SMMA VS Dropshipping: Which Business Model is Suited for Beginners?

March 31, 2024

smma vs dropshipping

SMMAs leverage platforms like Facebook, Instagram, and TikTok to deliver targeted advertising and content creation services for businesses to boost their digital presence. Dropshipping involves creating an e-commerce store using platforms like Shopify or Wix. You sell third-party products without ever handling inventory. Both SMMA and dropshipping offer the potential for big income. But, each has its own advantages and challenges.

SMMA generates $500-$5,000 per month with high potential for further growth. Founder of GrowYourAgency and IAGA, Iman Gadzhi states that social media marketing is the fastest way to build a six-figure business from your bedroom. This emphasizes the accessibility and potential profitability of the SMMA model. Noah Wickham from IdleShopper says that dropshipping stores generate an average of 40% gross profit and 20% net profit. Both business models can be profitable. But you need to stay updated on industry trends to stay competitive.

In this article, we'll compare SMMA vs Dropshipping, their earning potential, major pros and challenges. We'll compare the time, money, and skills needed for both models. This will help you see if they are a good option for you or if there’s a lucrative and sustainable business model.

SMMA VS Dropshipping

FEATURES

SMMA

DROPSHIPPING

FINAL VERDICT

Control Over Operations

SMMA has high control over branding, services, and pricing

Dropshipping has less control over operation because of reliant on suppliers and shipping.

SMMA

Skills Required

SMMA requires strong marketing (especially social media), sales, and communication.

Dropshipping requires skill set on e-commerce, marketing, some product research

Tie (This depends on your existing skills/preferences)

Services Or Product

SMMA provides services to businesses

Dropshipping sells products

Tie (This depends on your goals)

Scalability

Tiered service packages in SMMA let you scale revenue up with client size.

Dropshipping's lack of direct control over product quality makes scaling a challenge.

SMMA

Profit Margin

SMMA profit margin is within the 10-25% range.

Dropshipping profit margins fall between 15-20%.

SMMA

Popularity

SMMA's market value is expected to grow to $385 billion in 2027.

Dropshipping market value is at $231.1 billion in 2023.

SMMA

Market Saturation

SMMA market has low saturation since businesses always need marketing.

Dropshipping is over-saturated in some niches.

SMMA

Maintenance

SMMA is low maintenance because you only need ongoing education on digital marketing trends

Dropshipping stores are high maintenance because of finding winning products, managing suppliers.

SMMA

Inventory

SMMA doesn't need inventory

Dropshipping doesn't need inventory but risk of supplier stock-outs or long shipping times.

SMMA

Initial Investment

SMMA has zero to low startup costs (mainly tools and training)

Dropshipping initial investments falls between $100-$500

SMMA

Customer Interaction

Dropshipping requires direct client relationship management.

Dropshipping customer interactions are managed by the online store and support.

Tie

Final Verdict: Which Business Model is Suited for Beginners?

SMMA is more suited for beginners because it requires only expertise and a computer, ensuring low startup costs. This business model allows for direct client interaction and customized pricing tailored to your client's needs and budgets. Neil Patel asserts the high earning potential of SMMA, with fees ranging from $1,000 to $5,000 per client monthly. Forbes reported in 2023 that Caitlin Pyle's SMMA generated over $100,000 in its first year, with a laptop and social media expertise. This shows SMMA's potential and its suitability for beginners because of its low barrier to entry and high earning potential.

What is Social Media Marketing Agency (SMMA)?

SMMA is a business that helps B2B companies thrive on platforms like Facebook, Instagram, and LinkedIn. They do this by enhancing their online presence, engaging customers, and hitting marketing targets with tailored strategies. SMMAs leverage expertise in crafting content. They also manage social media interactions, and use targeted advertising and influencer collaborations. A Deloitte survey shows that 79% of companies outsource creative tasks. These tasks include social media management. This indicates a growing demand for social media marketing agencies (SMMA).

Pros and Cons of SMMA Business

3 Major Pros of SMMA

1. SMMA Services  is in Demand

SMMA services are in demand because over 70% of businesses use social media for marketing. Yet, 50% lack the expertise for effective strategy implementation. This gap shows the value of outsourcing to SMMA agencies. They offer skilled pros at navigating social media trends and using best practices.

