skills and setup are required to get started.
7. Conversion Control
With affiliate marketing, you send traffic to a third-party website, which means you may not have control over much of the sales process, potentially affecting your conversion rate. However, with dropshipping, you have complete control over your website, allowing you to tweak your conversion funnel for better results.
8. Passive Income Potential
Affiliate Marketing offers you a higher chance of earning passive income than dropshipping.
9. Risk Level
Since you don’t buy products or manage customer orders, your only risk is the time spent creating content as an affiliate marketer, which makes the risk level relatively low.
In contrast, with dropshipping, you must deal with various issues, including refund requests, shipping delays, and damaged items.
10. Platform Dependency
With affiliate marketing, you depend solely on the platform. If anything goes wrong, you will be affected. On the other hand, as a drop shipper, you own the platform and have complete control over your business. If anything goes wrong, you can easily switch suppliers or products without losing everything.
Summary Table
| Feature | Affiliate Marketing | Dropshipping |
| Ownership | No | Yes |
| Startup Cost | Very Low | Moderate |
| Profit Per Sale | Low to Medium | Medium to High |
| Customer Support | Not Required | Required |
| Branding | Limited | Strong |
| Technical Skills | Basic | Moderate |
| Control Over Sales | None | Full |
| Passive Income | High Potential | Moderate Potential |
| Risk | Very Low | Higher |
| Platform Dependence | High | Low |
Affiliate Marketing or Dropshipping: Which Should You Choose?
Now that you know the difference between affiliate marketing and dropshipping, it’s okay to wonder which to choose because both income models are legitimate ways to earn money online. I would recommend going for the one that aligns with your strengths, goals, and available resources.
If you have limited start-up capital, do not want to handle customer orders, or are looking for something that would earn you passive income, then affiliate marketing should be your best choice.
On the other hand, if you are looking to set up your online store, handle customer orders/complaints, have sufficient funds to cover upfront costs, and be in control of your profit margin, then choose dropshipping.
So the ball is in your court. However, always remember that affiliate marketing is straightforward to start with little or no risk. You can start right away with a free account on StakeCut while working to build your dropshipping business.
Wrapping Up
We have come to the end of this incredible piece. Still, before we draw the curtain to a close, I want you to always bear in mind that affiliate marketing and dropshipping offer real opportunities to build a lasting online income.
While one is more capital-intensive than the other, both enable you to build a solid online brand without owning the products or handling inventory. So, choose the one that works best for you, and align with your long-term goals.
And that’s it, buddy, until I write to you again. Stay winning.
FAQs
1. Is affiliate marketing more profitable than dropshipping?
It depends. Affiliate marketing can generate passive income when done right, but dropshipping often offers higher profit margins
2. Can I do both affiliate marketing and dropshipping?
Yes! You can combine both at once if only you have the strength and resources to pull it off.
3. Which is easier for beginners?
Affiliate marketing is generally easier and less risky to start with. Dropshipping requires more upfront cost, tools, setup, and customer handling.