Affiliate marketing and dropshipping are business models for selling products online. In affiliate marketing, you promote other companies' products and earn commissions on sales. With dropshipping, the key is to sell products without the need to stock them, as suppliers handle order fulfillment. In terms of their market size, affiliate marketing, and dropshipping continue to attract marketers. Based on the recent report published by Authority Hacker, the value of the global affiliate marketing industry is worth over $17 billion. The global dropshipping market could reach $301.11 billion in 2024, per Statista's forecast.
As to the role, you focus on driving traffic to your affiliate links through effective marketing as an affiliate. Meanwhile, as a dropshipper, you need strong marketing skills because you need to compete with dropshippers who control product pricing and branding. Both models require finding a profitable niche with in-demand products.
In addition, earning significant revenue from affiliate marketing and dropshipping could be challenging because of market competition, but it is possible. YouTube content creator Mikey Again recently shared that he profited $130,000 from dropshipping in 2023. Spencer Kelly Mecham, creator of Affiliate Secrets 3.0 and founder of Buildapreneur, grew his affiliate marketing business to 7 figures after over two years.
Choosing the right model depends on your skills and goals. Do you prefer content creation and audience engagement (affiliate marketing) or managing an online business (dropshipping)? Both offer earning potential, but which aligns better with your aspirations? Let's explore further.
Comparison Between Affiliate Marketing vs Dropshipping
Category
Dropshipping
Affiliate Marketing
Business Model
Affiliate marketing promotes another company's products or services via various forms of content. You don't hold products or worry about order fulfillment and customer support issues. However, affiliate marketers depend on sales and the rules outlined by affiliate network providers.
Key to Success
In affiliate marketing, because commissions are much lower since you can't control your price, it's challenging to run paid traffic unless you do 'scuzzy ads.' Organic affiliate marketing is about building a personal brand using social media, YouTube, or a blog that requires consistent effort. You need to build trust with your target audience, engage your viewers with valuable content, and have an irresistible offer.
Profit Margin
Affiliate marketers typically run at around 50% profit margins and earn commission for every click their links garner. However, affiliate marketers have zero control over retargeting. And the customer belongs to the parent company, so there isn't much opportunity for recurring sales.
Scalability
Scaling with drop shipping takes time and typically requires a drop shipping store to create a brand around their winning product(s) or shift to the e-commerce business model. But you're selling a physical product, so you can make much money if you sell your drop shipping business. Once you find that winning product and a high-converting ad, you can scale quickly for a few weeks (up to a few months). Or until you exhaust your audience, then you have to start over again. But you can scale quickly with dropshipping because you're using paid ads.
Scaling in affiliate marketing depends on your approach. Organic affiliate marketing may not lead to rapid scalability since it requires building your audience gradually through consistent content creation, which demands both time and effort. Alternatively, you can employ paid advertising to accelerate this process, although it involves significant trial and error, often featuring aggressive marketing tactics that some may find uncomfortable. However, discovering a successful ad version and the right offer can enable rapid scaling for several weeks or months. Despite this, it's essential to note that affiliate marketing does not provide tangible assets or a business entity for future sale.
What’s the Difference Between Affiliate Marketing and Dropshipping?
Setting Up and Initial Investment
Affiliate marketing is easy to set up and doesn't require a substantial initial investment. Most affiliate marketers write review articles or create videos comparing products. Plan on a budget of $1,000-$2,000 to cover the cost of resources, like:
- Website building and hosting
- Software and tools (example: TrackingDesk & SpyFu)
- Paid ads
Dropshipping’s initial investment costs are around $1,000-$5,000. This covers expenses associated with building your store, product testing, and running paid ads.
Customer Service
There is minimal involvement or no direct customer service responsibilities in affiliate marketing because affiliate links direct customers to the advertiser's sites. The advertiser here refers to the company or business owner who wants to promote their brand or product. Dropshipping might involve customer service. That’s why choosing a reliable supplier is a must. Rafael Angarita, a growth marketing director from New York, US, recommends maintaining a diverse portfolio of suppliers to mitigate risk in the event of supplier failure.
Pricing Control
Affiliates don’t have control over the pricing of products or services because it is the advertiser who controls the pricing. Affiliates only earn commissions based on the sales or actions completed by prospective clients. When the advertiser drops the price of the product or service, your affiliate commission can also decrease. Meanwhile, dropshippers determine the product pricing and can even decide to lower the price of items to attract more buyers.
Product Quality Control
Affiliate marketers and dropshippers cannot control the product quality or, at least, the quality of the product shipped to the customer. That’s why Robbie Cornelius, an affiliate marketer and owner of Web Asset Group from Atlanta Metropolitan Area, recommends you to promote only products that you tried. For dropshippers, researching reliable suppliers can also mitigate problems with product control.