2. SMMA is Highly Scalable

SMMA is scalable because it costs 60-70% less to keep clients than to get new ones. The cost of getting new clients is 5 to 25 times higher. SMMA services operate online, allowing national or global expansion with no extensive infrastructure.

3. SMMA Provide Remote Work Flexibility

MMA provides remote work flexibility. It does this by removing the need for physical offices. It also enhances work-life balance by letting people work from any location. According to Hive Desk survey, 20% of digital marketing agencies are virtual.

Owl Labs states that 16% of global companies are remote. This shows the efficiency and preference for remote models in digital marketing. The move towards remote work gives SMMA professionals more control. It will raise their job satisfaction and productivity.

3 Major Cons of SMMA

1. SMMA Field can be Overcrowded

SMMA can be overcrowded with over 30,000 agencies, plus countless freelancers and in-house teams saturating the market. Actual competition is higher than the number of established agencies. Standing out needs unique selling points. It also requires great services and effective agency marketing.

2. SMMA Requires Continuous Learning and Adaptation

SMMA requires continuous learning and adaptation to AI's growing role in digital marketing. Xavier Klein from Making Science states AI's help in creative development. He stresses the need for quality to adapt to each platform's unique demands. WebFX states 34% of businesses lack this AI expertise. This underscores the challenge and strain SMMAs face to remain competitive.

3. SMMA is Client Dependence

SMMAs depend on client contracts and retainers for income. A 2022 report by Bench.co states the average customer churn rate for marketing agencies is 11% per month. This creates a feast-or-famine situation where client acquisition or retention fluctuations impact finances.

Is SMMA Profitable?

Yes, SMMA is profitable, as each SMMA earns 32% between $100,000 and $500,000 per year. This translates to an earnings range of $228,000 to $372,000 annually. The 2023 Industry Report from Social Media Examiner says that skilled SMMA owners can make $5,000 to $15,000 per month. They can even exceed $25,000 per month. Many new SMMAs may have small budgets and low profit margins.

How Much Money can You Make With SMMA?

You can make between $2000 and $5000 monthly with SMMA. Experienced professionals often increase their earnings to $10,000 to $20,000 monthly. The top-tier agencies have lots of experience and a strong client base. They can earn over $50,000 per month and some surpass $100,000. Success hinges on dedication, client strategy, and skill enhancement.

Is SMMA Worth it in 2024?

Yes, SMMA is worth it in 2024 because of the high demand for social media lead generation. 52% of companies rely on it. Advertising budgets dedicate an average of 8.7% of total revenue to social media. Statista reports a massive 4.59 billion social media users worldwide in 2022, projected to reach 6 billion by 2027, showing an opportunity for SMMA services.

What is Dropshipping?

Dropshipping is a retail fulfillment model where the seller (store owner) doesn’t physically stock the products they sell. The dropshipping business owner acts as a middleman. They set the prices, market the products, outsource inventory management and shipping. This business model has low overhead. You don't need to invest in inventory or manage a warehouse.

Pros and Cons of Dropshipping

3 Major Pros of Dropshipping

1. Dropshipping has Low Startup Costs

Dropshipping eliminates the need for significant upfront investment. Dropshipping allows you to buy products from suppliers only after securing a sale. A survey from Oberlo states 67% of dropshippers start with less than $100,000 and 28% start with under $500. This  lowers the financial hurdles for aspiring dropshippers.

2. Dropshipping Offers Wide Range of Products to Sell

Dropshipping lets you offer many products. You're not limited by storage space or inventory investment. Doba offers a comprehensive directory of dropshipping suppliers and unique products. This flexibility allows you to adapt to market trends and customer preferences. You do this by adding or removing products from your dropshipping store. 

Doba connects you to hundreds of suppliers, offering millions of products across diverse categories. Doba goes through a vetting process with its suppliers to ensure quality and reliability within the dropshipping model. You still have limited direct control compared to sourcing your own suppliers. This means accepting some risk in terms of product quality and potential shipping delays.

smma vs dropshipping
3. Dropshipping Reduced Operational Burden

98% of dropshipping suppliers handle order fulfillment, from picking to shipping, to customers. A Spocket study states dropshipping businesses spend 50% less time on tasks. This setup cuts your operational efforts, letting you focus on growth and customer service.

