More people are shopping online than ever before. There is little doubt about the growth of eCommerce in virtually every market. This trend was continuing in an upward trajectory and the COVID -19 crisis revved up this growth. eCommerce in North America increased by 147% in April 2020 year over year. This has encouraged many people to join in the growing trend.
The eCommerce boom has encouraged businesses and individuals to open an online store on eCommerce platforms such as Shopify and AliExpress. In some cases, setting up a shop can take just a few minutes and carry few or no fees. Some platforms offer marketing tools and content.
Dropshipping is an effective way to sell online without needing to stockpile inventory or store merchandise. The question of dropshipping vs. affiliates is an important consideration when determining how best to leverage eCommerce platforms’ benefits.
Dropshipping vs. Affiliate Marketing
There are several ways to sell on eCommerce platforms, including dropshipping and affiliates. Dropshipping allows the business owners to open an online store, set a price, take care of marketing and customer service. Still, when the customer makes an order, the business owners use the money to buy the item at a lower price from the supplier, and the supplier ships the product to the customer. With dropshipping, the merchant does not deal with an inventory.
An affiliate marketer also does have to be responsible for inventory, but they also do not determine the price. The affiliate focuses mainly on marketing and drives traffic and customers to the seller, who then takes care of the process from there. An affiliate takes a commission for each sale.
There are several similarities between dropshipping and affiliate marketing. Neither deals directly with an inventory. Both are low-risk ventures with high earning potential. Both involve marketing and have low startup costs. There are also many differences between dropshipping and affiliate marketing.
Affiliates can focus on marketing. There is no customer service to deal with, and there is no need to determine pricing. Although there are marketing costs, usually being an affiliate does not require fees. Aside from creating ads and driving traffic, there is little work to do, and working as an affiliate can provide passive income. Also, not dealing directly with customers can also be a benefit.
The cons of being an affiliate are not having control over prices and products. Since an affiliate is paid on commission, this can fluctuate. Also, the eCommerce sites may not pay affiliates until they reach a certain target, and even then, they may get paid only with checks and gift cards. Finally, some people avoid affiliate links and go directly to the main site. When this happens, the affiliate loses the commission even though they attracted the lead.
Dropshipping has some disadvantages as well. For those who like to focus on running a business, dealing with customer support can be a hassle. However, this work can be outsourced easily. Also, pricing can be a challenge. It is hard to know how to price low enough to be competitive yet high enough to communicate quality and make a business profitable. Also, price wars can develop online in a few minutes, so it is important to stay aware of competitors’ pricing at all times.
Then again, pricing is one of the main advantages of dropshipping too. Setting a price means that a merchant can buy a product for $2 and charge $19.99, whereas an affiliate can only collect a commission. Everything an affiliate does is for their partner. A drop shipper has a distinct brand and can get its name out there. With dropshipping, a merchant is creating leads for their own store and can easily create repeat business.
Why Dropshipping is The Better Alternative
Affiliate marketing seems like a zero risk plan, but when you dive deeper you find out that it has the same barries of entry, same risks (some may even say that the risk is higher as you don’t control the entire sales lifecycle) but the reward is often lower.
In addition, by becoming the seller, you can create a loyal user base which increases your overall customer LTV and overall revenue.
The ability to deal with customers directly is also a boon for inspiring repeat sales. In general, dropshipping allows the merchant more freedom, lets them develop their own brand, choose their own products, and create their own customer base. This ultimately provides greater value and can generate higher profits than affiliate marketing.