Dropshipping is not similar to affiliate marketing because they differ in involvement, focus, strategy, and challenges. Dropshipping is selling products via your online store. Affiliate marketing is promoting affiliate products or services. In dropshipping you buy the products you sell. In affiliate marketing, you are the middleman who earns a commission for each sale or customer action. The products in affiliate marketing are owned by your affiliate partner or the merchants of the goods or services.
In terms of similarities, dropshipping and affiliate marketing are both popular ways to make money on the internet. A Forrester Consulting study found that 81% of advertisers and 84% of publishers use an affiliate program. Authority Hacker's recent report states that the value of the global affiliate marketing industry is over $17 billion. Meanwhile, Statista's forecast shows that the global dropshipping market could reach $301.11 billion in 2024.
Category:
Dropshipping
Affiliate Marketing
Business Model:
Dropshipping is an order fulfillment type of ecommerce that doesn't require you to own or store inventory. You earn money for every item you sell minus the initial cost of the product, shipping, and supplier fees.
Affiliate marketing is a performance-based model. Affiliate marketers earn based on sales, links, and commission rates.
Level of Competition:
Dropshipping is a competitive business model. Google Trends reports that, in January 2023, searches for "dropshipping" were 2.5 times higher than in 2022. That's a 156% increase.
Affiliate marketing is competitive. You're competing against a global market and brand names with a ton of trust and money behind their names. In 2024, there are many unsavory practices tied to the business model, like false promises and clickbait. To make money as an affiliate, you must build trust with your audience. You also need to know how to get the right attention on the internet.
Start-Up Costs:
To start dropshipping, plan on a budget of $1,000 to $5,000 to cover the costs of building your store, testing products, and running paid ads.
Costs for affiliate marketing are under $100 (even free). It costs nothing to start a YouTube channel or social media account. If you decide to publish a blog, you only need around $50/year for a domain and hosting. But what you don't pay in dollars, you pay for in time. There is no fast way to build an online audience. Getting attention in your niche market can take 6-36+ months. So be ready to do the hard work at the beginning.
Earning Potential:
The average dropshipper earns 10%-30% on every sale. You can secure repeat buyers, leverage bundles and upsells, or sell higher-ticket items like electronics or furniture to make better profit margins.
The customer belongs to the affiliate network. You don't get repeat buyers or any recurring orders as an affiliate. You also don't get access to a customer's contact information. So, you can't leverage email marketing or other methods to generate additional sales. But the average affiliate makes around $100-$10,000 per month.
Scalability:
Once you have a proven concept, you can brand your store and grow your ecommerce business. Or you can continue to add trending products. You can scale for minimal costs (compared to starting an ecommerce business).
Affiliate marketing is easy to scale. You can always promote new products to your audience or more offers.
Anton Kraly, the creator of Drop Ship Lifestyle, believes dropshipping is still profitable in 2024. Anton says you can sell products worth $1 to $5,000. This price range appeals to the upper middle class. It means these are products that people buy online every day. Robby Blanchard, a top affiliate marketer and creator of Commission Hero, says you can succeed with just $20 a day on ads.
Earning money online through dropshipping or affiliate marketing is possible. I've been making money online for over 10 years and have experience with both dropshipping and affiliate marketing. I can confidently guide you on how to make passive income online. This article covers the main differences between dropshipping and affiliate marketing. We will also discuss the pros and cons of dropshipping and affiliate marketing, and which is more profitable. In the last section, we'll discuss why local lead gen is better than dropshipping and affiliate marketing.
Is Dropshipping Superior to Affiliate Marketing in 2024?
Yes, dropshipping is superior to affiliate marketing in 2024 in terms of its profit margins. High-ticket affiliate programs may pay 100% or more in commission. But, affiliate commission rates are fixed. Dropshipping’s profit margin offers more leeway. Yaguara, a data provider for e-commerce, reported that dropshipping is 10-20% more profitable than affiliate marketing.
However, you must consider other factors in deciding if dropshipping or affiliate marketing is better. For instance, high-ticket affiliate marketing programs such as software offer big commissions. It all depends on your individual goals, skills, and resources. Here’s a breakdown of dropshipping and affiliate marketing pros and cons to help you decide.
Dropshipping Pros
A pro of drop shipping is that you get paid right away. The key is to automate your inventory management so you don't run out of stock.
Another pro of dropshipping is that you can build your own brand. Use methods like influencer marketing. Don't worry about any restrictions on where to post the link to your online store.
The biggest pro of drop shipping is that you own your audience. You can retain customers and have repeat buyers to generate a steady income.
Dropshipping Cons
A con of the business model is that you are responsible for customer service and have minimal control over order fulfillment.
Another con of drop shipping is that it's a competitive market. Building an online audience or driving eyeballs to your products can be hard.
The biggest con of drop shipping is your lack of control over the customer experience. Too many returns or negative reviews can shut down your store, and you'll lose money.
Affiliate Marketing Pros
A pro of affiliate marketing is how easy it is to start, and you don't need much cash to begin.
Another pro of the business model is that you can do it from anywhere in the world without worrying about customer service issues or negative reviews shutting you down.
The biggest pro of affiliate marketing is that you can add links to multiple platforms, like your social media or YouTube, to get more attention.
Affiliate Marketing Cons
A con of the business model is that you have zero control over pricing or payouts, and they can change without notice.
Another con of affiliate marketing is the wait for payment, which can take 3-6 weeks.