Sykocis shares their subpar experience with CJdropshipping's backend, describing it as disorganized and the user interface as extremely outdated. They also highlight significant language barriers because of poor English throughout the service.

smma vs dropshipping

3 Major Cons of Dropshipping

1. Dropshipping has Low Margins in Highly Competitive Markets

Dropshipping has low margins in highly competitive markets. Its easy entry leads to intense competition. The price of top-selling dropshipping products dropped by 10%. This drop shows the price wars in the dropshipping market. BigCommerce notes a 20% margin. It can drop more based on product and dropshipping trends.

2. Dropshipping Limits Control Over Supply Chain

Dropshipping limits control over supply chain by outsourcing shipping from supplier to customer, reducing control over product quality and fulfillment. A study shows that the average dropshipping fulfillment time is 15-30 days. Customers who have a bad experience due to long shipping times are less likely to return. This can hinder customer loyalty and brand building efforts.

3. Dropshipping is Dependence on Third-Party Suppliers

Your business' success depends on your suppliers' reliability and efficiency. Issues like errors, product discontinuations, or policy changes can affect operations and profits. Beachly, a dropshipping firm, shut down in 2018 because of supplier unreliability, facing stock shortages, delays, and quality issues that resulted in customer dissatisfaction and failure.

A 2022 Oberlo study showed 45% of dropshipping suppliers set minimum order quantities (MOQs) at $100-$500. This limits small dropshippers and hurts product testing.

Is Dropshipping Profitable?

Yes, dropshipping is profitable as many dropshippers earn between $1,000 to $5,000 per month. If you want to make $1,000 per month with a 15% profit margin, you need to make 66.7 sales. However, if you can increase your profit margin to 45%, you only need to make 22.2 sales. According to Shopify, generating up to $2,000 in monthly revenue requires 10-15 hours per week of work. Building a dropshipping business that replaces a full-time income of $50,000 can take at least 12 months of full-time effort.

How Much Money can You Make With Dropshipping?

Dropshippers earn 20% to 30% profit per sale. This totals $1,000 to $5,000 monthly. Successful businesses can make up to $100,000 yearly, with top stores reporting $50 to $5,000 daily profits. Choosing high-margin products or engaging in reverse dropshipping can increase earnings.

Is Dropshippng Worth it in 2024?

Yes, dropshipping is worth it in 2024 because it offers a low-cost entry into a business, suitable for generating a steady income. Grand View Research predicts that the global dropshipping market will reach $557.9 billion by 2025. This shows there is room for success. Research shows that manufacturers using dropshipping earn 18.33% more profit. This is compared to those who keep their own inventory. This shows the financial benefits for both dropshipping stores and suppliers.

SMMA VS Dropshipping on Reddit

SMMA on Reddit

Chicozeeninja from Reddit shares their success story of generating $133k in revenue with a 40% profit margin over eighteen months. They state that dropshipping success is achievable with dedication and strategic audience understanding. They also warn aspiring dropshippers about relying on misguided advice and online courses.

redditdropshipping

Dropshipping on Reddit 

Boop_boo12 states Social Media Marketing Agency (SMMA) is highly competitive and dynamic. Success hinging on your ability to adapt to new platforms and digital marketing space. They advise that without experience, starting an agency is likely to fail because of the stiff. Building client trust and relationships are critical for thriving in the SMMA industry.

smmaonreddit

Conclusion: What Business Model is Better Than SMMA and Dropshipping?

Local lead generation is more sustainable and profitable, relying on free traffic for success. This contrasts with SMMA, which requires continuous marketing and client engagement efforts. Local lead generation's profit margins are higher than SMMA's. This is because of exclusive lead generation and performance-based pricing. Once established, LLG assets attract traffic and revenue with little extra work.

Local lead generation has less risk and easier entry than dropshipping. Dropshipping can involve complicated inventory management with the supplier. Local lead generation focuses on generating leads and needs less complex operations. This accessibility benefits entrepreneurs with lower upfront costs and simpler business demands. Making it ideal for those building their skills and expertise.

conclusion-lead-gen-maps

Local lead generation emphasizes community and personalized solutions. This leads to higher conversion rates and happier clients. It's a clear contrast to the generic and impersonal nature of dropshipping. It is a big part of its long-term success. Local lead generation beats the transactional nature of dropshipping and the broad focus of SMMA.

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