Affiliate marketing and dropshipping are business models for selling products online. Affiliate marketers earn commissions by promoting others' products. Dropshippers sell products online, relying on suppliers to handle inventory and order fulfillment.
Affiliate marketers concentrate on generating traffic to product links through content marketing. Dropshippers need to stand out in a market where others control pricing and branding.
Affiliate Marketing
Affiliate marketing involves promoting other companies' products or services through content creation. Income is based on sales commissions and follows the affiliate network's guidelines.
Building a personal brand requires consistent content creation. Success comes from organic growth through valuable content that builds audience trust.
Affiliate marketers earn up to 50% profit margins through commission-based sales.
A significant drawback is that you're building someone else's business rather than creating a sellable asset of your own.
Affiliate marketing requires $1,000 to $5,000 initial investment.
Dropshipping
Dropshipping allows you to sell products without holding inventory. You work with third-party suppliers that handle order fulfillment.
Success in dropshipping depends on identifying trending products. You also need to create compelling paid ads that drive impulse purchases.
Dropshipping offers profit margins between 10% to 30%.
Dropshipping businesses can grow rapidly through paid advertising.
Initial startup costs range from $1,000 to $2,000.
Success in these models depend on identifying profitable niches with in-demand products. On average, affiliate marketers earn $100 to $10,000 per month. Dropshippers usually earn $500 to $10,000 per month. Top performers make way more.
Spencer Mecham founded Buildapreneur in 2017 with zero investment. He operated solo until the business started generating over $500,000 in profits. Eventually, he expanded his team and grew his affiliate business to a 7-figure company. Today, he offers free training on how to build “a $10,000 per month affiliate marketing business in 12 months or less.”
Meanwhile, Paul Lee is a 7-figure dropshipper. According to him, running Facebook ad campaigns played a big role in his strategy. He created engaging product pages and videos for his target market. He did this by showcasing the products' aesthetics and functionalities.
While both can be lucrative, affiliate marketing is ideal for those focused on content creation and engagement. Dropshipping requires strategic marketing and hands-on business management.
Also, affiliate marketing and dropshipping come with unique challenges that can affect success. In affiliate marketing, marketers lack control over product quality, pricing, and customer service. Dropshipping relies heavily on suppliers, which can lead to customer issues.
Over a decade ago, I did both affiliate marketing and Shopify dropshipping. I was able to earn 6 figures with both. However, the market was less saturated, and marketing was cheaper back then. I gave up both businesses because it started becoming unsustainable.
We go in-depth and compare affiliate marketing vs dropshipping. Plus, we discuss the pros and cons to help you decide which business model is best for you.
Comparison Between Affiliate Marketing vs Dropshipping
Category
Affiliate Marketing
Dropshipping
Business Model
Sells inventory via a third-party supplier. No stock or cash investment in products, but responsible for customer service. Relies on wholesalers for order fulfillment.
Key to Success
Build a personal brand through social media, YouTube, or blogging. Organic growth requires consistent effort. Build trust with the target audience and offer valuable content. Robbie Cornelius advises promoting only products that you have personally tried.
Find trending products before market saturation. Run effective paid ads with captivating hooks for impulse buys. A unique angle and high-quality creatives are essential. Rafael Angarita, a growth marketing director from New York, recommends a diverse supplier portfolio to reduce risk.
Profit Margin
Average profit margins of 10% to 30%. Complete control over pricing and inventory selection.
Scalability
Organic growth is slow but paid ads can scale it quickly. No tangible business asset for future sale.
Can scale quickly with paid ads. There is potential to sell the business as a tangible asset.
Setting Up and Initial Investment
$1,000-$5,000 initial investment for store setup, product testing, and paid ads.
Easier setup. $1,000-$2,000 for a website, tools, and ads. This includes software and tools like TrackingDesk and SpyFu.
Customer Service
May involve customer service; reliable supplier selection is crucial.
