In this post, I tackle the question of drop shipping vs affiliate marketing and which is a better online business model.
This is a question I have been pondering myself. Both business models have been around for many years.
As of late, I’ve seen a lot more advertisements for programs that are promoting the benefits of drop shipping.
Naturally, I’ve begun to wonder if drop shipping is a legitimate way to build an online business. What are the pros and cons? Is affiliate marketing better?
Let’s dive in!
Drop Shipping vs Affiliate Marketing – What are They?
Let’s start by defining what drop shipping and affiliate marketing are. Both of these online business models do not require any purchasing of inventory.
There is also no shipping and handling involved which is really nice.
What is Drop Shipping?
When you are a drop shipper, you are promoting various products typically using some type of e-commerce platform. The most popular e-commerce platform being used by many drop shippers is Shopify.
When a visitor buys a product from your store, you pay for the purchase using the funds you receive and forward their shipping information along to the company (supplier).
The company then ships the product to your customer as if it is coming from you. Your profit is the result of how much you charged for the product minus any fees and shipping you charged.
For example, if the product costs $10 and you sell it for $20, your profit would be $10 minus any shipping & handling and/or fees.
What is Affiliate Marketing?
Affiliate marketing is simply promoting a company’s products or services in exchange for a percentage of the sale (commission) when someone makes a purchase using your affiliate link.
There is a lot less involved with affiliate marketing. You do not need an e-commerce platform, there is zero shipping and handling, and no customer service involved.
Here is a flow chart of how affiliate marketing works:
Instead of an e-commerce platform, the only thing you need for affiliate marketing is a website—preferably a niche website.
The Pros and Cons of Drop Shipping
There are many people who are making a full-time income from running a drop shipping business.
The pros of drop shipping include:
- No purchasing of inventory
- You do not need to ship any products
- You can run a drop shipping business from home
- There are various drop shipping companies to choose from
The cons of drop shipping include:
- Often difficult to find reputable drop shipping companies
- Profit margins can be low depending on product costs
- Advertising costs can be high (no traffic = no sales)
- Customer services issues (product returns, complaints, etc.)
- Monthly fees for shopping cart software and possible drop shipping fees
The Pros and Cons of Affiliate Marketing
There are various ways in which to approach affiliate marketing. However, the most low-cost method and easiest method is to create a niche website.
There are no upfront costs with affiliate marketing. Affiliate programs are free to join and you can get a free niche website up in 30 seconds.
The pros of affiliate marketing include:
- No inventory to buy
- No shipping and handling involved
- No customer service involved
- Work from anywhere with a Wifi connection
- Unlimited income potential
- Very minimal overhead costs
- Low start-up costs (start for free!)
- No advertising costs necessary (you can grow free organic traffic)
- Promote products centered around your interests
The cons of affiliate marketing include:
- Slow growth – it can take 6 months to a year to grow your business
- A lot of writing (however, you can write about a topic you’re passionate about)
- Small learning curve but super easy to learn (affiliate marketing basics and what you need to learn)
My Conclusion – Drop Shipping vs Affiliate Marketing
I have dabbled in drop shipping many years ago. Instead of having my own e-commerce site, I drop shipped using eBay.
I have also been doing affiliate marketing for many years. The obstacle I ran into was not understanding how to create a long-term, full-time business with it.
Overall, I feel like both drop shipping and affiliate marketing are viable ways to earn income. However, the cons of drop shipping are what makes me favor affiliate marketing much more.
For one thing, affiliate marketing is extremely low-cost versus drop shipping. You could start for free for the most part.
Drop shipping requires a shopping cart platform and advertising costs. It is also difficult to find drop ship companies.
You’re likely going to have to buy a product or program to get a legitimate list of drop shippers.
Can You Do Both Drop Shipping and Affiliate Marketing?
Absolutely! There are many affiliate marketers that also start to drop ship as an extra stream of income.
If you can only start off with one online business, I recommend starting with affiliate marketing for multiple reasons:
- It is low-cost
- You learn how to grow your web traffic using SEO (search engine optimization)
- Earn as you learn
- It is fun!
When I became serious about my online business, I knew I had to learn how to do things differently if I wanted different results.
I enrolled as a free starter member with Wealthy Affiliate. It has changed everything for me.
I’m no longer feeling stuck or as if I’m spinning my wheels with creating an online business. I now have the knowledge and skills I need to create as many niche websites as I desire.
Whether you choose to pursue drop shipping, affiliate marketing, or both, I highly recommend learning internet marketing skills.
Having those skills will take you a long way. Find out exactly what Wealthy Affiliate teaches by clicking here.