The biggest con of affiliate marketing is link hacking. Sometimes, a network stops selling the things you're promoting but doesn't tell you.
What Is The Main Difference Of Dropshipping to Affiliate Marketing?
The main difference between dropshipping to affiliate marketing is how you get paid. As a dropshipper, you make money selling products to consumers. You determine the selling price and earn a profit on every sale. As an affiliate marketer, you promote other people's products or services. You make a commission for every sale, and your only job is to drive online traffic to offers. The higher your conversions, the more money you make.
Reddit has mixed views on dropshipping and affiliate marketing. They debate their income potential, challenges, and viability. A Reddit user, with 5 years in dropshipping, posted in January 2024. He said it has been "good, on average." His post showed dropshipping earnings of $9K to $15K monthly. He says one of the advantages of dropshipping is that you can start it as a business with a small capital of $300-$900. However, he adds that dropshipping "does not guarantee long-term success." Anything could happen.
A Redditor prefers affiliate marketing to dropshipping. They say affiliate marketing is easier to scale. Dropshipping has a complex system.
Another commenter who tried dropshipping says qualifying for an affiliate program requires you to have a following. A Redditor, in response to a question about Shopify's affiliate program, suggests making 50 videos in 60 days. They should explain how to set up a Shopify store. This could help you gain followers. Overall, both dropshipping and affiliate marketing have their own challenges and viability. The key is to know your own strengths and preferences as a marketer.
What Is The Main Similarity Of Dropshipping to Affiliate Marketing?
The main similarity between dropshipping and affiliate marketing is that both allow you to earn money without handling inventory. In affiliate marketing, you promote products via sites like Amazon Associates, ShareASale, or ClickBank. You earn a commission when someone clicks your unique affiliate link and makes a purchase. The focus is on driving traffic to the offer, typically through content marketing, social media, or paid ads.
In dropshipping, you set up an online store using platforms like Shopify, WooCommerce, or BigCommerce. You list products from suppliers on marketplaces such as AliExpress, Oberlo, or SaleHoo. When a customer places an order, the supplier handles fulfillment and ships the product directly to the customer. Both models rely on good marketing and traffic. But, dropshipping requires managing an e-commerce store, while affiliate marketing does not.
Auto DS says dropshipping and affiliate marketing are similar. Both let people earn money without handling inventory. AUTO DS says that both models promote third-party products. They drive traffic to them via websites, blogs, or social media. This setup makes both options cost-effective and low-risk, as there is no need for upfront investment in physical goods. Also, Auto DS notes that both dropshipping and affiliate marketing can be automated. This makes it easier to scale the business over time. You can focus on optimizing traffic and conversions, which are crucial for success in both models.
Is Dropshipping More Profitable Than Affiliate Marketing?
Dropshipping is more profitable than affiliate marketing because you regulate the price tag and how much you earn for every product you sell. Affiliate marketing depends on the affiliate network commission structure. As an affiliate, you have no control over how much each offer is worth.
Is Dropshipping Easier Than Affiliate Marketing?
Dropshipping is not easier than affiliate marketing because it involves complex processes such as product selection, supplier negotiation, and customer relationship management. You also don't need to spend time dealing with customer service issues. Instead, your only focus is promoting affiliate links and developing a marketing strategy to drive a ton of eyeballs to your offers.
For affiliate marketer Aaron Chen, both methods are profitable. It depends on how big you want the business to grow: dropshipping or affiliate marketing. However, he believes that compared to dropshipping, affiliate marketing makes it easier to earn money. He adds affiliate marketing has lesser work and fewer hours because you are selling other people's products. Aaron says he closed his dropshipping business. He now focuses on affiliate marketing with digital products.
What Are The Key Factors To Consider When Deciding Between Dropshipping and Affiliate Marketing?
The key factors to consider when deciding between dropshipping and affiliate marketing are whether you want to sell a physical product or promote other people's items.
Conclusion: How Does Local Lead Generation Compare To Affiliate Marketing & Dropshipping?
Local lead generation is an online business model like drop shipping and affiliate marketing where you don't own inventory or promote a product or service. Instead, you build and rank simple websites in one location that target one service. Because the focus is on the local market, you can get to the top of the search engines in 6 weeks - 6 months.
Once your sites are at the top, they're like digital billboards. They're in front of people who are actively searching for the service you provide. Those websites generate leads you sell to a local business owner for profit margins between 85%-90%. In dropshipping, the profit margin is between 10-30%. But Aaron Chen believes it is lower at 10-15% because of the physical nature of the products. In affiliate marketing, the profit margins range between 5-50%. There are affiliate programs that pay 100-200% commission rate for every sale. An example of this is the Shopify affiliate program that pays 200% commission.
You own the digital assets in local lead generation (website, tracking number, leads). So, you control every aspect of your business. In dropshipping, you rely on third-party suppliers to fulfill orders. This makes your business vulnerable to customer complaints. Meteor Space reported, using TrueList data, that 84% of dropshipping retailers say finding the right supplier is their biggest hurdle. In affiliate marketing, network rules or partners set the commission rates and cookie duration. This is the time you can earn from your affiliate link. Depending on the program, cookie duration may last from 30 days to 365 days.
And because lead generation is a learned skill set, there's less competition than dropshipping or affiliate marketing. The barrier to entry is higher and you can reduce the level of competition further by targeting more local niches. This way, you don't have to compete with global affiliate marketers and dropshippers. You'll get a more scalable and predictable source of passive income by setting up a local lead gen biz.