Minimal to no direct customer service responsibilities.
Pricing Control
No control over product/service pricing. Commission-based earnings.
Full control over product pricing.
Product Quality Control
Limited control over product quality. Affiliates should promote tried products.
Limited control over product quality. Dropshippers should research reliable suppliers.
Learning Curve
Focus on effective product promotion and link placement.
A steeper learning curve due to store management, supplier relations, and order fulfillment.
Similarities of Affiliate Marketing and Dropshipping
What Is Affiliate Marketing?
Affiliate marketing is a digital marketing business model where affiliates promote offers to customers using content with an affiliate link. The affiliate marketer will earn a commission for an action by the client. This can either be a click, download, or sale. Statista data shows that 56% of US content creators earn from affiliate marketing. A 2021 survey of affiliates found that 57.55% earned less than $10,000 from affiliate marketing. Meanwhile, 1 out of 6 reported earning $50,000, and almost 4% earned over $150,000.
Affiliate Marketing Pros
Low barrier to entry
Low-risk business model
High income potential
Flexible setup
Affiliate Marketing Cons
Market saturation
Unstable commission rates
Needs consistent content creation
Is Affiliate Marketing Easy or Hard for Beginners?
Affiliate marketing is hard for beginners, primarily due to three key factors. First, the market is highly competitive. Established sites and blogs are dominating top positions through years of trust-building. Second, lead generation can be difficult. According to HubSpot, 24% of marketers struggle to create converting content. Third, paid advertising can be expensive. In fact, average costs per click today range from $0.38 on Twitter to $1 on TikTok.
What Is Dropshipping?
Dropshipping is a retail fulfillment-style business where you take orders without keeping inventory. As a dropshipper, you're the middleman between a customer and a wholesaler or supplier. This business model is popular for its low entry barriers and low startup costs. When a customer orders through your online store, you forward the details to your supplier. They then ship the product directly to the customer. This lets entrepreneurs start an e-commerce business without warehousing or managing inventory. Oberlo, citing Statista, reports the global dropshipping market will hit $476.10 billion in 2026. There is potential to make good profits if you have good strategies.
Now, you need to be a better marketer. The tough competition demands you to show your products' benefits and solve consumer problems. You must show how your product can solve a problem or save them time. Find trending products that sell well before the market saturates.
Dropshipping Pros
Low barrier to entry
Minimal risks
Easy way to test the market
Allows you to scale quickly with new offers
Dropshipping Cons
Competitive market
Low profit margins
Rising cost of paid ads makes driving traffic more challenging
Why 90% Of Dropshippers Fail
Lack of control is the reason 90% of dropshippers fail. Dropshippers don't own or store inventory. You rely on third-party suppliers to fulfill orders. This setup makes it hard to manage shipping times or fix quality issues. For example, replacing damaged items can be a hassle.
Another reason for failure is that some see dropshipping as a get-rich-quick scheme. They choose the wrong niche and fail to do intensive research. Some also fail to treat their dropshipping store as a real business. Max Robinson of Fish Tank Bank says dropshippers also fail because “they don't try to add value for customers.”
Starting a dropshipping business in 2024 remains viable. However, success requires a strategic approach. Begin by identifying profitable niches with multiple high-ticket product opportunities. Use research tools like AdSpy and Social Ad Scout to find trending items. Monitor competitors and opportunities through spy software like PiPi Ads and Niche Scaper.
To stand out in the market, focus on creating compelling marketing materials. Try creating viral-worthy videos and persuasive copy that leverages customer psychology. Consider outsourcing video editors or copywriters to help you with content creation.
Could You Do Both Affiliate Marketing and Dropshipping?
You can do both affiliate marketing and dropshipping. However, it will take longer to learn the business models and succeed. Expet marketers and dropshippers would tell you to focus on one business model. Roy Digital CEO and affiliate marketer Hrishikesh Roy says affiliate marketing and dropshipping use different approaches to sell the same product. Affiliate marketing is about creating content and establishing a brand. Dropshipping is about order fulfillment and customer support. As such, these businesses require different skillsets. Both also come with with unique challenges and risks.
