Dropshipping is not similar to affiliate marketing because even if they're both online business models, they have different natures of involvement, focuses, strategies, and challenges. Dropshipping involves selling physical products through your online store, while in affiliate marketing, you sell either physical or digital products via an affiliate link. As a drop shipper, you own the products that you are selling, while in affiliate marketing, you are only the middleman who earns a commission per sale or action from the customer. 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 study conducted by Forrester Consulting and commissioned by Rakuten Advertising reveals that 81% of advertisers (business owners who want to promote the brand or product) and 84% of publishers reported using 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.
Anton Kraly, the creator of Drop Ship Lifestyle, believes dropshipping is still profitable in 2024. Anton says you can choose to sell products valued between $1 to $5,000, the price range that appeals to the upper middle class. It means these are products that people buy online every day. Robby Blanchard, creator of Commission Hero and a top affiliate marketer, shares that you can get started with only $20 a day on your ads and have success.
Earning money online through dropshipping or affiliate marketing is possible. This article covers the main differences between dropshipping and affiliate marketing. We will also discuss dropshipping and affiliate marketing pros and cons, and what is the more profitable between the two. In the last section, we'll discuss why local lead generation is superior to dropshipping and affiliate marketing.
Dropshipping Vs Affiliate Marketing
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. But you set the price and don't rely on a network to dictate how much you earn per sale.
Affiliate marketing is a performance-based model. The affiliate marketer earnings depend on the number of sales they make, how many affiliate links they promote, and the payouts or commission rate for each.
Level Of Competition:
Dropshipping is a competitive business model. Google Trends reports in January 2023, searches for the term dropshipping were 2.5Xs more than the same period in 2022, which is 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 name. In 2024, there are also a lot of unsavory practices associated with the business model, like false promises and clickbait techniques. To make money as an affiliate, you need to build trust with your target audience and know how to get the right kind of attention on the Internet.
Start-Up Costs:
To start dropshipping, plan on a budget of $1000-$5000 to cover the cost 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/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). But be ready to test a ton of products before you find a winner. It can take more than 6 months to start making real money.
Affiliate marketing is easy to scale because you can always introduce new products to your current audience or promote more offers.
What Is Dropshipping?
Dropshipping is an e-commerce-style online business model that depends on order fulfillment. Research says the dropshipping market could be worth $568.7 billion by 2026. Dropshippers don't need to own or house inventory. Instead, they rely on third-party suppliers to package, ship, and deliver items to the customer. You're not out of pocket for stock and only need a minimal investment to test things. Find winning products, then sell them to generate a profit margin.
What Is Affiliate Marketing?
Affiliate marketing is a referral-based type of digital marketing. The affiliate business model offers a commission for every action a person makes on an affiliate link. This can be a sale, lead, click, or a new user. But you don't own physical items. Instead, you partner with an affiliate program and promote other people's products or services. Data suggests that affiliate marketing drives 16% of ecommerce sales in Canada and the USA. Affiliates with an active online presence or a loyal following can earn a steady income with the business model in 2024.
What Is The Main Difference Between Dropshipping & Affiliate Marketing?
The main difference between dropshipping and 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.
Dropshipping Or Affiliate Marketing Reddit
Dropshipping or affiliate marketing Reddit shows varying views on the income potential, challenges, and business viability of dropshipping and affiliate marketing. An original poster on Reddit early January 2024 who has been into dropshipping for almost 5 years says dropshipping has been good “on average.” The Redditor’s post shows earnings from dropshipping can go from $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 or $300-$900. However, he adds that dropshipping “does not guarantee long-term success” because anything could happen.
A Redditor who prefers affiliate marketing over drop shipping says affiliate marketing is easier to scale because dropshipping has a very complex system.
Another commenter who tried dropshipping says qualifying for an affiliate program requires you to have a following. In response to a question about Shopify affiliate program, a Redditor suggests that making 50 videos in 60 days that explains how to set up a Shopify store could help you get 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 Are The Key Factors To Consider When Deciding Between Affiliate Marketing Vs Dropshipping As A Business Model?
The key factors to consider when deciding between affiliate marketing and dropshipping as a business model are whether you want to sell a physical product or promote other people's items.
Drop shipping allows you to set your prices and get repeat customers. Average profit margins are between 10%-30%. Affiliate marketing relies on fixed commission rates set by an affiliate partner. Profit margins with the affiliate marketing business model are around 5%-50%.
What Is More Profitable Dropshipping Vs. 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.
For affiliate marketer Aaron Chen, both dropshipping and affiliate marketing are profitable depending on how big you want the business to grow. 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 shares he closed his dropshipping business and is now focused on affiliate marketing involving digital products.
Is Dropshipping Superior to Affiliate Marketing in 2024?
Yes, dropshipping is superior to affiliate marketing in 2024 in terms of its profit margins. While there are high-ticket affiliate marketing programs that pay 100% or more in commission, affiliate commission rates are fixed. Dropshipping’s profit margin offers more leeway. Yaguara, a platform that offers data on e-commerce, reported that dropshipping is 10-20% more profitable than affiliate marketing.
However, there are other factors that you need to consider in determining whether dropshipping or affiliate marketing is superior. 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. Leverage methods like influencer marketing without worrying about any restrictions on where you 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 accounts or YouTube channel, 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 or a network no longer selling the things you're promoting but neglecting to inform you.
Which Is Easier: Dropshipping Or Affiliate Marketing?
Affiliate marketing is easier than dropshipping because affiliate marketing takes less investment or marketing efforts because you don't need to build a drop shipping store or source third-party suppliers. 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 dropshipping and affiliate marketing are profitable depending on how big you want the business to grow. 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 shares he closed his dropshipping business and is now focused on affiliate marketing involving digital products.
How To Start Dropshipping
How To Start Affiliate Marketing
Dropshipping & Affiliate Marketing FAQs
Yes, you can do both dropshipping and affiliate marketing. The business models are separate, but they're not in competition with each other. Combining both models can achieve a higher profit margin. You broaden your reach because you have multiple offers. Then you can get more sales. If you have a loyal dropship customer, you can send them details about an affiliate product that might interest them to earn a secondary income.
Affiliate drop shipping uses other people who act as affiliates. Their job is to promote your drop shipping products on their social media platforms, blog, website, or YouTube channel. Creating an affiliate drop shipping program can increase your reach, diversify your income, and get more conversions. Because you only pay for the actual sale, it's a cost-effective way to advertise your product.
Dropshipping affiliate programs pay people a commission to promote a dropshipping software or product. Popular dropshipping affiliate programs in 2024 include Spocket, SaleHoo, AutoDS, and AliDrop. Affiliates can earn a commission of 15%-50%+. Register and create a free account. Receive an affiliate link where you drive traffic for each offer. (Most programs provide content you can share with your audience to promote the product or service).
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.
However, because you own the digital assets in local lead generation (website, tracking number, leads), you have full control over every aspect of your business. In dropshipping, you rely on third-party suppliers to fulfill the order making business vulnerable to customer complaints. Citing data from TrueList, Meteor Space reported that 84% of dropshipping retailers consider finding the right supplier their major obstacle. In affiliate marketing, network regulations or affiliate partners dictate the commission rates and cookie duration or the time that 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.
