Most digital entrepreneurs fall into two major categories when checking for the ideal business considerations that offer profitable results: affiliate marketing or drop shipping. While the two often cause heated discussion on which one is better and more productive. Whether you wanted to venture into affiliate marketing or drop shipping, this guide will help you shed some light and clear all speculations on which one is better or not.
Affiliated Marketing or Drop Shipping: Which Is Profitable?
Understanding the similarities and differences of both businesses can help you figure out which one suits you better. While it’s accessible from the first glance, these business models promote products that you don’t own. In some instances, you’re not responsible for the item shipment or product quality. However, you are responsible for the promotional and marketing processes.
Knowing the similarities of both can help you appreciate their differences. Here’s a quick breakdown of the shared similarities these businesses have.
- You are responsible for successful product promotion.
- There are no responsibilities with shipping or holding inventory.
- They both offer a fast set up and business launch.
- Both are low-risk types of business models.
- They both offer endless profit income and opportunities.
- You don’t need large-scale investments for both businesses.
- They both offer high potential earnings.
While there are several factors these business models have in common, the significant difference between affiliate marketing and drop shipping is their compensation scheme. Affiliate marketing receives a commission from the accumulated conversions. On the other hand, with drop shipping, you can set the product price.
What is Drop Shipping?
Dropshipping is the retail business method in which you don’t necessarily keep any product in stock. You can start a drop shipping business with salehoo and sell various products from different suppliers. The main feature of this business is that you can influence the product’s final cost and set your pricing. That way, you’ll quickly determine the amount of commission you get for every successful transaction.
How Drop Shipping Works
- You can set the final price of the product. It can work like placing an additional expense from the real product value. For example, a product costs $40; you can sell it for $50.
- A client places the order and pays you the retail price of $50.
- Then you forward the order to your supplier and pay them a wholesale price of $40.
- Your selected supplier ships the item to your client, and now you can keep your $10 profit margin as your commission sale.
Pros
- It’s a guaranteed low-risk business
- It offers high-profit margins
- Immediate gets a payout
- It enables you to earn a little more
- It has several ways to retain customers
- It helps build assets
Cons
- You have little to no control over the shipment
- You need to manage your customer support
- It has a smaller focus audience, usually, impulse shoppers
Understanding What Affiliate Marketing Is
Affiliate marketing is a form of advertising and promotional business in which you have an agreement with a company to drive customers to their services or products through affiliate links. In return, you will earn commissions from the referral method. Affiliates cannot set the size of their commissions, and it’s more of the terms and conditions agreements can set it up.
How Affiliate Marketing Works
- You have to put an affiliate link and advertise the product.
- A potential customer clicks the provided affiliate link and purchases the product
- Then you’ll earn a commission from the generated conversions per sale
Pros
- It’s an excellent source of passive income
- There is no upfront payment to become an affiliate marketer
- No need for customer support
- It’s completely convenient and easy to start
Cons
- Fixed commissions
- You only earn with every sale
- Sometimes, payment gets delayed
- People can also remove your affiliate link
Conclusion
The bottom line is, both businesses offer high earnings with different approaches. Drop shipping and affiliate marketing have both their benefits and setbacks. With both delays in mind, you can always consider which one is profitable for you. Though both offer significant earnings, it requires effort if you want to earn more.