That said, you can combine both affiliate marketing and dropshipping into your business. THX News founder and CEO Ivan Golden says it's possible to add affiliate marketing to your dropshipping business. You can promote your dropshipping products to your affiliate audience and vice versa.
Affiliate Marketing vs Dropshipping Reddit: Which Would You Recommend for a Beginner?
Reddit has mixed views on affiliate marketing vs. dropshipping. Users are divided on which is better for beginners. Most commenters say that affiliate marketing is better than dropshipping for beginners. One commenter says affiliate marketing is best for beginners. Besides, it's easier to scale than dropshipping. He adds that affiliate marketing lets one focus on marketing. Since with affiliate marketing, the vendor handles the customer service.
Another commenter says neither method is best for beginners. Both affiliate marketing and dropshipping are oversaturated. Another Redditor thinks your experience decides between affiliate marketing and dropshipping. This same commenter adds that dropshipping needs more time to set up than support. Affiliate marketing, on the other hand, focuses on selling the product.
Dropshipping vs Affiliate Marketing Quora: Which is More Profitable?
On Quora, industry experts offer varied perspectives on affiliate marketing vs dropshipping. David Barnes from Jacksonville says both can be profitable. However, affiliate marketing often yields higher returns. This is because of higher commission rates. Additionally, it eliminates concerns about physical product management.
With 8 years of business experience, Katrin Brandberg says dropshipping is harder. It comes with the additional challenge of managing customer service and product issues. Ryan Levacy provides a concrete example of affiliate marketing's passive income potential. According to his example,a single product review can generate up to $2,500 in one day from 15 sales. He prefers affiliate marketing because it allows for a more hands-off approach.
What Is Better, Affiliate Marketing or Dropshipping?
There's no correct answer on which is better between dropshipping and affiliate marketing. Both dropshipping and affiliate marketing have pros and cons. They have minimal risk and low start-up costs by being the middleman. Only you can decide what best fits your skill set and long-term vision.
Affiliate marketing doesn't need significant funds because you pay with your time. You need a large, engaged audience for your affiliate site or a big social media following. It takes time and effort to build them. Dropshipping is also low-cost, but you'll need an initial budget of $2,000-$5,000+ if you want to set yourself up for success. Dropshipping is about riding trends before the market saturates. It takes a daily grind and the ability to stay one step ahead of the curve. Plus, you need to be an ace marketer with the skills to design high-converting ad content. And be ready to spend money on paid ads and test products (budget for $200-$300/product).
Local Lead Generation Is Better Than Dropshipping and Affiliate Marketing
Local lead generation is better than dropshipping and affiliate marketing. It offers greater control and scalability. Local lead generation is also much less saturated. Both affiliate marketing and dropshipping have low entry barriers. So, they are vulnerable to market saturation. You'll be competing in a global scale when you do affiliate marketing or dropshipping.
In local lead generation, you're targeting niche services in specific areas. Instead of selling physical products, you are building digital real estate assets. You're creating and ranking keyword and location-focused sites from scratch. Once your sites attract leads, you can approach local business owners and offer your services.
I've been doing lead generation since 2014. It's been more profitable and scalable than affiliate marketing and dropshipping. Today, I make $500 to $3,000 per month from each website I own. Since I own several sites, I make a total of $52,000 per month, providing lead gen services to local businesses.
Achieving this level of control is impossible with affiliate marketing and dropshipping. You can't do anything about it if the affiliate program changes commission rates. If your dropshipping supplier sends defective or low-quality items, your reputation suffers.
In many ways, local lead generation is a better business model. We have a local lead generation coaching program. Anyone who wants to learn the skills needed to make it in this industry should contact us.
