In this digital-oriented day and age, the countless opportunities to build a steady income online are practically countless.
Two of the most profitable and popular ones are affiliate marketing and dropshipping.
Both of them revolve around building a money-making online business, but their respective mechanics and approaches are fundamentally different.
To help you grasp how these models work and choose the one that aligns best with your financial goals, this article covers in great depth their key elements, differences, pros, cons, and more.
Let’s take a closer look.
What is affiliate marketing?
Affiliate marketing is a performance-based marketing model where you promote products or services of other companies and earn a commission for each sale or lead you refer.
The process of making money with affiliate marketing consists of four simple steps:
- Pick a niche
- Launch a blog
- Build an audience
- Promote products
Best Affiliate Marketing Courses
Best Affiliate Courses
Affiliate marketing pros
1. Minimal investment:
Since you don’t need to create products from scratch, your initial investment as an affiliate marketer is mostly limited to purchasing a domain name and hosting for your blog.
This makes affiliate marketing a very low-risk model, perfect for beginners who’d like to embark on a money-making journey without having to invest an arm and a leg.
2. No customer support:
The only job of an affiliate marketer is to refer customers to the merchants they’ve partnered with.
All customer support procedures (e.g., customer service, handling complaints, issuing refunds, etc.) are the responsibility of the merchant.
This significantly benefits resource allocation while also reducing operational headaches.
3. Passive Income Potential:
Affiliate businesses tend to have a very high potential of turning into passive income sources, especially if their promotions involve affiliate programs that pay recurring commissions.
Affiliate marketing cons
1. Variable commission rates:
Commission rates can vary widely across different affiliate programs, with some offering rather low payouts.
This could negatively affect the overall revenue of your affiliate business.
The upside is that there are dozens of affiliate programs available in almost every niche, so you could always shift your focus to promoting high-paying ones, assuming of course that their products fit your target audience.
2. Intense competition:
The popularity of affiliate marketing means you’ll face tough competition, especially in high-profit niches like fitness, making money, self-development, food, etc.
3. Performance-based
Affiliate income is directly correlated with how well you perform in terms of referring paying customers to the merchants you’ve partnered with.
Poor performance, which is rather common among affiliate beginners, will result in low earnings.
What is dropshipping?
Dropshipping is a retail business model in which you get paid for selling products that are stored, handled, and shipped on your behalf by a third-party supplier.
The process of making money with dropshipping consists of four simple steps:
- Launch a dropshipping store
- Find dropshipping suppliers
- Market your dropshipping store
- Get paid for every sale you generate
Dropshipping pros
1. Low startup costs:
Like affiliate marketing, dropshipping doesn’t involve creating, handling, or storing products, so the model requires an equally small upfront investment.
This makes dropshipping an appealing choice for individuals looking to enter the e-commerce landscape without the burden of significant capital expenditure.
2. Minimal risk:
Dropshippers don’t have to pre-purchase the products they sell upfront – they only pay for them after a sale is already made.
Therefore, dropshipping involves a much lower financial risk compared to traditional retail models where you might end up purchasing products that might never be bought.
3. Reduced overhead :
Dropshipping eliminates the need to maintain inventory and all the associated costs, such as renting physical storage, paying for utilities, and hiring warehouse staff.
This can lead to higher profits and more efficient resource allocation compared to traditional retail.
Dropshipping cons
1. Lower profit margins:
One of the key drawbacks of dropshipping is its relatively lower profit margins compared to other business models, particularly those that involve manufacturing or purchasing products in bulk.
That’s mainly because the wholesale price at which you purchase your dropshipping products tends to be rather higher than the price manufacturers or large retailers might pay for the same or similar products.
2. Limited control:
Since dropshippers neither hold inventory nor fulfill orders, they have no control over product unavailability, shipping delays, or the quality of overall service their suppliers offer to customers.
However, as middlemen, dropshippers may still be held accountable for such issues, despite the fact that they aren’t the ones responsible for them.
This could have a negative impact on your business reputation.
3. Multiple suppliers
Scaling a dropshipping business involves simultaneously coordinating orders, dealing with out-of-stock items, handling customer support, and ensuring consistent quality across dozens of products and suppliers.
This can be very taxing and time-consuming.
Affiliate marketing vs. dropshipping
Deciding whether you’re better suited for affiliate marketing or dropshipping depends on a vast range of factors, including your budget, interests, current skills, financial goals, values, level of commitment, and more.
To be more specific, affiliate marketing is generally considered more straightforward and beginner-friendly than dropshipping, mostly because it doesn’t involve as much groundwork like searching for wholesale suppliers, providing customer support, issuing refunds, tracking product availabilities, etc.
On top of that, affiliate marketing requires a much smaller initial investment than dropshipping.
All you have to purchase to venture into affiliate marketing is a domain name and hosting for your blog. You can even do affiliate marketing on social media or YouTube without spending a single dime.
Dropshipping can’t be done cost-free on social media or YouTube. As a dropshipper, you’ll have no choice but to launch an online store, which would involve buying a domain name and subscribing to a paid ecommerce platform like Shopify or BigCommerce, which is usually much more expensive than regular blog hosting.
Also, contrary to an affiliate business which can be effectively marketed for free via SEO and content marketing, most dropshipping stores have to be marketed via paid ads.