Learning Curve
Learning affiliate marketing and dropshipping both require patiences and willingness to spend time to understand the business models. Liran Zablo, content manager of AutoDS, discussed that affiliate marketers need to understand how to effectively promote products and affiliate links. The process covers identifying the right platforms (including social media platforms) for promoting content. In dropshipping, what you need to learn is how to set up and manage your online store, find a reliable product supplier and handle order fulfillment. Liran added you might find the learning curve in dropshipping steeper compared to affiliate marketing because of the differences in the business operation.
What Is Affiliate Marketing?
Affiliate marketing is a digital marketing business model where an affiliate finds a promotional offer and promotes it to customers via content containing an affiliate link. The affiliate marketer will earn a commission for an action taken by the prospective client - whether a click, download, or purchase. Data from Statista shows that affiliate marketing is a viable channel to earn income for 56% of content creators in the US. In a 2021 survey among affiliates, 57.55% of responders said they 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
What Is Dropshipping?
Dropshipping is a retail fulfillment-style business which doesn't require a ton of startup capital or needs to house any inventory. As a dropshipper, you're the intermediary between a customer and a wholesaler or US dropshipping suppliers. Oberlo, citing data from Statista, reports that the global dropshipping market size in 2024 will reach $301.11 billion. But the golden age of dropshipping is long gone, and old ways of generating sales for your dropshipping store won't cut it in 2024.
Now, you need to be a better marketer. The tough competition requires you to focus on the benefits of your products and tap into consumer problems. You must show how your product can solve a problem or save them time. You need to find trending products that sell well before the market becomes saturated.
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
Is Dropshipping Similar to Affiliate Marketing?
No, dropshipping is not similar to affiliate marketing even if both are internet-based business models because they differ in their nature, risks, product ownership and focus. However, dropshipping and affiliate marketing are similar because they both have low barriers to entry and depend on traffic. Both businesses also face the problem of market saturation and minimal or lack of control over product quality.
What Are the Similarities Between Affiliate Marketing and Dropshipping?
Is Affiliate Marketing Easy or Hard for Beginners?
Affiliate marketing is hard for beginners because you need to generate traffic consistently, which can be challenging with too many marketers to compete with. Your only job as an affiliate marketer is to drive traffic to your offers. But because you're not selling your own product or service, you make less profit. You also don't build a consumer base to generate recurring sales. And if your traffic doesn't act on your affiliate link, you don't make any money.
3 Things That Make Affiliate Marketing Hard for Beginners
PRO TIP:
Be particular with your affiliate program selections. Look for good high-ticket front offers with a backend offer that compliments the front-end offer but still aligns with your values and the needs of your target audience.
Affiliate Marketing Research Criteria Checklist
Is Dropshipping Easier Than Affiliate Marketing?
Dropshipping is not easier than affiliate marketing because the work required to set up an online store takes longer and requires constant effort in terms of management. Affiliates don’t deal with customers directly. Affiliates earn via promoting a product or service in content that contains their affiliate links. The customers click the link, which leads to the sales page of the advertiser. The advertiser then handles customer service for any inquiry. Dropshippers manage their online shop. Once a customer purchases, the supplier fulfills the order, but the dropshipper still maintains contact with the customer.
Why 90% Of Dropshippers Fail
Lack of control is the reason 90% of dropshippers fail. Dropshippers don't own or store inventory. In dropshipping, you rely on third-party suppliers to fulfill orders. This setup makes it hard to manage shipping times, or resolve quality issues, like replacing damaged items.
The concept of the dropshipping business model is simple. However, the success rate is only about 10%, because a lot of dropshippers think it's a get-rich-quick scheme. As a result, they choose the wrong niche or don't take the time to research and treat their online store like a proper business. According to Max Robinson of Fish Tank Bank, the main reason 90% of those in the dropshipping business fail is because "they don't focus on adding as much value as possible for the customers." Dropshipping is about testing lots of products. So you need to be prepared. You might fail more than once before you find a winning product.
Dropshipping Checklist for Beginners
Is it too late to start dropshipping in 2024?
It's not too late to start dropshipping in 2024, but you need to find unique products that fill a void in the market. You must also learn the best ways to increase your dropshipping success rate. Use tools like PowerAdSpy or Social Ad Scout to find hot-ticket items already selling well. Find a store dominating the niche and use real-time data tools like Niche Scaper or ShopInspect to find high-performing competitor ads.
Then see where the competition is lacking and do better. It's about controlling the narrative through your marketing and advertising strategies and increasing the perceived value of your products.
You need to leverage customer psychology and create an angle that convinces people to buy what you're selling. So if you don't have the skills, you need to outsource until you're confident in your own abilities. Connect with a dropshipping video ad service or hire a copywriter to help with product descriptions and ad copy. Because if you're not the best in the business, you won't get results.
Could You Do Both Affiliate Marketing and Dropshipping?
