Affiliate marketing and dropshipping are two popular ways to make money online. To get started with dropshipping or affiliate marketing, you do not need to make any major investments. In fact, having your own stock of products to offer is not necessary for these forms of business. In addition, both dropshipping and affiliate marketing are suitable for novice online entrepreneurs.
When you want to start as an online entrepreneur, it can be difficult to decide which business model will allow you to make the most profit. After all, making a profit is one of the reasons why you would want to start an online business. To help you get started, we have compared affiliate marketing and dropshipping so that you can decide which business model suits you best.
The basics of dropshipping vs affiliate marketing
Both affiliate marketing and dropshipping allow you to make money online. In both forms of business, you earn money by selling other people’s products. The nice thing about these earning models is that you can work anytime and anywhere. After all, you do not need your own stock and, in addition, you are not responsible for the production or shipment of products.
What exactly is affiliate marketing?
In affiliate marketing, you earn money by promoting other people’s products or services to your audience, followers or readers. For example, you can promote products on the various social media channels you are active on, or in the blogs you write. The promotion is done using your affiliate link, which you add to your content. For example, a link to a webshop where you can immediately order the product you are promoting.
Then, when someone makes a purchase by clicking on the affiliate link you shared, you receive a percentage of the sale. This percentage is considered to be a commission that you can later have paid out. Usually, this is once a month. Sometimes it is also possible to receive commission when someone clicks on your affiliate link, but does not immediately proceed to buying the product. This is also called an extended cookie period.
When you want to start affiliate marketing, it is important that you first decide on a niche. Then you can get to work creating a website and sign up with companies that sell products you want to promote. You can then sign yourself up with these companies for a special affiliate marketer programme.
Did you know that more than 90% of online customers look for reviews on products and services before they decide to buy?
Read the full article on what affiliate marketing is and how it works.
What exactly is dropshipping?
Dropshipping, like affiliate marketing, is an online business model. With dropshipping, you earn money by selling products from other suppliers on your own website. You can decide which products to sell. To start dropshipping, you don’t need to have your own stock or ship your products to customers yourself. When a customer has placed an order with you and paid, you forward this order to your supplier. The product is then shipped directly to the customer.
Although you don’t need your own stock, you are responsible for customer service and forwarding orders to your suppliers. A big advantage of dropshipping is that you, yourself, get to set the selling prices of the products you sell.
Read our full guide on how to start a dropshipping business.
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Dropshipping or affiliate marketing – what are the pros and cons?
Dropshipping and affiliate marketing are great business models when you want to earn your money online. It is even possible to generate extra income alongside your current job using one of these business models. Both business models have different advantages and disadvantages.
Benefits of affiliate marketing:
- Low start-up costs: when you join an affiliate partner programme, there are no upfront costs involved. The only costs you have to incur to get started are the marketing costs for your online earning model. Think: advertising campaigns and web hosting.
- Easy to start: anyone can become an affiliate marketer. In fact, all you have to do is sign up for an affiliate partner programme. Then you can get started right away.
- Customer service is not necessary: as an affiliate marketer, you are not responsible for the delivery, quality, guarantee and stock of products. In addition, you are also free to decide for yourself where you want to promote certain products or services. After all, it’s up to you to make sure people buy a product or service through your affiliate link.
- Large passive income possible: using affiliate marketing, you can make money at any place and at any time. When you set up an effective marketing strategy, it is possible to generate a large passive income without spending much time on it yourself. Everything starts with finding the right platform and setting up the right promotional ads.
Disadvantages of affiliate marketing:
- Low commission when you start: to ensure a lot of clicks on your affiliate links, you may need to invest in advertising campaigns. The costs you incur for this can be higher than the commission you receive. In addition, there are affiliate programmes that only pay out when you reach a certain target.
- Restricted from using ads: you may be restricted from using ads to promote certain products or services. In affiliate marketing, you enter into an agreement with a particular company that comes with conditions and rules.
- No influence on setting prices: as an affiliate marketer, you have no influence on the selling prices of the products or services you promote.
Advantages of dropshipping:
- Building your own brand: when you start dropshipping, it gives you the opportunity to build your own brand. This is because you are the owner of an online shop and so you decide what happens. Think about setting up campaigns, determining selling prices, posting content, etc.
- High profit margins: because you have control over the selling prices of the products you sell, it is possible to achieve higher profit margins. Of course, when you set the selling price of a product, it is important that this price is acceptable. If it is not, customers will be more likely to go to your competitors.
- Direct payment: when a customer orders a product from you, you get paid immediately by this customer – as soon as the payment for this product is made. This allows you to withdraw money at any time.
- Easy to scale up: an online store is easy to scale up. When you start dropshipping, you can decide the size of your reach. Do you only want to sell nationwide? Or do you also want to operate internationally?
Disadvantages of dropshipping:
- Competition with other businesses: anyone can start dropshipping. This means that more and more people are starting their own webshops. Also within the niche in which you operate. This means there is a lot of competition. It is important to take this into account when setting the selling prices of your products. As a result, you may make less profit than you had hoped.
- No influence on stock management and shipping: as a dropshipper, you have no influence on the stock and shipping of a product. You are completely dependent on your suppliers for this. As a result, an ordered product may not be delivered on time, or may not be in stock at all. This can affect your customer relations.
- Customer service is necessary: as a dropshipper, you manage a shop. While this is an online shop, it is important that you take responsibility where necessary. If something goes wrong, then it’s up to you to resolve it with your customers and your suppliers.
Affiliate marketing vs dropshipping – the similarities
Besides the differences that exist between affiliate marketing and dropshipping, these business models also have many similarities such as:
- low start-up costs required for both business models
- easy to start with both business models
- high earning potential with both business models
- both business models are low risk
- in both business models you have nothing to do with inventory management
- in both business models, you have nothing to do with shipping products
Affiliate marketing vs dropshipping – which is better?
When looking at affiliate marketing or dropshipping, there is no right or wrong. Still, it makes more sense to focus on dropshipping when you want to start with an online revenue model. This is because dropshipping generally allows you to make more profit than affiliate marketing does. This is partly because dropshipping allows you to set your own product prices and thus your own profit margins. On the other hand, affiliate marketing is easier to apply than dropshipping. So are you going to go for profit or simplicity?
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