Moreover, affiliate marketing allows for a more flexible schedule than dropshipping which might demand a more hands-on approach and a willingness to handle day-to-day business operations, especially in its initial stages.
On the other hand, dropshipping offers the potential for quicker returns, especially if you leverage paid ads to promote trending or eye-catching products.
Lastly, affiliate marketing gears toward skillsets like researching, writing long-form content, producing videos, search engine optimization, email marketing, data interpretation, creating engaging graphics, etc.
Contrarily, the skills involved in running a dropshipping business mostly revolve around funnel optimization, UX design, copywriting, monitoring inventory, overseeing product quality, managing suppliers, data analysis, financial management, etc.
To sum everything up, you should go for affiliate marketing if you:
- Have very limiter or even zero initial capital
- Are a complete beginner to making money online
- Would enjoy creating long-form content
- Want to avoid having to deal with customer support
- Are after a more flexible and creative approach
On the other hand, dropshipping could be your best bet if you:
- Are willing to take on more responsibilities
- Have $100 – $200 to spare per month
- Would rather start generating sales as fast as possible
- Prefer being able to manage customer inquiries
- Want to work with physical products
- Are after a more tangible and analytical approach
Affiliate marketing FAQs
Affiliate marketing is an online business model that involves promoting products or services created and distributed by third-party online merchants in exchange for getting paid a commission for each sale you refer.
In layman’s terms, affiliate marketing is the process of being compensated for helping businesses sell to more customers.
Here’s a bird’s eye view of how affiliate marketing works.
- You join a merchant’s affiliate program
- The merchant gives you a unique affiliate link that points to their e-shop
- You promote your unique affiliate link online (blog, forums, social media, paid ads, etc.)
- Every time someone clicks on your unique affiliate link and makes a purchase on the merchant’s e-shop, the merchant pays you a commission
There are thousands of successful affiliate marketers all around the world. Some of the most well-known ones are:
- Pat Flynn
- Matt Diggity
- Matthew Woodward
- Doug Cunnington
- & more
You can check out a roundup of my 17 favorite examples of affiliate success and their backstories right here.
- Billion-dollar industry
- Very low startup & operational expenses
- Huge income potential
- Flexible & versatile
- Passive income
- Simple to implement
- No technical background
- No customer support
- No physical setup
Affiliate marketers can be divided into five main income groups:
- Total beginners: $0 – $20,000 per year
- Low-level affiliates: $20,000 – $50,000 per year
- Intermediate affiliates: $50,000 – $100,000 per year
- High-level affiliates: $100,000 – $500,000 per year
- Super affiliates: $500,000+ per year
According to PayScale, the average annual income for affiliate marketers in the US is over $54,000 per year. Statistics reveal that 13% of affiliates earn more than $75,000 per year.
Some of the factors that influence how much you earn as an affiliate marketer include:
- seniority
- target niche
- available resources
- previous experience
- marketing efforts
- & overall mindset
Here’s a rough income growth timeline of a typical affiliate marketing business:
- months (0-3): no earnings
- months (3-6): first affiliate sale
- months (6-12): $100-$500 monthly
- months (12-18): $1000 monthly
- months (18-24): $3000+ monthly
This timeline isn’t a guarantee of future performance but rather a mere approximation of the income growth of an average affiliate business. Your own timeline could be shorter or longer than projected.
Over the years, I’ve seen aspiring affiliates striking a gold vein just a few months into the industry. On the other hand, I personally know people who’ve been struggling to grow their affiliate revenue to $1000 per month for several years.
Affiliate marketing is one of the most affordable money-making models out there.
Here’s a breakdown of everything you need to get started as an affiliate marketer along with their associated costs:
- web hosting & domain name: $2.95/month (Bluehost)
- keyword research tool: $49/month (Jaaxy)
- expert guidance: $49/month (Wealthy Affiliate)
- email autoresponder: Free for up to 1000 subs (MailerLite)
Please note that on top of expert guidance, Wealthy Affiliate also provides free access to hosting and a keyword research tool so you don’t have to purchase them separately.
Yes, you can do affiliate marketing without a website by promoting your affiliate links on other marketing channels, such as:
- Social Media
- Paid Ads
- YouTube
- Podcast
- etc.
The process of getting started with affiliate marketing can be broken down into the following four simple steps:
- Pick a niche
- Launch a blog
- Build an audience
- Promote affiliate products
No, you don’t.
Affiliate marketing is very simple to get started with by virtually anyone regardless of age, education, background, available capital, tech-savviness, professional network, etc.
In fact, most 6-figure affiliate marketers were no more experienced than you currently are when they first ventured into the affiliate marketing industry.
Nonetheless, being knowledgeable in fields like marketing, sales, content production, business management, etc., could help you reach your financial goals somewhat faster.
Conclusion
In conclusion, both affiliate marketing and dropshipping constitute perfectly viable ways to make money online.
Fully understanding the mechanics, differences, and nuances of each model will significantly boost your chances of picking the one that fits you and your goals the best.
Remember, success in any business endeavor requires dedication, perseverance, and constant adaptation to market trends and consumer preferences.
Have any questions or need further help?
Leave a comment below or drop me a line and I’ll do my best to get back to you as soon as possible.
All the best, and stay safe,
Harry, Founder & Creative Director at dearboss-iquit.com