Yes, you can do both affiliate marketing and dropshipping, but it will take you longer to learn the business models and achieve success. Affiliate marketing experts would recommend you to focus on one instead of combining both businesses. According to Hrishikesh Roy, an affiliate marketer and CEO of Roy Digital, affiliate marketing and dropshipping require different approaches to selling the same product. Dropshipping focuses on order fulfillment and customer support, while affiliate marketing is about creating high-quality content and building a brand to promote affiliate links.
But you can combine affiliate marketing and dropshipping because they are not in competition with each other. Ivan Golden, founder and CEO of THX News, who is currently based in Tucson, Arizona, incorporating affiliate marketing into your dropshipping business, can be done. Ivan says you can reach the audience of your relevant affiliates and promote to them your dropshipping products.
Affiliate Marketing vs Dropshipping Reddit: Which Would You Recommend for a Beginner?
Affiliate marketing vs. dropshipping Reddit shows several views on which of the two they would recommend to beginners. Most commenters say that affiliate marketing is better than dropshipping for beginners. One commenter explains that affiliate marketing is best for beginners because it is easier to scale than dropshipping. He adds that affiliate marketing allows one to focus on marketing and let others (the vendor) deal with customers.
However, there is also a commenter who says neither affiliate marketing nor dropshipping is best for beginners because they are both oversaturated. While, another believes that choosing between affiliate marketing or dropshipping depends on your experience. This same commenter adds that dropshipping requires more time to set up customer support, while affiliate marketing focuses on selling the product.
Dropshipping vs Affiliate Marketing Quora: Which is More Profitable?
Dropshipping vs. affiliate marketing, Quora covers many topics, including which of the two is more profitable. According to David Barnes, an affiliate marketing and dropshipping specialist from Jacksonville, Florida, you can make money with the two. Still, he believes affiliate marketing is more profitable because you don’t have to run paid ads. He adds that affiliate marketing can have higher commissions and less worry about having physical products.
Katrin Brandberg, an affiliate marketer for 8 years from Sweden, also said both affiliate marketing and dropshipping can be profitable and that it’s “all up to you.” However, she added that while dropshipping can be very profitable, you need to deal with customers and product concerns.
Lastly, Ryan Levacy, a digital marketer from Austin, Texas, explained that affiliate marketing is more passive than dropshipping. Ryan shared that after promoting the offer on their email list, they sold 15 units and earned $2,500 in one day from a product review he wrote 2 years ago. He said choosing between dropshipping and affiliate marketing depends on how much involvement you want with customers. For him, affiliate marketing is easier because it’s the affiliate partners who handle customers.
What Is Better, Affiliate Marketing or Dropshipping?
There's no correct answer on which is better between dropshipping and affiliate marketing. Both drop shipping 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 require significant funds because you pay with your time. However, you need to have a large and engaged audience for your affiliate website or a substantial social media following, which takes time and effort. 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 jumping on trends before the market becomes saturated, so you need to hustle hard. It takes a daily grind and the ability to stay one step ahead of the curve. In addition, 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 in terms of the level of control and scalability you get. Local lead generation is also way less saturated compared to the two business models. I've tried affiliate marketing and dropshipping, and neither is the best online business to start in 2024.
Both affiliate marketing and dropshipping have low barriers to entry, making them vulnerable to market saturation. With affiliate marketing, all you need to do is generate attention to a product and earn a commission, even when English is not your first language. So, you'll be competing with more global affiliate marketers. Dropshipping also requires minimal initial investment and overhead expenses that's why it is attractive for beginners. Adobe blog says you can easily "start a dropshipping business" even if you "don't have the funds necessary to run a traditional retailing operation." As a new dropshipper, you can copy what other dropshipping companies do. You may even sell the same products, post similar ads, and get the same suppliers.
Local lead generation is less saturated because of natural geographic barriers and the specific skill set it requires. In local lead generation, you need to target the right niche in your local area. This type of parameter itself avoids competing with too many players. Local lead generation also involves learning about basic local SEO and leveraging Google to move your online assets to the top of the search engine. In local lead generation, you build and rank websites. Once it's ranked, you can decide which local business owner will get to rent it.
Aside from reduced level of competition, you get more control over your business with local lead generation because you own the digital assets. This control is lacking in affiliate marketing and dropshipping. If the affiliate program changes the commission structure, you can't do anything about it. If the supplier in dropshipping sends out defective or low-quality items, your reputation is also affected. The same problem with lack of control over product quality is present in affiliate marketing.
In addition, you need to spend money on primarily paid Facebook to see any real payouts in dropshipping and affiliate marketing. Brad Rosenfeld, the Chief Marketing Officer at Prove, wrote a Forbes article in November 2022 about the rising ad costs. For Facebook ads in particular, the ad costs, according to Brad, have increased by 89%. These costs dip into the profit margins of marketers. Plus, as the industry becomes more competitive, they will only get higher. With local lead generation, you leverage Google's organic traffic to rank your site. If you want to learn more, we offer a course on the local lead generation biz model that teaches how you can build a more stable and scalable source of passive income.
