There is an obvious difference between dropshipping and affiliation. The first one allows you to do e-commerce while the second one allows you to make a living on the Internet by recommending services or products. Here are a few things to consider when deciding whether to do dropshipping or affiliation?
If you like e-commerce, start dropshipping
If you want to have your own e-commerce site and sell products around the world in a specific niche, dropshipping may interest you. As a reminder dropshipping is the concept of selling a product when you have no stock. You will then ask your supplier to ship the product directly to your customer.
Dropshipping is a kind of simplified e-commerce without stock with minimal financial risk. It has advantages like not having stocks, being able to select products that we don’t need to make and also not to commit too much money. It also has disadvantages such as problems and delivery times that are very long if you do not have a supplier close to your customer, having to advance advertising budgets on Facebook and Google Adword is also not to control the quality of your products. Dropshipping is made for those who like to sell products through the Internet.
The advantages of dropshipping are :
Few financial commitments. With drop shipping, you don’t need to buy a large inventory or warehouse space to start a business. You can be up and running with just a few supplier agreements and a basic online sales website. You pay for products as you sell them, not a moment before. This reduces your start-up costs and overall risk.
No headache about shipping or management. There are so many things you don’t have to worry about as a freight forwarder. Not only are your upfront costs very low, but you also don’t have to worry about the costs of storage, warehousing, personnel for pickup and shipping. Since your supplier takes care of these aspects, you have more time to focus on sales and business development.
Freedom and flexibility. When offering a new product is as easy as adding a new product page to your website, you can take advantage of some great opportunities. First, your business is able to remain agile and respond quickly to market demands and changes. A niche doesn’t suit you? You can quickly change your product.
You can also experiment with different product offerings and quickly grow your dropshipping store.
But dropshipping has other drawbacks that affiliate marketing does not:
Lower profit margins. For a supplier to deliver individual products for you requires additional time, labor and logistical coordination. You’ll have to pay extra for the privilege of drop shipping versus buying products in bulk.
These additional costs decrease your profit margin, making it harder for your business to stay in the black. It’s also harder to stay competitive in the marketplace with cheaper products available from non-drop shipping shippers.
Less control over storage, packaging and shipping. As an online business owner, the first physical interaction you will have with your customer is when they receive their package. As a package shipper, you don’t have much control over how the unpacking will go. In fact, there are many things you don’t have control over. You don’t have control over sudden stock-outs or shipping delays. This leaves you vulnerable to interactions with angry customers, with limited ability to resolve the situation.
A low barrier to entry leads to increased competition. Drop-shipping essentially makes you a middleman. Many online retailers are using the same suppliers and selling the same products as you. This means there is a lot of competition and few ways to differentiate your business. You’ll need to learn how to differentiate yourself and offer added value in order to stand out.
Sometimes, despite the drawbacks, it still makes sense to dropship. It’s a great business model to get into without having to make a huge initial investment. All you have to do is find products that you can deliver profitably, connect with a reliable supplier, set up your drop site and find customers.
Affiliate marketing is a great opportunity if you have influence
The principle of affiliation is simple. A company where a person sells a product for X euros. If you recommend this product to someone and they buy, you will get a percentage of the sales. This can range from a few percent like Amazon does as a partner, to over 70% on online training and software sales. It’s also very simple to set up.
If you have a database of emails that are interested in products that you have selected in affiliation, you can easily earn a lot of money without taking any risks. Indeed, if you offer physical products in affiliation, it is not up to you to manage the orders or the customer returns. If you offer services or software, you will be able to earn a very good commission by simply sending a few well-written emails.
Here are the significant advantages of affiliate marketing over dropshipping:
- Affiliate income is often called “passive” income because well optimized affiliate placements can generate continuous income. So automatically without managing anything, by placing links on a youtube channel or a blog.
- Commissions can therefore be higher, with a higher payment in the long run if the collaboration goes well with a platform.
- There is no after-sales service to manage, or even shipping of packages or anything else.
- You can never show your face to do affiliate marketing!
But there are also disadvantages:
- Generally, it will take time.
- Some other affiliates may also get your customers.
- Some platforms do not pay their affiliates.
- You are dependent on the image of a brand, a person or a product.
- You have to know how to create content (blog with a good natural referencing for example or even a youtube channel).
- It is not easy to track your sales (for example via a facebook pixel).
I personally find affiliate marketing much simpler, in my opinion it’s the easiest business to start. You can do it in cryptocurrency, recommend software, training, there are hundreds or even thousands of affiliate programs!
Combine affiliate Marketing and dropshipping
You don’t have to do either one or the other. You can very well imagine a store on the Internet or a website that offers both dropshipping products and other elements in affiliation. For example, you can imagine a dropshipping guitar equipment store that offers guitar lessons as an affiliate. This way you can diversify your income while selling different products and solutions to the same customer. In any case, you can do affiliate dropshipping and offer your products to influencers!
In my opinion, it is not a question of choosing between affiliation or dropshipping. In fact, you have to analyze your market and see what they are interested in. You can then imagine a business that will answer a given problem in a specific niche. This is when you will be able to integrate both dropshipping and affiliation elements. Combining affiliation and dropshipping is an opportunity to increase your turnover considerably by using the same database of visitors and customers.