Dropshipping and affiliate marketing are two great online business models that anyone can use to start their own business.
Both models are low cost to start, don’t require any inventory, and can be run from anywhere with an internet connection.
Each has its pros and cons. In this post, I will go over the pros and cons of each business model in order to help you make a better decision about which one is ideal for you.
How Does Dropshipping Work?
Dropshipping is such an awesome business model because anyone can get started without investing a lot of cash up front.
You do not need to buy any inventory but you can sell a wide variety of products through various dropshipping suppliers.
The process is really quite simple. You place various products from your dropshipping suppliers into your online store.
When customers place orders in your store, you then pay for those products through your dropship suppliers and pass along your customer’s shipping information.
Your dropshipping suppliers then ship the items directly to your customers. The difference in price between what you charge your customer and what the dropshipping suppliers charge you is your profit.
The benefits of dropshipping include:
- No inventory to buy or store up front
- Your cash isn’t tied up in products that may or may not sell
- Low start-up costs
- Offer a wide variety of products
- No shipping and handling worries
- Work from anywhere with a Wi-Fi connection
- No previous experience necessary
- Unlimited earning potential
- Usually turns a profit quickly
The Pros of Dropshipping
Dropshipping has a lot of benefits. First, you don’t need any prior experience to open your own drophipping store.
For a few hundred dollars or less, you can have a drop-shipping store up and running and pre-loaded with products of your choice.
Another benefit is that you are not tying up your cash in a ton of inventory that is not guaranteed to sell.
This enables you to offer a wide variety of products within your niche. Another huge plus is that you can set the price points on all of your items.
You can have profit margins as high as 2,000% percent. This is especially true if you choose to use AliExpress as your dropshipping supplier.
The reason why dropshipping can do so well is that most dropshippers sell products that are impulse buys.
Dropshippers typically turn a profit much faster than affiliate marketing. This is because dropshippers often promote their stores with paid advertising.
Affiliate marketing is usually a slower process as most affiliates rely on SEO to generate traffic.
Dropshipping is by no means the perfect online business. Now I will cover some of the cons (downsides) that come with dropshipping.
The Cons of Dropshipping
One of the main risks involved with dropshipping is having to rely on your dropship suppliers to ship the items to your customers.
Usually, this is not a huge issue. AliExpress merchants, in particular, are accustomed to dealing with dropshippers.
That isn’t to say that some suppliers miss orders and do not ship an item to your customer. These things happen, it is a part of doing business.
Fortunately, this is not often the case. Another risk that you will have to deal with advertising costs.
Promoting your store will cost money as you will likely need to run Facebook and Instagram ads.
Often there is a learning curve with when dealing with online advertising. So you may end up losing money before you find those winning campaigns.
Another downside of dropshipping is having to deal with customer complaints and refunds. You will more than likely spend a few hours a day handling these issues.
How Does Affiliate Marketing Work?
Affiliate marketing is much different than dropshipping as you do not need an actual eCommerce platform to get going.
The process of affiliate marketing involves the promotion of another company’s products or services in exchange for a commission when a sale is made.
The Pros of Affiliate Marketing
One of the huge benefits of affiliate marketing is that you do not need a product of your own. You also do not ever need to buy inventory to make sales.
There are millions of affiliate products that you can promote and you can work from anywhere with an internet connection.
Some of the benefits of affiliate marketing include:
- No products to buy or store
- No shipping and handling ever
- Work from anywhere
- Unlimited earning potential
- No customer service issues
- You can rely on free traffic using SEO
- Low cost to start
The Cons of Affiliate Marketing
There are definitely some downsides to affiliate marketing. It can be a struggle for many people to get their footing and start earning a consistent income online.
A lot of new affiliates get caught up in what I refer to as “shiny object syndrome”. This has to do with jumping from one strategy to the next and buying one make money online product after the next.
This often leads to starting projects and then abandoning them. Another thing to keep in mind is that affiliate marketing is often a slower process in terms of turning a profit.
This is especially true if you do affiliate marketing by creating niche websites. You are relying on SEO to generate web traffic.
The upside to this is when your website does begin generating free web traffic the sales you earn are pure profit as you did not have to pay for advertising.
Like any business, your income will fluctuate from month to month with affiliate marketing. This is something you need to prepare for as you go forward.
Which is the Ideal Business to Start When it Comes to Dropshipping Versus Affiliate Marketing?
Deciding which business to start comes down to your personal preference as well as your budget.
Since dropshipping typically requires paying for advertising, affiliate marketing may be the better choice if you have patience and are willing to wait as your business develops.
On the other hand, if you are willing to put in the hard work that is required with dropshipping and maybe even find three methods of advertising, you could reinvest your profits to grow your business.
Both business models require consistent effort and hard work. Regardless of which online business model you choose, I highly recommend learning as much as you can about it.
If you are interested in starting a drop-shipping business of your own, check out the AliDropship plugin.
It is one of the lowest-cost ways that you can get started with your own dropshipping business. Click here to learn more about the benefits and features of AliDropship.